In Indonesia’s corporate insolvency proceedings, wages disbursement for workers often faces legal uncertainty despite clear provisions under Article 95 Paragraph 4 of the Indonesia Manpower Law, which states that workers’ wages and rights take precedence in bankruptcy. However, in practice, companies prioritize state debts, curator fees, and secured creditors, creating a conflict with Article 21 Paragraph 3 of Law No. 28 of 2007 concerning tax procedures. This discrepancy has led to judicial reviews and a Constitutional Court decision affirming that workers’ wages must take precedence over tax debts.

Under the clarified ruling, workers in indefinite-term agreements terminated due to bankruptcy are entitled to severance pay, gratuity pay, and compensation. Fixed-term workers are entitled to compensation equal to their wages until the agreement’s expiration. This development aims to ensure fair treatment for workers and greater clarity in resolving corporate insolvencies. Read more on the implications of wage disbursement in insolvency proceedings here.