INDEX [rc.persol-group.co.jp] · and civil law transplanted during Dutch colonial rule. Indonesia...

Labor Laws

March 2019

PERSOL HR DATA BANK in APAC

INDONESIA

　Indonesia is a country that promptly ratified, before other Asian countries, the conven-tions of the International Labor Organization (ILO) such as the freedom of association, right to organize, and right to collective bargaining, and its labor laws are designed to be extremely advantageous for employees. Due cause is required upon dismissing a worker, and permission of Labor Court is even required. It should be further noted that companies are required to pay huge statutory retirement benefits upon dismissing a worker, and the minimum wage is also prescribed.

　Furthermore, activities of trade unions and coordination among trade unions are also active, workers often go on strikes, and there many cases where companies are forced to pay more than statutory retirement benefits.

　Moreover, it takes much time for a foreigner to acquire a visa, and it cannot be said that Indonesia is generous in employing foreigners. Thus, it could be said that Indonesia is one of the jurisdiction in which labor management is extremely difficult for companies.

*Overview of Common Law and Civil Law　Common Law is a legal system mainly in use in the UK and in nations formerly part of the British Empire (the US, Canada, Australia, New Zealand, etc.), which emphasizes decisions based upon traditions, customs, and prece-dent.　On the other hand, civil law developed on the European continent in nations such as France and Germany, and as a legal system compared to common law, civil law places emphasis on statutes. Japan uses a civil law legal system.

introduction

INDEX

1. Points to consider regarding labor management in Indonesia, characteristics of laborpractice in Indonesia, and the status of recent labor policy ··············································································· 3

1-1.　Regulations ····················································································································································································· 31-2.　Abundant workforce and laborer-favorable labor laws ····················································································· 31-3.　Religious consideration ·························································································································································· 41-4.　Use of Indonesian language ················································································································································· 4

2. Overview of basic labor laws of Indonesia ····················································································································· 52-1.　Legal system regarding labor issues ································································································································ 52-2.　Labor law ·························································································································································································· 52-3.　Other laws ······················································································································································································· 10

3. Duty to prepare enterprise rules and regulations in Indonesia, and contents of suchemployment handbook ················································································································································································· 12

3-1.　Duty to prepare enterprise rules and regulations ·································································································· 123-2.　Contents of enterprise rules and regulations ··········································································································· 123-3.　Dissemination ··············································································································································································· 133-4.　Changing enterprise rules and regulations ················································································································ 14

4. Overview of the wage system (bonus, retirement benefit, overtime payment) and otherlegal systems in Indonesia ·········································································································································································· 15

4-1.　Definition of wage ····································································································································································· 154-2.　Manner of payment ·································································································································································· 174-3.　Minimum wages ········································································································································································· 174-4.　Retirement allowance ······························································································································································· 184-5.　Bonus and religious festivity allowance ······················································································································· 204-6.　General Holidays ········································································································································································ 20

5. Method of and points to consider regarding ordinary dismissal, punitive dismissal, anddismissal on grounds of reorganization in Indonesia. ······························································································ 23

5-1.　Dismissal ·························································································································································································· 235-2.　Ordinary dismissal ····································································································································································· 255-3.　Punitive dismissal ······································································································································································· 265-4.　Dismissal on grounds of reorganization ······················································································································ 275-5.　Dismissal allowance ·································································································································································· 27

6. Types of foreigner passes and acquisition requirements ················································································· 286-1.　General information ································································································································································· 286-2.　Visas regarding immigration ··············································································································································· 286-3.　Working permit ··········································································································································································· 306-4.　Points to note ················································································································································································ 31

About this document ······················································································································································································ 33About the information compiled in this document ············································································································ 33Contact information regarding this document ······················································································································ 33

Company profile ··································································································································································································· 34About PERSOL Research and Consulting ································································································································ 34About PERSOLKELLY Consulting ·············································································································································· 34

1. Points to consider regarding labor management in Indonesia, characteristics of labor practice in Indonesia, and the status of recent labor policy 3

1. Points to consider regarding labor management inIndonesia, characteristics of labor practice in Indone-sia, and the status of recent labor policy

1-1.　Regulations

　 Indonesia is a country consisting of many islands including Java and Sumatra. This geographical characteristics make

its citizens diversified in religion, culture, and language. Due to this characteristic, Indonesia has a pluralistic legal system,

encompassing community based customary law called "Hukum-Adut", Islamic law in varying degrees in different provinces,

and civil law transplanted during Dutch colonial rule. Indonesia uses a civil law system similar to Japan.

　 Indonesia’s legal system is structured such that the 1945 Constitution is sovereign. Various individual laws including, law

(Undang-Undang), government regulation in lieu of law (Peraturan Pemerintah Pengganti Undang-Undang), government

regulation (Peraturan Pemerintah), presidential regulation (Peraturan Presiden), other regulations (including regional

regulation (Peraturan Daerah)) are subordinate to the 1945 Constitution. However, since some inconsistency exists within

these legal orders which remain unremedied, it is sometimes necessary to cooperate with local lawyers to be kept abreast of

updates to the laws and legal system of Indonesia.

1-2.　Abundant workforce and laborer-favorable labor laws

　 Indonesia has the world’s fourth largest population (250 million) and has been getting attention for having a potential labor

force that is estimated at more than half of its population. The size of the working population is increasing along with the

economic upturn, with the national economy realizing a GDP growth rate of 5% for past 5 years.

　Although it is estimated that the size of the labor force is increasing, in terms of labor laws, there are some considerations for

business enterprises that are launching a new business in Indonesia. For example, an employer needs to get permission from

the institute for the settlement of industrial relations disputes to fire its employees. In addition, in some cases, an employer is

obligated to pay dismissal allowance even if it is a punitive dismissal. Moreover, in Indonesia, employees tend to demand their

own rights and labor unions play an active role in defending workers’ rights. Therefore, in some industrial areas, employers

are advised to put in place measures to weather strikes and demonstrations. An employer that has above a certain number of

employees is also advised to establish a labor-management council consisting of representatives of both the employer and the

employees to better reflect the opinions of employees.

　 It is also necessary for an employer to have up-to-date information on the retirement age, as the government is planning to

gradually increase said retirement age. According to government regulation No.45 of 2015, although retirement age is 57 in

1. Points to consider regarding labor management in Indonesia, characteristics of labor practice in Indonesia, and the status of recent labor policy 4

2017, it will be increased to 57 in 2019, and 58 in 2022 respectively; this upwards progression is scheduled to continue until

the retirement age reaches 65 in 2043.

1-3.　Religious consideration

　 Indonesia is the world’s largest Islamic country and Indonesian labor law demands that an employer makes special

considerations for prayers and show respect to employees’ religious values (Act of the Republic of Indonesia Number 13 Year

2003 Concerning Manpower (hereinafter called "Labor Law"), Article 86, Paragraph 1). An employer is obligated to provide

adequate opportunity for employees to pray and worship God (Labor Law, Article 80), as well as to pay wages if employees

have to be absent from work due to their mandated participation in religious rituals (Labor Law, Article 93, Paragraph 2, Item

e). In addition, an employer is prohibited from terminating its employees on the grounds that they are absent from work as a

result of practicing what is required by their religion (Labor Law, Article 153, Paragraph 1, Item c), or for the reason that they

are of a different belief and religion (Labor Law, Article 153, Paragraph 1, Item i). Another characteristic of Indonesian labor

law regarding religion is that an employer is obligated to pay a religious festivity allowance (see also 4-5, bonus and religious

festivity allowance), which does not exist in Malaysia and Singapore.

1-4.　Use of Indonesian language

　 In Indonesia, the use of the Indonesian language is obligatory by law when signing a contract1.

　Using the Indonesian language is mandatory, even when making a collective work agreement, an individual fixed-term

contract and an enterprise’s rules and regulations (Labor Law, Article 57, Paragraph 1, Article 116, Paragraph 3). This rule has

been instituted both for the government to make administrative procedures smooth and for employees to better understand

the contents of contracts so as to protect the worker’s rights. Besides, the Labor Law stipulates that if a work agreement is

written in both the Indonesian language and a foreign language, and differences in interpretation between the Indonesian text

and the one in the foreign language subsequently arise, then the Indonesian version of the agreement shall be regarded as the

authoritative one (Labor Law, Article 57, Paragraph 3, Article 116, Paragraph 3, 4). Therefore, an employer is required to

draft most legal documents in the Indonesian language.

1.Act no.24 of 2009 National Flag, Language, Coat of Arms and National Anthem

2. Overview of basic labor laws of Indonesia 5

2. Overview of basic labor laws of Indonesia

2-1.　Legal system regarding labor issues

　The Indonesian Labor Law and the Indonesian Civil Code both define what is a work agreement. The Indonesian Civil

Code stipulates that a work agreement is an agreement in which one party, the laborer, agrees to render his/her services to

the other party, the employer, for a specific term in return for remuneration (Indonesian Civil Code, Article 1601, Item a).

The Civil Code also stipulates the obligations of employers and employees, how contracts are terminated, and the general

provisions of a work agreement. Labor issues are under the control of Department of Manpower and Transmigration which

issues cabinet orders to complement the Labor Law.

2-2.　Labor law

　The Labor Law is the fundamental code relating to labor issues and it stipulates minimum standards as to the conditions of

work.

(1) Applicable Scope

　A worker/laborer is every person who works for a wage or other forms of remuneration (Labor Law, Article 1, Paragraph

3). Due to this broad definition, under the Labor Law, a wide variety of people fall within the definition of "worker/

laborer", including migrant workers and corporate board members. The Labor Law defines an employer as individuals,

entrepreneurs, legal entities, or other bodies that employ manpower by paying wages or other forms of remuneration

(Labor Law, Article 1, Paragraph 4. Representative office is also included (Article 1, Paragraph 5 c)).

(2) Work agreement

　An individual work agreement is defined as an agreement made between a worker/laborer and an entrepreneur or an

employer, which specifies work requirements, rights and obligations of both parties (Labor Law, Article 1, Paragraph 14).

Any individual work agreement shall not violate what is stipulated in the collective work agreement (Labor Law, Article

127, Paragraph 1), and any above-mentioned violation shall be null and void by law (Labor Law, Article 127, Paragraph

2).


　When an employer hires a worker/laborer, there are 3 types of agreement as follows: 1) work agreement without a fixed

term, 2) fixed-term work agreement, and 3) daily employment contract.

　 It is assumed that, in most cases, an employer needs to hire its workforce directly, because the Labor Law prohibits an

employer from utilizing workers from enterprises that provide workers/laborers services [a contractor] for work in its core

business activities (Labor Law Article 66). If an employer contravenes this law, the employment relationship between the

worker/laborer vis-à-vis the contractor shall cease and instead change into that of an employment relationship between

the worker/laborer and the enterprise that commissioned the contractor to carry out the work (Labor Law Article 65,

Paragraph 8, 9, Article 66, Paragraph 4).

　A work agreement shall be made in 2 equally legally binding copies, 1 copy of which shall be kept by the entrepreneur

and the other by the worker/laborer (Labor Law Article 54, Paragraph 3). A work agreement cannot be withdrawn and/

or changed unless both sides in the agreement agree to do so (Labor Law, Article 55).

　A written work agreement must include the following items (Labor Law Article 54, Paragraph 1);

　　 a. The name, address and line of business

　　b. The name, sex, age and address of the worker/laborer

　　 c. The occupation or the type of job

　　d. The place, where the job is to be carried out

　　 e. The amount of wages and how the wages shall be paid

　　 f. Job requirements stating the rights and obligations of both the entrepreneur and the worker/laborer

　　 g. The date on which the work agreement commences and the period during which it is effective

　　h. The place and the date of where and when the work agreement is made

　　 i. The signatures of the parties involved in the work agreement

(The rulings in a work agreement as far as point e. and point f. above are concernedmust not run against the enterprise’s rules

and regulations, the enterprise’s collective work agreement and valid statutory registration (Labor Law Article 54, Paragraph

2).)

　A work agreement for a specified period of time must be made in writing and be written in the Indonesian language

(Labor Law, Article 57, Paragraph 1). If a work agreement for a specified period of time contravenes this provision, , said

work agreement shall be regarded as a work agreement for an unspecified period of time (Labor Law, Article 57, Paragraph

2). It also should be noted that if a work agreement is written in both the Indonesian language and a foreign language and

differences in interpretation between the Indonesian text and the one in the foreign language subsequently arise, then the

Indonesian version of the agreement shall be regarded as the authoritative one (Labor Law, Article 57, Paragraph 3).


　Types of direct employment are as follows;

(i) A work agreement for an unspecified period of time

　Those laborers who made a work agreement for an unspecified period of time are allowed to work in any part of the

employer’s business. Work agreements can be made either orally or in writing (Labor Law, Article 51, Paragraph 1)1.

In addition, an employer is obligated to provide severance pay for those who made a work agreement for an unspecified

period of time (Labor Law, Article 156).

(ii) A work agreement for a specified period of time

　A work agreement for a specified period of time can only be made for a certain job set out below (Labor Law Article 59,

Paragraph 1). An employer shall register such an agreement at the department of Manpower and Transmigration within

7 days after the individual work agreement has been made (Minister of Manpower and Transmigration Decree No.100

of 2004). Unless any reservations exist either in the collective agreement, the individual work agreement or the enterprise

rules and regulations, an employer does not have to provide severance pay. The agreement may have a maximum term of

no longer than 2 years (Labor Law, Article 59, Paragraph 4). Entrepreneurs who intend to extend work agreements for a

specified period of time shall notify the laborers contracted under the said work agreements of the intention to do so in

writing no later than 7 days prior to the expiration of the said work agreements and may only extend the work agreement

for no more than 1 year (Labor Law, Article 59, Paragraph 5). The renewal of a work agreement for a specified period of

time may only be made after a period of 30 days has passed since the work agreement for a specified period of time comes

to an end; the renewal of a work agreement for a specified period of time may only be made once and for a period of no

longer than 2 years (Labor Law, Article 59, Paragraph 6). Any work agreement for a specified period of time that does not

fulfill the above-mentioned requirements shall become a work agreement for an unspecified period of time (Labor Law,

Article 59, Paragraph 7).

1.If a work agreement for an unspecified period of time is made orally, the entrepreneur is under an obligation to issue a letter of appointment (surat pengangkatan) for the worker/

laborer. The letter should include a) the name and address of the worker/ laborer, b) the date the worker starts to work, c) the type of job or work that the worker is supposed to do,

and d) the amount of wage that the worker is entitled to (Labor law, Article 63).


　Laborers who made a work agreement for a specified period of time are only allowed to work under the following

conditions (Labor Law Article 59):

　　 a. Work to be performed and completed at one go or work which is temporary by nature;

　　b. Work whose completion is estimated at a period of time which is not too long and no longer than 3 years;

　　 c. Seasonal work; or

　　d. Work that is related to a new product, a new activity or an additional product that is still in the experimental stage or try-out

phase.

　 It is also possible to make work agreement for a specified period of time in the form of a daily contract. In the case of a

daily contract, an employer cannot permit workers to work more than 21 days a month. If the employer makes its workers

work for more than 21 days a month for 3 consecutive months, the work agreement for a specified period of time shall

become a work agreement for an unspecified period of time (Minister of Manpower and Transmigration Decree No.100 of

2004). In the case of a daily employment contract, it is mandatory to submit a written labor agreement and to register said

agreement at theMinistry ofManpower and Transmigration within 7 business days from the start of the contract (Minister

of Manpower and Transmigration Decree No.100 of 2004). In a work contract, it is necessary to specify 1) the name and

the location of the enterprise, 2) the name and address of the worker, 3) the content of the work, and 4) the amount

of wages and remuneration (Minister of Manpower and Transmigration Decree No.100 of 2004). In the case of daily

employment contracts, instead of individual labor contracts, employers may instead prepare a list of applicable workers

(Minister of Manpower and Transmigration Decree No.100 of 2004). In cases where such a worker list is compiled, the

employer is required to submit said worker list to the Department of Manpower and Transmigration within 7 business

days.

(3) Probation Period

　A work agreement for an unspecified period of time may only require a probation period for no longer than 3 months

(Labor Law, Article 60). In case that the contract is made orally, it is necessary to state that a probation period is set in

the work agreement. If the contract is silent in relation to a probation period, the probationary period will be deemed

non-existent (Interpretation of Labor Law, Article 60). Terminating workers/laborers during a probation period does not

require a decisionmade by the institute for the settlement of industrial relation disputes (Labor Law, Article 154, Paragraph

1, Item a).

　On the other hand, a work agreement for a specified period of time cannot stipulate a probation period and if a work

agreement stipulates a probation period, it shall then be declared null and void by law (Labor Law, Article 58).

(4) Working hours

　The working hours shall be arranged as followings: 7 hours a day for a total of 40 hours a week, for 6 workdays in

a week; or 8 hours a day for a total of 40 hours a week for 5 workdays in a week (Labor Law, Article 77, Paragraph 2).

Entrepreneurs are under an obligation to allow their laborers to take a breaks and leave. The period of rest or a break

between working hours shall be no shorter than half an hour after working for 4 consecutive hours and this period of rest


shall not be included in the calculation of the Employee’s working hours (Labor Law, Article 79, Paragraph 2, Item a).

(5) Collective work agreement

　A collective work agreement is an agreement resulting from negotiations between an employer and a labor union2.

Provisions in any individual work agreement shall not run contrary to the collective work agreement and should there

be any stipulations under the individual work agreement that runs contrary to the collective work agreement, then those

particular provisions in the individual work agreement shall be declared null and void by law (Labor Law, Article 127,

Paragraph 1, 2). If an employment/work agreement does not contain the rules and regulations that are stipulated in the

collective work agreement, then the stipulations specified in the collective work agreement shall apply (Labor Law, Article

128).

　 In each enterprise, only 1 collective work agreement can be made that shall apply to all laborers working in the enterprise

in question (Labor Law, Article 118)3. A collective work agreement that has been signed by those making the agreement

must be submitted to the prefecture/city (if the employer is located in the same prefecture or city), the state (if the employer

is located in the different prefecture or city) and the Director General of Industrial Relations and Labor Social Security

Development (if the employer is located in the different state). After being reviewed by the person in charge, the collective

work agreement shall be signed and registered at the department of Manpower and Transmigration (Labor law, Article

132, Paragraph 1, 2).

　A collective work agreement shall at least contain the following (Labor Law, Article 124, Paragraph 1):

　　 a. The rights and obligations of the employer

　　b. The rights and obligations of the trade/labor union and the worker/laborer

　　 c. The period during which and the date starting from which the collective work agreement takes effect

　　d. The signatures of those involved in making the collective work agreement

　The entrepreneur and the trade/labor union are under an obligation to inform all the enterprise’s workers/laborers of

the contents of the collective work agreement or any changes made to it (Labor Law, Article 126, Paragraph 2). The

entrepreneur must print and distribute the text of the collective work agreement to each worker/laborer at the enterprise’s

own expense (Labor Law, Article 126, Paragraph 3). A collective work agreement shall remain in force for no longer than

2 years from commencement and the time which the collective work agreement remains in force may be extended for

no longer than 1 year based on a written agreement between the entrepreneur and the trade/labor union(s) (Labor Law,

Article 123, Paragraph 1, 2).

2.A labor union is defined as an organization composed of a majority (6 out of 10) of all workers/laborers or an organization that received a majority of votes of all workers (Labor law,

Article 119, 120).

3.If there is only one trade/labor union in an enterprise, the only trade/labor union in the enterprise shall have the right to represent workers/laborers in negotiating a collective work

agreement with the entrepreneur of the enterprise provided that more than 50% of the total number of workers/laborers who work in the enterprise are members of the trade/labor

union in question (Labor Law, Article 119, Paragraph 1). In case there is only one trade/labor union in an enterprise but the number of its members does not exceed 50% of the total

workforce in the enterprise, the trade/labor union in question may represent workers/laborers provided that a vote is held on this issue that confirms that the trade/labor union has the

support of more than 50% of the total number of workers in the enterprise (Labor law, Article 119. Paragraph 2). If the support of more than 50% of the enterprise’s workforce is not

obtained, the trade/labor union concerned may once again put forward its request to negotiate a collective work agreement with the entrepreneur after a period of six (6) months is

passed subsequent to the initial vote (Labor law, Article 119, Paragraph 3).


2-3.　Other laws

(1) Laws related to labor unions

　 Indonesia is a signatory of and has ratified the Freedom of Association and Protection of the Right to Organize

Convention (ILO convention No. 87) and the Right to Organize and Collective Bargaining Convention (ILO convention

No. 98). Indonesia thus pays careful attention to labor-management relations compared to its neighboring countries. The

law in relation to labor unions is as follows.

(i) Act No.21 of 2000 Concerning Trade Union/Labor Union

　The law stipulates that a properly registered Trade Union/Labor Union has the the right to a) Negotiate a collective

labor agreement with the management, b) Represent workers/laborers in industrial disputes, c) Represent workers/laborers

in manpower institutions, d) Establish an institution or carry out activities relating to efforts to improve workers/ laborers’

welfare, and e) Carry out other manpower or employment-related activities that do not run contrary to national statutory

rules and regulations currently in force (Article 25).

(ii) Act No. 2 of 2004 Concerning Industrial Relations Disputes Settlement

　The entrepreneur and the worker/laborer or the trade/ labor union are under an obligation to make efforts to settle any

industrial relations dispute they have through deliberations aimed at reaching a consensus, but if a consensus is not reached

after the deliberations, then the entrepreneur and the worker/ laborer or the trade/ labor union shall have the industrial

relations dispute settled through procedures for the settlement of industrial relations disputes that are determined and

specified by legislation (Labor Law, Article 136, Paragraph 1, 2).

　Act No. 2 of 2004 Concerning Industrial Relations Disputes Settlement (Industrial Relations Disputes Settlement

Law) applies to the issues relating to worker’s rights, benefits (such as changes to the work contract), or termination of

employment between an employer and laborers including labor unions, as well as to disputes within labor unions, which

stipulates procedures for methods of dispute settlement such as bilateral negotiations and arbitration. It should be noted

that the organization in charge differs depending on the method of dispute resolution, such as mediators, arbitrators, the

institute for the settlement of industrial relations disputes and the Supreme Court.

(2) Social security

Act No.24 of 2011 Social Security Organizing Agencies

　 Indonesia had a social security system called "Jaminan Sosial Tenaga Karja (JAMSOSTEK)", but, since 2014, this

was replaced by a new system called Badan Penyelenggara Jaminan Sosial (BPJS) which was created by new legislation


introduced in 20114. Under the new legislation, foreign laborers who are working in Indonesia for more than 6 months,

as well as Indonesian laborers, are obligated to join the Old Age Security Program, Pension Security Program, Health Care

Security5, Occupational Accident Security Program, and Death Security Program. Laborers are required to fund these

insurances at a specified rate excluding worker’s accident compensation insurance; which employers are required to fund

excluding death insurance.

(3) Occupational safety of workers and social welfare

Act No.1 of 1970 Occupational Safety and Health

(4) Foreign workers

Act No.9 of 1992 Concerning Immigration

　The law regulates immigration including passports, discontinuation, rejection, and investigatory authority.

Presidential Regulation No. 20/2018 on the Use of Foreign Workers in Indonesia

　This Presidential Regulation contains the new regulations which governs the utilization and working permits for foreign

employees. One of themain changes of this Presidential Regulation simplifies the work and stay permit application process,

including removing the requirement for an employer to obtain an Expatriate Work Permit (Izin Mempekerjakan Tenaga

Kerja Asing (IMTA)) to employ a foreign employee. This Presidential Regulation was issued on 29 March 2018 and will

be implemented on 29 June 2018.

4.Jaminan Sosial Tenaga Karja (JAMSOSTEK) is no longer valid (Article 64) The new social security system is under the control of Social Security Organizing Agency for Manpower

and Social Security Organizing Agency for Health.

5.Presidential regulation No.111 of 2013

3. Duty to prepare enterprise rules and regulations in Indonesia, and contents of such employment handbook 12

3. Duty to prepare enterprise rules and regulationsin Indonesia, and contents of such employment hand-book

3-1.　Duty to prepare enterprise rules and regulations

(1) Duty

　Every enterprise which employs no less than 10 workers/laborers is under an obligation to create a set of enterprise rules

and regulations that shall come into force after being made legal by a Minister or another government official appointed

to act on behalf of the Minister (Labor Law, Article 108, Paragraph 1). The obligation to have a set of legalized enterprise

rules and regulations, however, does not apply to enterprises that already have a collective work agreement (Labor Law,

Article 108, Paragraph 2).

(2) Things to consider

　 It should be noted that a) enterprise rules and regulations are only effective for a maximum of 2 years, b) both interviews

and recommendations of representatives of workers are required, c) it is obligated that enterprise rules and regulations

are written in the Indonesian language, d) it is obligated that an employer informs and explains its enterprise rules and

regulations to its laborers.

　Also, where individual work agreements are concerned, binding provisions will be contained in the following; 1) labor

related legislation setting labor laws, 2) a collective work agreement, 3) an individual work agreement, and 4) the enterprise

rules and regulations.

3-2.　Contents of enterprise rules and regulations

(1) Matters to be included in the articles of incorporation

　Enterprise rules and regulations shall at the minimum, contain stipulations concerning (Labor Law, Article 111):

　　 a. The rights and obligations of the entrepreneur

　　b. The rights and obligations of the worker/laborer


　　 c. Working conditions/ requirements

　　d. Enterprise discipline and code of conduct

　　 e. The period of validity (maximum 2 years)

(2) Procedure to make enterprise rules and regulations

　Enterprise rules and regulations shall be formulated by taking into account the recommendations and considerations

from the enterprise’s worker/laborer’s representatives. If a trade/labor union has already been established in the enterprise,

the worker/laborer’s representatives shall be the trade/labor union’s officials (Labor Law, Article 110, Paragraph 1, 2, and

3).

　 If the period of 30 workdays for legalizing the enterprise rules and regulations has elapsed but the Minister or the

appointed government official1to act on behalf of the Minister has not legalized them yet, then the enterprise rules and

regulations in question shall be assumed to have been legalized (Labor Law, Article 112, Paragraph 2). Approval will

be given by the government authorities within 7 business days of the acceptance of the enterprise rules and regulations

(Minister of Manpower and Transmigration regulation, No 16 of 2011).

　Within a period of no later than 14 workdays after the date on which the written notification that the submitted

enterprise rules and regulations do not meet the requirements is received by the entrepreneur, the entrepreneur is under

an obligation to resubmit a corrected version of the enterprise rules and regulations to the Minister or government official

appointed to act on the Minister’s behalf (Labor Law, Article 112, Paragraphs 3, and 4).

　There is no regulation stipulating the contents of enterprise rules and regulations. The contents are subject to corporate

needs including grounds of disciplinary actions, warning letters, confidentiality clauses, non-compete clauses, and matters

concerning working conditions such as wages, paid holidays, and bonuses.

3-3.　Dissemination

　The entrepreneur is under an obligation to communicate and explain to workers/laborers all of the enterprise rules and

regulations and of all changesmade to said enterprise rules and regulations (Labor Law, Article 114). These rules and regulations

are, in practice, communicated through notices, distribution of said rules and regulations, and orientations.

1.Depending on the location of the enterprise, the government authority to be submitted differs. If the enterprise has branch offices across the country, the government authority in

charge should be the one that governs a larger jurisdiction (If the enterprise has no branch office, it will be the official of the Department of Manpower and Transmigration in the

prefecture/city where it is located. If the enterprise has branch offices across the country, it will be the Director General of Industrial Relations and Labor Social Security Development.

If the enterprise is located across prefectures/cities, but they are all within the same state, the government authority in charge will be the officials of the department of Manpower and

Transmigration in the state).


3-4.　Changing enterprise rules and regulations

　Any changes to enterprise rules and regulations prior to their expiration can only be made on the basis of an agreement

between the entrepreneur and the workers/ laborers’ representatives. Should such changes be made, the new enterprise rules

and regulations resulting from the agreement shall then be made legal by theMinister or another government official appointed

to act on behalf of the Minister (Labor Law, Article 113). This legislation prevents laborers from being pushed into a

disadvantaged position.

　The entrepreneur is under an obligation to tell and explain to the worker/laborer all the enterprise rules and regulations and

all changes made to them (Labor Law, Article 114).

4. Overview of the wage system (bonus, retirement benefit, overtime payment) and other legal systems in Indonesia 15

4. Overview of the wage system (bonus, retirementbenefit, overtime payment) and other legal systems inIndonesia

4-1.　Definition of wage

(1) Wage

　Wages consist of 1) fixed pay, consisting of base salary and fixed allowance, 2) variable compensation, and 3) overtime

payment. It should be noted that there is a legislation that stipulates that basic salary must be more than 75 % of fixed

allowance (Labor Law, Article 94).

(2) Payment system

　An employer should devise a payment system that takes into account the length of service and performance of laborers

and must submit it to the government authority (Government regulation No.78 of 2015 and Regulation No.1 of 2017 on

Wage Structure and Scale). The payment system should be submitted together with the enterprise rules and regulations

as well as the collective work agreement. If an employer violates this regulation, the government authority will issue a

warning letter and may restrict business activity. An employer should make an effort to set wages by considering laborers’

job scope, responsibilities, and difficulties (Minister of Manpower and Transmigration Decree No.49 of 2004)


(3) Overtime allowance

　The working hours shall be 7 hours a day to a total of 40 hours a week for 6 workdays in a week or 8 hours a day to

a total of 40 hours a week for 5 workdays in a week (Labor Law, Article 77, Paragraph 2). The maximum overtime work

permitted is 3 hours per day and a cumulative total of 14 hours per week with the consent of laborers. Entrepreneurs who

require their workers/laborers to work overtime are under an obligation to pay overtime pay. On the other hand, persons

bearing of certain duties such as executives and managers can be excluded benefiting from overtime allowance (Minister

of Manpower and Transmigration Decree No.102 of 2004). However, because the decree does not define such persons

clearly, employers are advised to make the relevant inquiries of the government authority. In cases where an employer

would like laborers to work more than above mentioned maximum amount of overtime, the employer must submit an

"application for exempting regulations regarding working hours and break time（Ijin Penyimpangan Waktu Kerja dan

Waktu Istirahat）"to the Department of Manpower and Transmigration to obtain approval.

　The "basic wage" is defined as the calculation of the quotient of dividing the monthly wage by 173 (monthly wage/

173). Overtime payment is calculated by using the basic wage as a multiplicand, with a multiplier applied according to

the following chart:

　On top of that, if overtime work exceeds 3 hours a day, the employer is required to provide laborers with food and

drinks, which contain more than 1400 kcal (Minister of Manpower and Transmigration Decree No.102 of 2004).


4-2.　Manner of payment

(1) Manner of payment

　Wages shall be paid in the Indonesian rupiah, and an employer shall issue a detailed statement (Government regulation

No.78 of 2015).

(2) Payment period

　A worker/laborer may make an official request to the institute for the settlement of industrial relation disputes to

terminate his/her employment relationship with his/ her employer, if the employer has not paid wages at the prescribed

time for three consecutive months or more (Labor Law, Article 169, Paragraph 1, c).

4-3.　Minimum wages

　 In order to enable laborers to earn a living that is decent from the viewpoint of humanity, the government shall establish

a wage policy that protects the worker/laborer. The wage policy that protects workers/laborers shall include minimum wages

(Labor Law, Article 88, Paragraph 2, 3, item a). Entrepreneurs are prohibited from paying wages lower than the minimum

wages (Labor Law, Article 90, Paragraph 1, Article 91, Paragraph 1).

　The specific minimum wages of specific employees is determined by the sector-based minimum wages within a given

province or district/ city (Labor Law, Article 89, Paragraph 1). In Indonesia, the minimum wages are decided and publicized

in each province, district, and city annually by the end of November. As mentioned, since sector-based minimum wages are

determined regionally, it is recommended that an employer should make inquiries in each region regarding the applicable

minimum wage. Published minimum wages are revised annually and come into force on 1 January of the following year.

The formula of calculating the rate of increase of minimum wages is "inflation rate + economic growth rate" (Governmental

regulation No.78 of 2015). In 2018, it was set at 8.71% which is the sum of 3.72% (the inflation rate of the previous year)

and 4.99% (the previous year’s economic growth rate).

　Whosoever violates above-mentioned regulation shall be subject to criminal prosecution, and on conviction, carries a

custodial sentence of a minimum of one (1) year and a maximum of four (4) years and/or a fine of a minimum of

Rp100,000,000 and a maximum of Rp400,000,000 (Labor law, Article 185).


4-4.　Retirement allowance

　Retirement allowance includes Severance Pay, Reward for Service, Compensation Pay andDetachmentMoney. The method

of calculation of the retirement allowance is defined in the Labor Law as follows (Here, "wage" means fixed pay that includes

basic salary and fixed allowance). Since specific formulae for each payment is stipulated in the Labor Law for each grounds of

dismissal, it is necessary for laborers to consult the legislation in force at the time of retirement.

(1) Severance Pay

　The calculation of severance pay shall at the minimum, be at least as follows (Labor Law, Article 156, Paragraph 2);

(2) Reward for service

　The sum of money to be paid as a reward for service rendered during the worker/ laborer’s term of employment shall

be determined as follows (Labor Law, Article 156, Paragraph 3);


(3) Compensation Pay

　Compensation pay shall include following (Labor Law, Article 156, Paragraph 4):

　　 a. Entitlement to paid annual leave that has not expired that the worker/ laborer has not taken;

　　b. Costs or expenses of transporting the worker/ laborer and his or her family back to the point of hire where he or she was

recruited and hired to work for the enterprise;

　　 c. Compensation for housing allowance, medical and health care allowance is determined at fifteen percent (15%) of the

severance pay and/ or reward for years of service pay for those who are eligible to receive such compensation; and

　　d. Other compensation that is stipulated under the individual work agreement, the enterprise rules and regulations or the

collective work agreement.

(4) Detachment Money

　An employer shall pay detachment money when a laborer resigns of his or her own will (Labor Law, Article 162) or

when the employer terminates laborers (Labor Law, Article 158, 168). Since the amount of payment and the payment

conditions will be stipulated in the collective work agreement, the enterprise rules and regulations, and the individual work

agreement, it is in practice, necessary for an employer to acquire the consent of employee to terminate their employment.

In addition to this, some employers voluntarily provide certain allowances in the collective work agreement for those

employees who were terminated for disciplinary reasons or absenteeism.


4-5.　Bonus and religious festivity allowance

(1) Bonus

　The Labor Law does not contain any provisions regarding bonuses. Therefore, an employer is not obligated to pay

bonuses, unless if the employer has a collective work agreement or an individual work agreement which contains provisions

stating that the employer will pay a bonus.

(2) Religious festivity allowance

　 In Indonesia, instead of providing bonus, the Labor Law provides for a religious festivity allowance (Tunjangan Hari

Raya (THR)). An employee who is employed for a period of one month or more is entitled to a prorated amount of THR

in cash (Minister of Manpower and Transmigration regulation No.6 of 2016).

　Although the religious festivity allowance should be paid 7 days in advance of each religious festivity, in practice, it is

common that the allowance is paid before Idul Fitri Day.

4-6.　General Holidays

(1) Holidays

　 In principle, when employees work on a public holiday, the same amount of wages will be paid as would be for work

on a weekend. Public holidays in 2018 are as follows:


(2) A long period of rest

　 In Indonesia, an employer may establish a long period of rest. The application of the legislation concerning a long period

of rest is to be determined and specified in the relevant individual work agreement, the enterprise’s rules and regulations

or a collective work agreement (Labor Law, Article 79, Paragraph 3). In the 7th and 8th years of an employee’s service, a

long period of rest if to be awarded to the said employee, where the said employee has worked for 6 consecutive years for

the same enterprise. The said long period of rest is to be for at least 1 month of the aforementioned 7th and 8th years of

service, for a cumulative total of not less than 2 months. Where such long period of rest has been awarded, the employee

to whom the period of rest was awarded to will not be entitled to the annual leave that would otherwise be entitled to had

the long period of rest not been awarded. (Labor Law, Article 79, Paragraph 2, Item d).

(3) Holiday for prayer

　Entrepreneurs are under an obligation to provide workers with adequate opportunity to pray to and/ or worship God

as required by their religions (Labor Law, Article 80). Entrepreneurs are required to pay the worker/ laborer’s wages even if

the worker/ laborer does not perform work as a result of practicing or observing religious obligations ordered or required

by their religion (Labor Law, Article 93, Paragraph 2, Item e).


(4) Congratulatory or compassionate leave

　The entrepreneur shall be obliged to pay the worker/ laborer’s wages if the worker/ laborer does not perform work due

to the following reasons (Labor Law, Article 93, Paragraph 2, Item c, Paragraph 4).

(5) Paid annual leave

　Entrepreneurs are under an obligation to grant their workers/laborers annual leave. The minimum amount of annual

leave to be granted is to be no less than 12 workdays if the worker/laborer works for 12 consecutive months (Labor

Law, Article 79, Paragraph 2, Item c). Annual leave in accordance with the minimum amount of annual leave shall be

determined and specified in the individual work agreement, the enterprise’s rules and regulations or the collective work

agreement (Labor Law, Article 79, Paragraph 3).

(6) Other regulations including medical leave

　 If the worker/laborer is issued a doctor’s statement, the said worker/laborer may take medical leave for an unrestricted

amount of time. The amount of wages payable to workers who have taken ill shall be determined as follows (Labor Law,

Article 93, Paragraph 3). As an employer, it should be noted that the regulation regarding medical leave differs from Japan

in that the employer is not allowed to dismiss employees due to said employee taking medical leave of 1 year or more.

　An employer is required to pay an employee’s wages if the employee is absent from work as he/ she is voting in an

election.

5. Method of and points to consider regarding ordinary dismissal, punitive dismissal, and dismissal on grounds of reorganization in Indonesia. 23

5. Method of and points to consider regarding ordi-nary dismissal, punitive dismissal, and dismissal ongrounds of reorganization in Indonesia.

5-1.　Dismissal

(1) General information

　 In Indonesia, the Labor Law imposes severe restrictions on dismissal. For instance, the Labor Law strictly defines the

situation where an employer can fire its employees. Also, in order to fire its employees, the employer is required to wait

for a decision made by the institutes/agencies for the settlement of industrial relations disputes. Even in cases of punitive

dismissal, the employer is required to pay a dismissal allowance under the Labor Law.

　The entrepreneur, the worker/laborer and or the trade/labor union, and the government must make all efforts to prevent

termination of employment from taking place (Labor Law, Article 151, Paragraph 1). If in spite of all efforts, termination

of employment remains inevitable, then, the intention to carry out the termination of employment must be negotiated

between the entrepreneur and the trade/labor union to which the affected worker/laborer is a member of, or between the

entrepreneur and the worker/laborer to be dismissed if the worker/laborer in question is not a union member (Labor Law,

Article 151, Paragraph 2). If the negotiation fails to result in any agreement, the entrepreneur may only terminate the

employment of the worker/laborer after receiving a decision from the institute for the settlement of industrial relation

disputes (Labor Law, Article 151, Paragraph 3). Any termination of employment that is carried out without fulfilling

what is stipulated in Article 151 shall be declared null and void by law and the entrepreneur will be obligated to reemploy

the said worker/laborer and pay all wages and entitlements which the affected worker/laborer should have received (Labor

Law, Article 151, Paragraph 1, Article 170).

　There are however, circumstances elucidated belowwhere a decisionmade by the institute for the settlement of industrial

relations disputes is not necessary.

　・In cases where a worker/laborer has stolen or smuggled goods, given false or falsified information, has gotten drunk or

consumed narcotics in the working environment, has committed immorality/indecency, has attacked, battered, or threatened

co-workers, has persuaded co-workers or the entrepreneur to engage in an illegal activity, has destroyed property belonging to

the entrepreneur, has committed other wrongdoings within the working environment, which call for imprisonment for 5 years


or more (Labor Law, Article 170, Article 158, Paragraph 1)1

　・In cases where the worker/laborer is unable to perform his/her work after six (6) months from the initiation of the legal process

associated with legal proceedings taken against him/her for a crime that he/she is alleged to have committed and not because

of a complaint filed by the entrepreneur. (Labor Law, Article 160 Paragraphs 1, 3 and 6, and Article 170).

　・In cases where the court finds the worker/laborer guilty of a crime (Labor Law, Article 160, Paragraphs 5 and 6)

　・In cases where the entrepreneur is found not guilty of committing the following acts after being accused of such by the worker/

laborer by the institute for the settlement of industrial relation disputes (Labor Law, Article 169, Paragraphs 1 and 3, and

Article 170)

　・The following cases as defined in Article 154 of the Labor Law.

　　　 a. The affected worker/laborer is still on probation provided that such has been stipulated in writing beforehand

　　　b. The affected worker/laborer makes a written request for resignation at his/her own will with no indication of being

pressurized or intimidated by the entrepreneur to do so (Ex: Labor Law, Article 170, 162); or the employment relationship

comes to an end according to the work agreement for a specified period of time for the first time

　　　 c. The affected worker/laborer has reached a retirement age as stipulated under work agreements, enterprise rules and

regulations, collective work agreements, or laws and regulations

　　　d. The affected worker/laborer dies

(2) The process of dismissal

　A dismissal must be done accordance with the relevant provisions of the Labor Law and the Industrial Relations Disputes

Settlement Law. If the negotiation fails to result in any agreement, the entrepreneur may only terminate the employment of

the worker/ laborer after receiving a decision from the institute for the settlement of industrial relation disputes (Labor Law,

Article 151, Paragraph 3). Any termination of employment that is carried out without fulfilling the stipulated procedure

shall be declared null and void by law (Labor Law, Article 170). In cases where an employee is to be dismissed at the

entrepreneur’s behest, the process of the dismissal should be as follows.

　 In cases where a worker/laborer resigns of his/her own will, a decision made by the institute for the settlement of

industrial relations disputes is not necessary, the worker/laborer must submit a resignation letter [to the management] no

1.In cases that an employer fires its laborers based on the Article 158 of the Labor Law, waiting until the employee is convicted is highly recommended in order to to prevent future

conflicts and to hew to the principle of the presumption of innocence. This is because that while there is case law, where the constitutionality of Article 158 of the Labor Law and its

related provisions apropos of Article 27 of the Indonesian Constitution was contested in the constitutional court (Case No. 012/PUU-I/2003), the debate over the scope of the decision

has not been settled. Another reason is that a subsequent decision made by Minister of Manpower and Transmigration (Minister of Manpower and Transmigration Decree No.13 of

2005) ruled that it is possible for an employer to dismiss an employee after verifying that said employee has been convicted in a criminal trial.


less than 30 days prior to the date on which he/she will cease to work (Labor Law, Article 162, Paragraph 3, Item a).

　Even when a worker/laborer resigns of his/her own will, some employers register the said resignation at the institute for

the settlement of industrial relations disputes in order to pre-empt later disputes between the employer and the worker/

laborer.

(3) The process of dismissal

　 It should be noted that the Labor Law stipulates that the entrepreneur is prohibited from terminating the employment

of a worker/laborer because of the following reasons (Labor Law, Article 153, Paragraph 1):

Restrictions on dismissal

　 a. The worker/laborer is absent from work because he/she has taken ill as attested by a written statement from the physician who

treats him/her provided that he/she is not absent from work for a period of longer than 12 consecutive months consecutively

　b. The worker/laborer is absent from work because he/she is fulfilling his/her obligations to the State in accordance with what is

prescribed in the valid statutory legislation

　 c. The worker/laborer is absent from work because he/she is practicing what is required by his/her religion

　d. The worker/laborer is absent from work because he/she is getting married

　 e. The worker/laborer is absent from work because she is pregnant, giving birth to a baby, having a miscarriage, or breast-feeding

her baby

　 f. The worker/laborer is related by blood and or through marriage to another worker in the enterprise unless so required in the

collective work agreement or the enterprise’s rules and regulations

　 g. The worker/laborer establishes, becomes a member of and/or an administrator/official of a trade/ labor union; the worker/

laborer carries out trade/labor union activities outside working hours, or during working hours with permission by the

entrepreneur, or according to that which has been stipulated in the individual work agreement, or the enterprise’s rules and

regulations, or the collective work agreement

　h. The worker/laborer reports to the authorities a crime committed by the entrepreneur

　 i. Because the worker/laborer is of a different understanding/belief, religion, political orientation, ethnicity, color, race, sex,

physical condition or marital status

　 j. Because the worker/laborer is permanently disabled, ill as a result of a work accident, or ill because of an occupational disease

whose period of recovery cannot be ascertained as attested by a written statement made by the physician who treats him/her

5-2.　Ordinary dismissal

　 In Indonesia, terminating a worker/laborer by way of a so called an "ordinary dismissal" meaning dismissal on grounds

such as poor performance as would be possible in Japan is prohibited. Therefore, it is necessary for entrepreneurs to scrutinize

candidates by contemplating several factors including the various applicable work agreements.


5-3.　Punitive dismissal

(1) Warning letter

　 In Indonesia, the process for the issuing of warning letters is regulated by the Law. The said process governs the

issuance for the first, second, and third warning letters. The entrepreneur must define the violations which provide

grounds for the issuing of each escalating stage of warning letter in the individual work agreement, the enterprise’s rules

and regulations, or the enterprise’s collective work agreement (Ex: pay reduction2). The entrepreneur may terminate the

employee’s employment after the entrepreneur precedes the termination with the issuance of the first, second and third

warning letters (Labor Law, Article 161, Paragraph 1). It should be noted that unlike Japan, even punitive dismissals

require permission from the institute for the settlement of industrial relations disputes settlement. This is elaborated on

in the following passage.

　The process of issuing warning letters is as follows. First, an employer issues a warning letter after confirming that a

violation as defined in the various aforementioned documents warranting the issuance of a warning letter has taken place.

If any further violation is committed within 6 months from the issuing of the first warning letter, the employer can issue

another warning letter in accordance with the table below. After issuing the third warning letter, the employer may then

make a disciplinary dismissal. The 6-month period is set such that there are opportunities for the laborer in question to

be reevaluated. If the laborer does commit any such violation during the 6‒ month period, the accumulation of warning

letters will be reset and any subsequent violation will be treated as the first violation (see Labor Law, Article 161, Paragraph

2).

　 In relation to the contents of the warning letters, an employer is may not unilaterally define the grounds for issuing the

warning letters, because it is necessary for the employer to reach an agreement with the laborer, including the labor union

when setting out the said rules. Also, if these grounds were agreed to by the laborer, but are in fact advantageous to the

employer, the process of issuing the warning letters should be done carefully, because the Department of Manpower and

Transmigration, which makes final decision, may not approve the decision made by the employer.

(2) The process of punitive dismissal

　An employer can impose a punitive dismissal where the employee commits further violations subsequent to the issuing

of the third warning letter. Subsequent to the dismissal, the employer is required to seek authorization from the institute

for the settlement of industrial relations disputes.

(3) Points to note

　 It should be noted that, even in the case of punitive dismissal, an employer is required to pay a dismissal allowance.

2.For example, the entrepreneur can define being late for work as a ground for issuing the first warning letter and committing a criminal offense as a ground for issuing the third warning

letter.


　An entrepreneur may terminate the employment of a worker/ laborer if the worker/ laborer has been absent from work

for no less than 5 consecutive workdays without submitting a written account supplemented with valid evidence to the

entrepreneur. The entrepreneur must also have properly summoned him or her twice in writing as such absenteeism may

disqualify the worker/ laborer in question from continuing his or her employment (Labor Law, Article 168, Paragraph 1).

5-4.　Dismissal on grounds of reorganization

　The labor law strictly defines the situations where an entrepreneur can dismiss an employee on grounds of reorganization

(Labor Law, Article 164, 165). Where an employer temporarily dismisses laborers due to the enterprise encountering financial

difficulties (a so-called layoff), the employer may be required to pay all fixed pay including basic salary and fixed allowance.

Grounds of reorganization

　 a. The enterprise has to be closed down due to continual losses it suffers for two years consecutively or force majeure (Labor Law,

Article 164, Paragraph 1)

　b. The enterprise has to be closed down and the closing down of the enterprise is caused neither by continual losses for 2 years

consecutively nor force majeure but because of rationalization (Labor Law, Article 164, Paragraph 3)

　 c. Any other reasons such as closing down or bankruptcy (Labor Law, Article 164, Paragraph 3, Article 165)

5-5.　Dismissal allowance

　For information relating to dismissal allowance, refer to chapter 4 on "wage". Since the amount of payment differs according

to the grounds of dismissal, it is advisable to consult the relevant legislation when making a decision on termination.

6. Types of foreigner passes and acquisition requirements 28

6. Types of foreigner passes and acquisition require-ments

6-1.　General information

　Regarding hiring of foreign nationals, it should be noted that an entrepreneur and a worker/labor are advised to keep an eye

on changes to the relevant laws due to frequent systemic reform in this respect. Indeed, the government issued new regulations

several times in 2015, which drastically altered previous modes of operation and generated disruption in the field.

　 In this regard, on 29 March 2018, the President issued Presidential Regulation No. 20/2018 on the Use of Foreign Workers

in Indonesia (Regulation 20/2018). Regulation 20/2018 will come in force three months after its issue date on 29 June

2018. Regulation 20/2018 revokes Presidential Regulation No. 72 of 2014 on Utilization of Foreign Employee and the

Implementation of Education and Training for Accompanying Employee. However, implementing regulations of Presidential

Regulation No. 72 of 2014 remains valid as long as its provisions do not contravene the provisions of Regulation 20/2018.

　The Regulation 20/2018 contains the new regulations which governs the utilization and working permits for foreign

employees. One of the key provisions of this Presidential Regulation simplifies the work and stay permit application process,

including removing the requirement for an employer to obtain an Expatriate Work Permit (Izin Mempekerjakan Tenaga Kerja

Asing (IMTA)) to employ a foreign employee.

　According to the Regulation 20/2018, the limited stay visa (Visa Tinggal Terbatas (VITAS)) and the temporary stay permit

(Izin Tinggal Terbatas (ITAS)) have been turned into one process. The VITAS and the ITAS can now be applied together to

the Indonesian Embassy in the foreign country. ITAS will be given to the foreigners in the immigration inspection gate.

6-2.　Visas regarding immigration

　This chapter introduces visas for the purpose of working or business. To work in Indonesia, acquiring a working visa is

necessary. It should be noted that even for a business trip, a working visa and a working permit will be necessary in certain

situations, such as 1) business instruction at a factory, 2) technical guidance, and 3) the repair and maintenance of machines.

　 In recent years, the government has enhanced immigration enforcement in industrial areas and Jakarta. Foreign nationals

are asked to produce their passport, a residency permit, or visas. This has been not only for those who reside in Indonesia but

also those who are in Indonesia temporarily for business travel. As such, obtaining updated information regarding immigration

visas through the Indonesian Embassy in Tokyo1is recommended.

　As mentioned above, Regulation 20/2018 simplifies the work and stay permit application process to employ a foreign

1.Indonesian Embassy in Tokyo: https://kbritokyo.jp/


employee. However, it should be noted that the details of procedures will be further regulated in the regulations to be issued

byMinistry of Manpower and theMinistry of Law and Human Rights. The following description is pursuant to the provisions

then in force.

(1) Working visa (312)

　This is a visa for the purpose of working in Indonesia. It is valid for a maximum of 1 year2. The documents necessary to

apply for this visa differ according to the duration of visit. It is necessary for foreign enterprises to apply at the Indonesia

Investment Coordinating Board or Regional Capital Investment Coordination Board. It is also noted that getting a VBS

number and a recommendation from the Department of Manpower and Transmigration is a precondition to getting the

visa.

　The process of issuing a working visa is complicated compared to the neighboring countries. Those who are applying

for a working visa need to get an Expatriate Manpower Utilization Plan (RPTKA), a recommendation letter for the issuing

of a visa (TA-01), Limited Stay Visa (Visa Tinggal Terbatas (VTT)), and a Temporary Stay Permit (ITAS) within a given

period. Since the list of documents that must be submitted is subject to change, asking the government authorities for

updated information is recommended.

(2) Multiple Entry Business Visa (D212)

　This type of visa is issued for one year and within this year visa holders are allowed to visit Indonesia as many times as

they want with one limitation: each single visit must not exceed 60 days. Holders of such a visa must leave the country

after 60 days before they may re-enter. It should be noted that this visa does not allow the visa holder to work in Indonesia.

　The following documents are required to be issued a multiple entry business visa or a single entry business visa.

- Passport that is valid for at least 6 months with a copy of the passport holder’s ID and a photograph

- Filled in application form

- Official invitation letter from the company

- Official recommendation letter from the company

- Resumes

- Return airline ticket

(3) Single Entry Business Visa

(i) Single Entry Business Visa A（B211A）　This type of visa is for business and tourism, not for work. In principle, the visa holders are allowed to stay in Indonesia for

60 days with this visa. This visa may be extended on a monthly basis, up to a maximum stay duration of 6 months.

(ii) Single Entry Business Visa B (B211B)

　This type of visa allows the visa holder to work under certain circumstances. With this visa, the visa holders can work

2.Under Regulation 20/2018, an ITAS will be issued for up to two (2) years and may be extended.


1) for training, guidance and assistance of export expansion (ex: inspection of factories), 2) in the auditing of subsidiaries,

implementation of quality control and inspection, and 3) on probation in the field. In order to get this visa, documents such

as a recommendation letter from the Department of Manpower and Transmigration, Expatriate Work Permit (IMTA), and

permission from the Directorate General of Immigration (VKU-211) are necessary.

(iii) Single Entry Business Visa C (B211C)

　This type of visa is issued for journalism and film production.

(4) Visa on Arrival (213/VOA)

　This type of visa is issued for visitors of certain countries upon arrival in designated Indonesian seaports or airports.

This visa is valid for 30 days and it can be extended to up to 60 days. Getting this visa is necessary for those who wish to

visit Indonesia for more than 30 days or those who visit for business purposes3. Although this visa can be obtained for the

purpose of tourism and business, changing this visa to other types of visa is not permitted.

(5) Temporary Stay Visa (311-319)

　 In addition, there are types of temporary stay visas, such as a visa for working as experts (C312), family reunion

(C317), participating in training or research (C315), undertaking education (C316), foreign direct investors (C313, 314)

and retirement (C319).

6-3.　Working permit

　Workers of foreign citizenship can be employed in Indonesia in employment relations for certain positions and for a certain

period of time only (Labor Law, Article 42, Paragraph 4). Making inquiries of the government authority if there are any

regulations is recommended as the government may pass different regulations for different industries4. The length of this visa’s

period of validity also differs according to the industry the visa applicant will be working in. However, in general, a working

permit for a period of 12 months is issued to those who work as a manager or other higher position.

　When an employer hires a worker of foreign citizenship, an employer needs to submit an Expatriate Manpower Utilization

Plan (RPTKA), and an Expatriate work permit (IMTA)5to the government authority (See Labor Law, Article 42, Paragraph 2,

Article 43, Paragraph 1). On top of that, an employer is required to submit a copy of a Temporary Stay Permit Card (KITAS),

the work contract as well as a payment certificate of Expertise and Skills Development Fund (DPKK) to the government

3.It should be noted that if one enters Indonesia under a visa exemption and conducts business negotiations, the government will impose a fine or issue a deportation order in accordance

with Indonesian Immigration law.

4.For example, according to the decree of Energy and Mineral Resources No.13 of 2013 regarding Expatriate Utilization and Development of National Employees in Oil and Gas

Business, foreign workers in the gas and petroleum industry must, in principle, be between 30 and 55 years of age and they are not supposed to be in positions

5.Under the Regulation 20/2018, it is not required to obtain an Expatriate work permit (IMTA).


authority6.

- Copy of the passport

- Application for a work permit (IMTA)

- Limited stay permit (ITAS)

- Acceptance letter from the host company (guarantor)

- Copy of the labor contract

- Graduation certificate, Curriculum Vitae

- References from the company

- Appointment letter of the Indonesian co-worker(TKI Pendamping）- Payment certificate of Expertise and Skills Development Fund (DPKK)

- Copy of the company’s tax number (NPWP)

- Certificate of registering social security (BPJS)

　 It should be noted that the procedure above will be changed pursuant to the Regulation 20/2018 and its implementing regulations.

6-4.　Points to note

(1) Demands to hire local work force

　 In 2015, the Indonesian government issued a regulation that requires an employer to hire 10 local workers for every

foreign employee. However, the requirement is still uncertain as the regulation was repealed the very same year (Minister

of Manpower and Transmigration Regulation No. 16 and 35 of 2015、No. 35 of 2015）. Since acceptance of foreign

workers in Indonesia is based on the transfer of technology and expertise to Indonesian citizens, it can be assumed that

an employer needs to hire at least 1 local worker for every foreign worker. In order to establish how many local workers

must be hired, asking the government authority when submitting the Expatriate Manpower Utilization Plan (RPTKA) is

recommended as it may differ for varying corporate personalities and as the decision is at the discretion of the department

of Manpower and Transmigration.

(2) Limitation of foreign workers

　No worker of foreign citizenship is allowed to occupy positions relating to human resources and/or occupy certain

positions (Labor Law, Article 46, Paragraph 1). Also, these foreign workers are not allowed to work under dual employment

(Minister of Manpower and Transmigration Decree No.20 of 2004).

6.Tka online: http://tka-online.naker.go.id/default.asp


(3) Others

　 In Indonesia, foreign workers who work for more than 6 months in Indonesia are obligated to join the social security

system as well as to obtain taxation identification number (Nomor Pokok Wajib Pajak (NPWP)) (Minister of Manpower

and Transmigration Decree No.16 of 2015).

About this document 33

About this document

About the information compiled in this document

The various data and commentary presented in this document has been compiled and written by One Asia Lawyers, based on

information released at the time of this document’s creation; its accuracy and completeness are not guaranteed. In addition,

One Asia Lawyers bears absolutely no responsibility for any damages incurred as a result of the use of the information in this

document.

●Author：One Asia Lawyers

●Writing date：June/2018

Contact information regarding this document

Persol Research & Consulting Co., Think Tank Headquarters

Overseen by the Persol HR Data Bank, APAC

E-mail:[email protected]

Tel.: +81-3-6385-6888

Company profile 34

Company profile

About PERSOL Research and Consulting

PERSOL Research and Consulting is the PERSOL Group’s think tank and consulting firm.

Through surveys and research, we uncover and clarify issues surrounding people and organizations in areas such as labor

markets, human resources development, new forms of employment, and working styles. We also work to investigate and

present solutions.

We provide solutions in areas including organizational and personnel consulting, people analytics, assessments, talent

management systems, human resources development, and employee training, based on the knowledge built up through our

survey and research activities.

We link these surveys, research, and solutions organically to help solve the various problems that arise in society and

corporations.

About PERSOLKELLY Consulting

PERSOLKELLY Consulting aspires to be a leading global human resource consulting and professional services organisation

committed to shape the future workforce by empowering individuals, organisations and societies.

To further align the corporate brand strategy, PERSOLKELLY Consulting is a rebrand of BTI Consultants in Asia and

Intelligence SMC in Hong Kong. These brands combine their vast experiences and knowledge in innovative talent

development, HR & Management advisory, organisational effectiveness and insights-driven HR solutions to achieve optimal

results for their clients in the regions.

Today, PERSOLKELLYConsulting is represented in 6 countries, includingHong Kong, India, Indonesia, Malaysia, Singapore

and China (operating under Intelligence Anchor Consulting). It is also in active collaboration with PERSOL Research and

Consulting in Japan.

PERSOLKELLY Consulting is an entity within the PERSOLKELLY company, a joint venture between PERSOL Group, and

Kelly Services, Inc, forming one of the largest recruitment companies in Asia Pacific.

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