In the implementation of Merger & Acquisition There Are Cases On Payment of Employee Termination - Indonesia Labor Law

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2. Merger & Acquisition
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Merger means a legal action taken by one or more Companies in order
to merge with another existing Company, which causes the transfer of
assets and liabilities of the merging Companies by operation of law, to
the surviving Company and thereafter the legal entity status of the
merging Company ceases by operation of law.
Acquisition means a legal action conducted by a legal entity or an
individual to acquire the shares of the Company, resulting in the
transfer of control of such Company.

3. Employees’right on employment termination
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REASON FOR TERMINATION
TERMINATION PAYMENT PACKAGE
PAID BY EMPLOYER TO EMPLOYEE
Without Violation Of Company
Regulation
Yes, With Payment of Bigger Formula
Light Violation Of Company
Regulation
Yes, With Payment of Smaller Formula
Serious Violation Of Company
Regulation
None (Low Level Employee Gets Separation Pay,
Small Amount at Company’s discretion)
Employee Resignation
None (Low Level Employee Gets Separation Pay,
Small Amount at Company’s discretion)

4. Two companies conduct a merger
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Company A merged to Company B
Company A Company B
1. Employees of Company A are NOT WILLING to continue working in Company B
although Company B is WILLING to accept employees of Company A. In this case,
the employees are eligible for termination payment with smaller formula from
Company A, or
2. Employees of Company A are WILLING to continue working in Company B but Company B
is NOT WILLING to accept employees of Company A. In this case, the employees are
eligible for termination payment with bigger formula from Company A.

5. Acquisition of a company (change of ownership)
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Company X Company Y
Company X is acquired
by Company Y
Employees of Company X are NOT WILLING to continue working in Company Y although
Company Y is WILLING to accept employees of Company X. In this case, the employees
are eligible for termination payment with smaller formula from Company X.
Indonesia Labor Law does not regulate for a Company or an individual who acquires
the shares of another Company may reject to employ the employees from the
acquired Company

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1 Q : What if the employees demand to get termination
payment because they feel that they no longer work
for the previous company ?
A : As far as the employees still continue working in the new
Company resulted from Merger or Acquisition, the
previous company or the new company has no
obligation to issue termination payment. Indonesia
Labor Law does not necessitate Company to give
termination payment
What might happen in the process of M & A
(Merger & Acquisition) ?
Q & A

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What might happen in the process of M & A
(Merger & Acquisition) ?
Q & A
2 Q : How is the employees' service years in the previous
company related to the transfer of employment of the
employees to continue working in new Company ?
A : The liabilities of previous company related employees'
service year that affect the severance pay must be settled
with the new company. Service years of the employees are
carried forward to the new company

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What might happen in the process of M & A
(Merger & Acquisition) ?
Q & A
3 Q : What if the employees insist to get the termination
payment ?
A : Provided that employees continue to work in the new
company, company can defend its position for not
giving the termination payment

9. Reference for Comparison
TUPE – law of the UK
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10. TUPE – Law of the UK
• TUPE refers to the "Transfer of Undertakings (Protection of
Employment) Regulations 2006" as amended by the "Collective
Redundancies and Transfer of Undertakings (Protection of
Employment) (Amendment) Regulations 2014".
• The TUPE rules apply to organisations of all sizes and protect
employees' rights when the organisation or service they work for
transfers to a new employer.
• When TUPE applies, the employees of the outgoing employer
automatically become employees of the incoming employer at the
point of transfer. They carry with them their continuous service from
the outgoing employer, and should continue to enjoy the same terms
and conditions of employment with the incoming employer.
(http://www.acas.org.uk/index.aspx?articleid=1410)
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11. End of Slides
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