Acquisition Does Not Change Employment Relationship
ACQUISITION DOES NOT CHANGE EMPLOYMENT RELATIONSHIP
Acquisition, Merger, and Consolidation of Limited Liability Companies are generally regulated in Law No. 40 of 2007 on Limited Liability Companies. Furthermore, the implementation of acquisition will involve many legal aspects which are regulated in many legal provisions.
In relation to the status of the target company's employees after the acquisition, it is regulated in Law no. 11 of 2020 on Job Creation Law as well as Law no. 13 of 2003 on Manpower.
In general, the status of the employees of the target company after an acquisition does not change. The employees are still bound by the employment relationship with the target company that remains standing. The acquisition will cause the shareholders of the target company to change, but will not cause the target company to dissolve.
However, in practice, from previous experiences, not all employees will agree with the acquisition. Those who do not agree may prefer to terminate their employment relationship (also known as PHK).
In accordance with the provisions of the Job Creation Law and the Manpower Law, employees who choose to be laid off can apply for severance pay, service pay, and compensation of rights that should have been received.
For instance, severance pay is given in the amount of 2 months' wages for employees who have worked for more than 1 year, but less than 2 years. While service pay is given in the amount of 2 months' wages for employees who have worked for 3 years or more, but less than 6 years. Lastly, compensation is given for things such as paid leave that has not been taken as well as reimbursement of other rights that are regulated in the Collective Labor Agreement (also known as PKB).
In practice, it is not uncommon for employees through their unions to ask for rights more than what is stipulated in the law. Case-by-case settlement can be carried out, in accordance with the PKB that applies to them. While the PKB itself is regulated in the Minister of Manpower Regulation No. 28 of 2014.
Said, Sudiro & Partners
Indonesian Legal Consultants
Sampoerna Strategic Square
South Tower, Level 30
Jl. Jend. Sudirman Kav. 45 - 46
Jakarta 12930 Indonesia
Phone: (62-21) 575.0983
Fax: (62-21) 575.0803
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