In Indonesia’s fast-evolving labor landscape, workplace conflicts are inevitable — from disagreements over terminations to wage disputes. When internal resolutions fail, cases often escalate to the Pengadilan Hubungan Industrial (PHI), or Industrial Relations Court. Understanding how this process works and how to approach it strategically is crucial for both local and foreign employers operating in Indonesia.

Understanding the PHI Process

The PHI serves as a specialized court handling disputes between employers and employees concerning rights, interests, terminations, and union relationships. Before a case reaches PHI, the law requires a bipartite negotiation between the two parties. If this fails, the dispute proceeds to mediation or conciliation facilitated by the Ministry of Manpower. Only when these stages are unsuccessful can the matter be formally filed to the PHI for adjudication.

The process at PHI is generally document-heavy and time-bound, with an emphasis on written evidence such as employment contracts, internal regulations, and termination letters. Proceedings are typically concluded within 50 working days, but in practice may extend longer depending on case complexity.

Legal Framework in Indonesia

The PHI process is governed primarily by Law No. 2 of 2004 on Industrial Relations Dispute Settlement, complemented by Manpower Law No. 13 of 2003 and its amendments under Law No. 6 of 2023 (Job Creation Law). These regulations establish procedural stages, legal standing of each party, and the enforceability of PHI verdicts, which can be appealed to the Supreme Court.

Real Case in Indonesia

In 2022, a multinational manufacturing company in Bekasi faced a dispute after mass layoffs during business restructuring. Employees filed a case to PHI claiming unlawful termination and unpaid severance. The PHI ruled partly in favor of employees, emphasizing that any restructuring must follow consultation and proper notification procedures. This case underscores the importance of due process and documentation before implementing employment decisions.

Best Practices for Foreign Employers

Foreign employers should maintain clear employment contracts, implement transparent disciplinary and termination procedures, and document every decision related to employee relations. Engaging a local legal counsel early in dispute stages and ensuring compliance with mediation requirements can significantly reduce litigation risks. Moreover, building strong communication channels with employees and unions helps prevent minor issues from escalating into formal disputes.

Conclusion

While the PHI provides a structured mechanism for resolving employment conflicts, prevention remains the best strategy. A proactive approach—anchored in compliance, documentation, and fair treatment—will safeguard an organization’s reputation and minimize legal exposure.

References:

• Law No. 2 of 2004 on Industrial Relations Dispute Settlement
  
• Law No. 13 of 2003 on Manpower
  
• Law No. 6 of 2023 (Job Creation Law)