What does termination of employment mean?
Termination of employment means the employment relationship comes to an end. It may be initiated by the employee, initiated by the employer, or occur because a fixed-term contract ends. The process can be simple in some cases, but it can also become one of the highest-risk areas of HR management.
A termination may happen for several reasons, including resignation, poor performance, misconduct, redundancy, business closure, retrenchment, role elimination, retirement, probation failure, or expiry of a fixed-term contract. The correct process depends on the reason, the employee’s country, employment contract, length of service, employee status, and local employment law.
The word “termination” should not be used casually. In some countries, the legal treatment differs depending on whether the employee resigned, was dismissed for cause, was retrenched, or separated due to business reasons. Each scenario can affect notice, final pay, severance, documentation, and post-employment obligations.
Why termination of employment matters
Termination affects people, payroll, legal risk, business continuity, and employer reputation. A poorly handled exit can lead to disputes, delayed final pay, employee complaints, data access issues, or reputational damage among current and future employees.
From an HR perspective, the company needs to document the reason for termination, follow the required process, calculate final pay correctly, remove system access, collect company property, and manage handover. Payroll teams may need to calculate unpaid salary, unused leave, deductions, reimbursements, notice pay, severance, service appreciation pay, or other termination-related payments where applicable.
In Indonesia, Government Regulation No. 35 of 2021 covers fixed-term employment, outsourcing, working time, rest time, termination procedures, and termination-related payments such as severance pay, service appreciation pay, and compensation of rights. Other Southeast Asian countries have their own termination, redundancy, final pay, and employee protection rules.
Common types of employment termination
Termination can take several forms. The label matters because different processes and payments may apply.
Note: This table is a general guide. The legal effect of each termination type depends on the employee’s country, employment contract, facts, and current local rules.
Termination of employment in Southeast Asia
Termination rules differ significantly across Indonesia, the Philippines, Malaysia, Vietnam, and Thailand. A process used in one country should not be copied into another country without review.
In Indonesia, contract type is important. A PKWT fixed-term employee and a PKWTT indefinite-term employee may have different termination considerations. Payroll may involve final salary, THR-related treatment, BPJS records, PPh 21, unused leave, severance-related items, or compensation depending on the facts.
In the Philippines, termination may involve just causes, authorised causes, final pay, 13th Month Pay treatment, and statutory contribution records. Malaysia termination planning may involve notice, contract terms, Employment Act considerations, final wages, and statutory payroll items such as EPF, SOCSO, EIS, and MTD. Vietnam and Thailand have their own labour contract, notice, severance, social insurance, and documentation rules.
This is why a regional HR policy should be treated as a framework, not a replacement for local review.
What should employers check before termination?
Before confirming a termination, HR and management should usually review:
Note: This table is a planning checklist, not legal advice. Termination requirements may change and should be verified against local law and the specific employment facts.
Termination and hiring without a local entity
Termination can become more complex when the employee is based in Southeast Asia but the company is managed from another country. A founder, HR manager, or operations leader may want to end the role quickly, but the local employment process still needs to be followed.
If the employee is hired through an Employer of Record, the client company should coordinate with the EOR before taking any action. The EOR is usually the local legal employer, so termination documents, payroll calculations, statutory benefits, and local requirements need to be reviewed before the decision is communicated.
Weshine’s Employer of Record service can support companies hiring employees in Southeast Asia without setting up a local entity, including local employment administration and offboarding coordination. Weshine’s payroll service can also support final payroll items, payslips, and statutory payroll records.
Practical employer example
A company hires a remote operations employee in Indonesia through a local employment structure. After several months, the company decides the role is no longer needed because the function has been reorganised. Before informing the employee, the company should review the contract type, reason for termination, local process, notice, final pay, BPJS records, PPh 21, unused leave, and any termination-related payments that may apply.
This avoids a common problem: communicating the exit decision first, then discovering later that payroll, documentation, or statutory obligations were not ready.
Common mistakes employers should avoid
A common mistake is treating termination as a single HR letter. The letter is only one part of the process. Termination may also involve manager documentation, employee communication, payroll calculation, statutory records, handover, and system access removal.
Another mistake is using one termination template across all countries. A Singapore, Australian, Hong Kong, US, or other home-country template may not match the rules for employees in Indonesia, the Philippines, Malaysia, Vietnam, or Thailand.
Employers should also avoid confusing resignation, retrenchment, dismissal, and fixed-term expiry. Each situation may involve different documentation, notice, final pay, or severance treatment.
A final mistake is delaying final pay preparation. Payroll should review final salary, unused leave, deductions, reimbursements, tax, and statutory contributions as early as possible once the termination route is known.
Note: Termination rules are country-specific and can change. Employers should verify current local requirements before calculating, promising, or processing termination-related payments.
