Forced to Resign to Avoid Severance Pay? Understand These Legal Regulations First!

Introduction

Companies sometimes request or encourage workers to resign when they wish to terminate an employment relationship. In some cases, such actions are taken to avoid the obligation to pay severance pay and other rights arising from the termination of employment. This situation can be detrimental to workers because pressure from management causes workers to sign resignation letters even though they do not genuinely wish to resign. Therefore, it is important for workers to understand the difference between voluntary resignation and termination of employment resulting from an employer's actions. Such understanding can help workers protect their rights and avoid losses due to resignation under pressure.

Legal Basis

The provisions regarding termination of employment, resignation requirements, and the rights of workers upon the termination of the employment relationship are regulated under Government Regulation Number 35 of 2021 on Fixed-Term Employment Contracts, Outsourcing, Working Hours and Rest Times, and Termination of Employment ("GR 35/2021").

Article 36 Letter i of GR 35/2021

"i. The Worker/Laborer resigns voluntarily and must meet the following requirements:

1. submit a written application for resignation no later than 30 (thirty) days prior to the effective date of resignation;

2. not be bound by an official service bond; and

3. continue to perform their obligations until the effective date of resignation;"

Resignation must be carried out voluntarily as required in GR 35/2021. Therefore, an employer cannot force or pressure a worker to submit or sign a resignation letter. If a company requests a worker to resign through threats, intimidation, or other forms of pressure, the resignation no longer reflects the worker's own will. Under such conditions, the worker can argue that the termination of the employment relationship occurred due to the employer's actions, rather than a voluntary resignation.

Article 50 of GR 35/2021

"A Worker/Laborer who resigns voluntarily and meets the requirements as referred to in Article 36 letter i, is entitled to: 

a. compensation pay in accordance with the provisions of Article 40 paragraph (4); and 

b. separation pay, the amount of which is regulated in the Employment Contract, Company Regulation, or Collective Labor Agreement."

Workers who resign voluntarily and meet the requirements in GR 35/2021 are not entitled to severance pay and long service pay. Under these conditions, workers are only entitled to receive compensation pay in accordance with Article 40 paragraph (4) and separation pay if stipulated in the Employment Contract, Company Regulation, or Collective Labor Agreement. The difference in compensation rights between resignation and termination of employment must be understood by workers before deciding to sign a resignation letter.

Article 36 Letter g of GR 35/2021

"g. there is an application for Termination of Employment submitted by the Worker/Laborer on the grounds that the Employer commits the following acts:

1. physically abusing, coarsely insulting, or threatening the Worker/Laborer;

2. persuading and/or instructing the Worker/Laborer to commit acts that contradict the laws and regulations;

3. failing to pay Wages on time for 3 (three) consecutive months or more, even if the Employer subsequently pays the Wages on time;

4. failing to perform the obligations promised to the Worker/Laborer;

5. instructing the Worker/Laborer to carry out work outside of what was agreed upon; or

6. providing work that endangers the life, safety, health, and morality of the Worker/Laborer, whereas such work is not stated in the Employment Contract;"

GR 35/2021 grants workers the right to file for termination of employment if the employer commits certain acts, including threatening the worker. Therefore, a worker is not required to comply with an employer's request to resign if such request is accompanied by threats or other forms of pressure. Instead, the worker can use the employer's actions as a basis to apply for termination of employment in accordance with the applicable regulations.

Article 48 of GR 35/2021

"The Employer may terminate the employment of a Worker/Laborer due to an application for Termination of Employment submitted by the Worker/Laborer on the grounds that the Employer commits acts as referred to in Article 36 letter g, in which case the Worker/Laborer is entitled to: 

a. severance pay in the amount of 1 (one) time the provisions of Article 40 paragraph (2); 

b. long service pay in the amount of 1 (one) time the provisions of Article 40 paragraph (3); and 

c. compensation pay in accordance with the provisions of Article 40 paragraph (4)."

GR 35/2021 grants the worker the right to receive severance pay in the amount of 1 (one) time the provisions of Article 40 paragraph (2), long service pay in the amount of 1 (one) time the provisions of Article 40 paragraph (3), and compensation pay in accordance with Article 40 paragraph (4) if the worker files for termination of employment on the grounds that the employer has committed acts as referred to in Article 36 letter g. Thus, workers who terminate their employment relationship due to threats or other actions included in these provisions can still obtain their termination rights in accordance with GR 35/2021.

Sanction Risks for Violators

Forced resignation can lead to industrial relations disputes if the worker claims that the resignation was not submitted voluntarily. Under certain conditions, a worker may file for termination of employment on the grounds that the employer committed acts as referred to in Article 36 letter g of GR 35/2021. If such claim is granted, the worker will be entitled to severance pay, long service pay, and compensation pay in accordance with Article 48 of GR 35/2021. In addition, if the parties do not reach an agreement through bipartite negotiations or mediation, the dispute may proceed to the Industrial Relations Court in accordance with Law Number 2 of 2004 on Industrial Relations Dispute Settlement.

Strategic Steps to be Taken

Workers facing pressure to resign may consider the following steps:

1. Refuse to sign the resignation letter and keep evidence showing the existence of threats or other actions from the employer. If the employer commits acts as referred to in Article 36 letter g of GR 35/2021, the worker may file for termination of employment in accordance with the applicable regulations.

2. Seek resolution through bipartite negotiations with the employer within a maximum period of 30 working days, as stipulated in Article 3 paragraph (1) of Law Number 2 of 2004 on Industrial Relations Dispute Settlement.

3. Register the dispute with the agency responsible for manpower affairs for the mediation process, as stipulated in Article 4 paragraph (1) of Law Number 2 of 2004, if the bipartite negotiations fail to reach an agreement.

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Recommendations

Companies and workers may note the following points:

1. Companies must avoid practices that encourage or force workers to resign and must follow the procedures for termination of employment in accordance with GR 35/2021. In the event of termination of employment by the employer, Article 37 paragraph (3) of GR 35/2021 requires the employer to deliver a notification letter stating the intention and reasons for the termination to the worker no later than 14 working days before the effective date of the termination, or no later than 7 working days before the effective date of the termination if the termination occurs during the probationary period, as stipulated in Article 37 paragraph (4).

2. Companies need to calculate the obligation to pay termination compensation in accordance with the applicable regulations so as to fulfill the rights of the workers when the employment relationship ends.

3. Workers need to understand the rights arising from both resignation and termination of employment, including the provisions regarding compensation pay and separation pay as stipulated in Article 50 of GR 35/2021, before deciding to submit a resignation.
   

Closing

GR 35/2021 clearly distinguishes between voluntary resignation and termination of employment resulting from an employer's actions. Workers who resign and meet the requirements in Article 36 letter i are only entitled to compensation pay and separation pay if stipulated in the Employment Contract, Company Regulation, or Collective Labor Agreement, meaning workers need to understand these consequences before signing a resignation letter. On the other hand, if the employer commits acts as referred to in Article 36 letter g, including threatening the worker, the worker can apply for termination of employment and is entitled to severance pay, long service pay, and compensation pay in accordance with Article 48 of GR 35/2021. Therefore, workers facing pressure to resign must keep relevant evidence and pursue dispute resolution mechanisms in accordance with the applicable regulations, starting from bipartite negotiations up to mediation if necessary. Meanwhile, companies must avoid practices that encourage or force workers to resign, follow the procedures for delivering the termination of employment notification letter in accordance with the time limits in Article 37 paragraphs (3) and (4) of GR 35/2021, and calculate the obligation to pay termination compensation so that the rights of workers can be fulfilled in accordance with the applicable regulations.