In one case we handled, an oversight at a single stage of the redundancy process led to far greater consequences than management had anticipated. Ironically, that stage could have been completed in less than a day.
Redundancies are never an easy decision. However, when the correct procedures are disregarded, the consequences can escalate into legal, financial and operational risks that could otherwise have been avoided.
⚠️ Here are 10 steps to bear in mind: ⚠️
Step 1: Ensure the grounds for dismissal are clear and documented.
Dismissal must be based on grounds recognised by the Labour Law: efficiency, gross misconduct, repeated breaches, or other specific grounds. ‘Not a good fit’ or ‘poor performance’ alone are not sufficient without supporting documentation.
Step 2: Check whether there are any mandatory internal procedures that must be followed first.
For performance-based redundancies: have Warning Letters 1, 2 and 3 been issued at appropriate intervals? For redundancies on efficiency grounds: has the internal process been followed in accordance with company regulations?
Step 3: Calculate the total compensation liability correctly
Severance pay, Length of Service Award (UPMK) and Compensation for Entitlements (UPH) have different calculation formulas based on length of service and the grounds for dismissal. Calculation errors here are the primary cause of labour court claims.
Step 4: Conduct bipartite negotiations and document them
The initial written invitation, the meeting recorded in the minutes, and the outcome must be documented. This is not a mere formality, it is a legal requirement that must be fulfilled before proceeding to the next stage.
Step 5: If an agreement is reached draw up a proper Collective Agreement
The Joint Agreement must meet certain formal requirements in order to be registered with the Labour Court and have enforceable status.
Step 6: Register the Joint Agreement with the Labour Court
This is a step that is often overlooked. Without registration with the Labour Court, the Joint Agreement cannot be enforced if the company subsequently fails to fulfil its commitments.
Step 7: If no agreement is reached proceed to the Department of Labour
Mediation through the Department of Labour is mandatory before a case can be brought before the Labour Court. Ensure you are well represented at this stage.
Step 8: Finalise employees’ administrative entitlements
The SKTT (Worker Certification Letter), the BPJS Ketenagakerjaan process for JKP (Unemployment Insurance), and other documents to which employees are entitled.
Step 9: Manage system access and information security
Revoke access to company email, systems and data at the appropriate time – not too early (before the official announcement) and not too late.
Step 10: Document the entire process for archiving for at least 5 years
All redundancy documents must be archived. If a claim arises 2 years later, you will need evidence that all steps were carried out correctly.
The checklist/steps above can serve as a starting point for conducting a legal review before any risks arise.