Since March 2003, employment matters in Indonesia have been governed by Law No. 13 of 2003 on Manpower (“Law No. 13/2003”). Recently, the landscape of employment law in Indonesia changed with the enactment of Law Number 6 of 2023, which ratifies the Regulation of the Government in lieu of Law Number 2 of 2022 on Job Creation (“Job Creation Law”). This new law is accompanied by several implementing regulations, including Government Regulation Number 35 of 2021 on Fixed-Term Employment Contracts, Outsourcing, Working Hours and Rest Periods, and Termination of Employment (“GR No. 35/2021”).
This article focuses on the issue of severance pay distribution in termination (PHK) cases, particularly in situations where an employee was terminated before the enactment of GR 35/2021 but only filed a lawsuit after GR No. 35/2021 came into effect. In practice, the question of how severance pay should be calculated in such cases raises an important legal issue:
“Does GR No. 35/2021 apply to termination cases that occurred before the GR No. 35/2021 was enacted?”
To address this, several legal aspects must be examined:
a. The Non-Retroactivity Principle
The principle of non-retroactivity means that laws only apply to future events and not to actions that occurred in the past. Under Article 1(1) of the 2023 Criminal Code, “No act may be punished unless it is based on a law that was already in force when the act was committed.”
However, Article 3 of the law allows an exception: newer regulations may apply if they are more favorable to the defendant or accomplice in a criminal case. This principle may influence which rule should apply in past termination disputes.
b. Comparison between Law No.13/2003 and GR No.35/2021
Generally, GR No. 35/2021, reduces the amount of compensation employers must pay upon termination compared to Law No.13/2003. The main reduction is in severance payments across nearly all grounds for termination, giving companies more flexibility in citing reasons for dismissal.
Given the exception to the non-retroactivity principle mentioned earlier, it is important to assess whether the new or old regulation is more favorable to the party involved in termination cases predating the Job Creation Law.
c. Supreme Court Circular Letter No. 5 of 2021 (“SEMA No. 5/2021”)
Although the non-retroactivity principle might apply in some cases, the Supreme Court issued SEMA No. 5/2021, which provides clear guidance on using the GR No. 35/2021, in past termination cases.
Specifically, under SEMA No.5/2021, state that if an employment dispute was filed before the issuance of the GR No. 35/2021, Law No.13/2003 applies. Whereas, if an employment dispute is filed and examined by the court after the issuance of the prior GR No.35/2021, then Law No.13/2003 would not be applicable although the case occurred before the issuance of the GR.
In essence, SEMA emphasizes that the determining factor is the date the case is filed with the court, not when the termination occurred.
d. Precedent / A Court Ruling
It is equally important to consider how judges apply these laws in practice. There is an interesting case from the Bandung Industrial Relations Court, a Case No. 225/Pdt.Sus-PHI/2024/PN Bdg, about an employee whose job ended back in 2010 when he was appointed to director by the General Meeting of Shareholders (GMS). When he got that director role, his employment automatically ended. Fast forward to 2024, he decided to file a lawsuit to claim his severance package, even though his employment had ended years earlier.
In the judgment on 14 April 2025, the judges referred to GR No. 35/2021, even though the termination of his employment happened in 2010. The Judges pointed out that since he filed the lawsuit in 2024, after GR No.35/2021 took effect, his severance pay calculations would be based on GR No. 35/2021 instead of Law No.13/2003.
Conclusion:
Based on the analysis above, the question of whether GR No. 35/2021 applies to termination cases that occurred before Law No.13/2003 and the Job Creation Law can be answered: Yes, it applies as long as the lawsuit was filed after the GR No. 35/2021 came into effect.
While the non-retroactivity principle says new rules should not apply to past events, SEMA No. 5/2021 sets the legal reference point as the filing date of the case, not the date of termination. Therefore, even if the termination happened years ago, courts may still apply GR No. 35/2021 if the legal process began after the Job Creation Law was enacted, as demonstrated in Ruling No. 225/Pdt.Sus-PHI/2024/PN Bdg.