Introduction

In 2020, a mid-sized technology company in Jakarta faced revenue declines during the pandemic. Instead of forcing layoffs, management sat down with employees to discuss a fair path forward. Together, they chose a mutual termination agreement (PHK Sepakat)—a solution that gave employees dignity in exit and kept the company compliant with Indonesian labor law.

What Is PHK Sepakat?

PHK Sepakat, or mutual termination, is when employment ends based on consensus between employer and employee. Unlike resignation (employee-initiated) or dismissal (employer-initiated), it ensures that both sides agree on the terms of separation, including severance, benefits, and outstanding rights.

This approach reduces future disputes and provides certainty:

• For employers – legal clarity and reduced litigation risk.
• For employees – transparency and assurance of fair treatment.

Legal Framework

Mutual termination is governed by:

• Law No. 13 of 2003 on Manpower
• Law No. 11 of 2020 on Job Creation (Omnibus Law)
• Government Regulation No. 35 of 2021

Key points include:

• Agreements must be voluntary and in writing.
• Ideally registered with the local manpower office.
• Employees are generally entitled to severance pay and compensation, unless otherwise lawfully agreed.

Real Case in Indonesia

In 2021, a national retail chain closed multiple outlets due to financial pressures. Instead of unilateral termination, it used PHK Sepakat with hundreds of staff. Each agreement specified severance packages aligned with regulations. By taking this approach, the company avoided labor disputes and earned public recognition for fair downsizing practices.

Best Practices for Employers

1. Communicate Transparently – Share business reasons openly.
2. Document Clearly – Draft a written agreement with all details.
3. Offer Fair Compensation – Align with statutory severance formulas.
4. Consult Legal Experts – Prevent invalid or challengeable agreements.
5. Engage Manpower Authorities – Registering agreements adds extra security.

Conclusion

PHK Sepakat is not just a legal mechanism—it’s a bridge between business needs and employee rights. When managed with openness and fairness, it strengthens trust, reduces disputes, and enhances a company’s reputation in Indonesia’s labor landscape.

References

• Law No. 13 of 2003 on Manpower (Undang-Undang Ketenagakerjaan)
• Law No. 11 of 2020 on Job Creation (Omnibus Law)
• Government Regulation No. 35 of 2021 on Fixed-Term Contracts, Outsourcing, Working Hours, and Termination
• Ministry of Manpower, Indonesia (www.kemnaker.go.id)