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Implication of Merger to Employee

Mergers & Acquisitions
A decision of top management to perform merger always raises a direct impact to employees (workers), moreover when the type of merger is a horizontal merger, in which the merger is conducted by companies that have the same business activities, it will certainly bring an impact on streamlining of the structure of human resources to the companies. Accordingly, Law No. 40 of 2007 on Limited Liability Company (“Company Law”) and Law No. 13 of 2003 on Manpower (“Manpower Law”) have contained the provisions concerning the protection of the rights of employee as the result of merger.
Prior to the merger, a Merger Plan must be initially prepared. Such Merger Plan must also include the settlement procedures of the status, rights and obligations of employees of the companies as a merger must be performed, among others, with due regard to the interest of the employees. A summary of the approved Merger Plan must also be announced in writing to the employees no later than 30 (thirty) days prior to the notice for General Meeting of Shareholders. Such notice is aimed at providing an opportunity to the parties concerned including the employees to know the Merger Plan.
A merger will certainly have the impact to the employees. For that reason, Manpower Law provides a protection to employees’ right in a merger transaction. In the event of a merger, employees may opt to not continuing working with the surviving company. In such a case, the employees are still entitled to receive severance pay, service reward pay and compensation respectively in an amount equal to 1 (one) time of the formula as stipulated in Article 156 paragraphs (2), (3) and (4) of the Manpower Law. It is also possible, however, that the employees are not accepted to continue working with the surviving company. In this case the Manpower Law provides that the employees are entitled to receive severance pay in an amount equal to 2 (two) time of the formula as stipulated in Article 156 paragraph (2) as well as service reward pay and compensation respectively in an amount equal to 1 (one) time of the formula as stipulated in Article 156 paragraphs (3) and (4) of the Manpower Law.
Another implication of merger to employees is in relation to the  collective labor agreement (CLA). If both the merging and surviving companies have CLAs, then the prevailing CLA shall be the one that is more beneficial to the employees. In case it is only one company that has the CLA while the other does not have a CLA, then the existing CLA shall apply to the surviving company until the CLA expires.
Source: Ekonid