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A Severance Agreement outlines the terms and benefits when an employer and employee part ways. In Indonesia, these agreements must follow Law No. 13/2003 on Manpower, which sets minimum severance payments based on years of service and reasons for termination.

The agreement typically covers final salary, unused leave payments, pension benefits, and any additional compensation. It often includes a release clause where employees agree not to sue their former employer, plus terms about company property return, confidentiality, and non-compete restrictions. Under Indonesian law, employers must provide a written notice detailing these terms before ending employment.

Use a Severance Agreement when ending employment relationships on clear, mutually understood terms. This is especially important during company restructuring, voluntary resignations, or performance-based terminations in Indonesia, where Labor Law No. 13/2003 requires specific severance calculations and procedures.

The agreement becomes essential when dealing with senior executives, handling sensitive departures, or managing mass layoffs. It helps prevent future disputes by documenting exact payment terms, confidentiality requirements, and non-compete obligations. Many Indonesian companies use these agreements during mergers and acquisitions to protect both parties during leadership transitions.

• Voluntary Redundancy Settlement Agreement: Used when employees voluntarily accept redundancy, typically offering enhanced benefits above standard severance to encourage participation in workforce reduction programs.
• Severance Package Letter: A simpler format focused on communicating basic termination terms and severance benefits, commonly used for routine departures or when detailed negotiations aren't needed.
• Standard Severance Agreement: The most common type, covering basic termination terms, payments, and mutual releases as required by Indonesian labor law.
• Executive Severance Agreement: Enhanced version with additional provisions for senior leaders, including extended benefits, strict non-compete clauses, and detailed confidentiality terms.

• Human Resources Directors: Lead the drafting and negotiation of Severance Agreements, ensuring compliance with Indonesian labor laws and company policies.
• Company Directors: Review and authorize agreements, particularly for senior-level terminations or large-scale redundancy programs.
• Legal Counsel: Provides guidance on legal requirements, reviews terms, and ensures the agreement meets Law No. 13/2003 standards.
• Departing Employees: Review, negotiate, and sign the agreement, often with their own legal representation.
• Labor Unions: May participate in negotiations when collective bargaining agreements are involved or during mass layoffs.
• Ministry of Manpower Officials: Review agreements in dispute cases or mass terminations to ensure compliance.

• Employee Details: Gather employment history, position, salary, and benefits information to calculate severance according to Law No. 13/2003.
• Termination Context: Document the reason for separation, last working day, and any performance or disciplinary records.
• Payment Calculations: Determine severance pay, service appreciation pay, and compensation rights based on years of service.
• Company Assets: List all company property to be returned, including equipment, documents, and access credentials.
• Post-Employment Terms: Define confidentiality requirements, non-compete restrictions, and reference arrangements.
• Final Review: Our platform generates legally compliant agreements tailored to Indonesian law, ensuring all mandatory elements are included.

• Identification Section: Full names, positions, and details of both employer and employee as registered with Indonesian authorities.
• Termination Terms: Clear statement of employment end date and reason for separation under Law No. 13/2003.
• Severance Calculation: Detailed breakdown of severance pay, service appreciation pay, and rights compensation as per legal formulas.
• Payment Schedule: Specific dates and methods for severance disbursement.
• Release Clause: Mutual release of claims and obligations in Bahasa Indonesia and English.
• Non-Compete Terms: Geographic and time restrictions following local enforceability standards.
• Confidentiality Provisions: Scope of protected information and duration of obligations.
• Signature Block: Space for both parties' signatures, witnesses, and company stamp (meterai).

A Severance Agreement differs significantly from a Acquisition Agreement in both purpose and scope, though they sometimes overlap during company mergers or restructuring. While both documents handle significant business transitions, they serve distinct functions under Indonesian law.

• Primary Purpose: Severance Agreements focus on ending employment relationships and settling final compensation, while Acquisition Agreements govern the purchase and transfer of business assets or shares.
• Legal Framework: Severance Agreements must comply with Labor Law No. 13/2003 regarding mandatory termination benefits, whereas Acquisition Agreements follow Company Law No. 40/2007 and investment regulations.
• Timing and Duration: Severance Agreements typically conclude within a defined payment period, but Acquisition Agreements often include ongoing obligations and warranties.
• Parties Involved: Severance Agreements are between employer and employee, while Acquisition Agreements involve corporate entities, shareholders, and often multiple stakeholders.