INDONESIALabor Laws

Regulations

Indonesia is a multi-racial country consisting of many islands, including Java and Sumatra. This geographical characteristic makes for a diversity of religions, cultures, and languages of its citizens. Because of this characteristic, Indonesia has a pluralistic legal system that encompasses community-based customary law called Hukum-Adat, which is 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 regulations in lieu of law (Peraturan Pemerintah Pengganti Undang-Undang), government regulations (Peraturan Pemerintah), presidential regulations (Peraturan Presiden), and other regulations (including regional regulations [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.

Abundant workforce and laborer-favorable labor laws

Indonesia has the world's fourth largest population (over 250 million) and has attracted attention for having a potential labor force that is estimated at more than half of its population. The size of the total population and working population is increasing along with the economic upturn with the national economy realizing a GDP growth rate of 5% for the past five 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 launching new businesses in Indonesia because the country provides generous protection for workers. For example, since the Indonesian Law prescribes the grounds for dismissal, an employer needs to get permission from the institute for the settlement of industrial relations disputes to dismiss employees. In addition, in some cases, an employer is obligated to pay a dismissal allowance even if the dismissal is punitive. Moreover, in Indonesia, employees tend to demand their 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, in addition to the labor union, consisting of representatives from both the employer and the employees to better reflect the opinions of employees.

Regarding retirement age, there is no law in Indonesia that directly stipulates the retirement age. It is, however, important to note that the age at which employees begin receiving pension benefits is stipulated by law, and a gradual increase is planned by 2043. According to government regulation No. 45 of 2015, although the retirement age was 57 in 2021, it will be increased to 58 in 2022; this upward progression every three years is scheduled to continue until the retirement age reaches 65 in 2043. It should also be noted that the Labor Bureau instructs companies to set the retirement age as the same age as the pension age.

Religious consideration

Indonesia is the world's largest Islamic country, and Indonesian labor law demands that employers give special consideration for prayers and show respect to employees' religious values (Act of the Republic of Indonesia, Number 13, Year 2003, Concerning Manpower [hereinafter called the "Labor Law"], Article 86, Paragraph 1, Item c). An employer is obligated to provide adequate opportunities 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 because of mandated participation in religious rituals (Labor Law, Article 93, Paragraph 2, Item e). In addition, an employer is prohibited from terminating 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.

Use of Indonesian language

In Indonesia, the use of the Indonesian language is obligatory by law when signing a contract with an Indonesian corporation, government authority, or citizen.¹

Using the Indonesian language is mandatory, legally and practically, 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 and 4). 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 workers’ 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 2², and Article 116, Paragraphs 3 and 4). Therefore, in addition to a practical requirement that all documents submitted to public agencies must be submitted in the Indonesian language, an employer is required to draft most legal documents in the Indonesian language.

Legal system regarding labor issues

The Indonesian Labor Law and the Indonesian Civil Code (Book Three, Chapter VII A) both define what is a work agreement (or employment agreement). The details of the Indonesian Labor Law are stated below; the Indonesian Civil Code stipulates that a work agreement is an agreement in which one party, the laborer, agrees to render 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.

Labor law

The Labor Law is the fundamental code related 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). Because of this broad definition, a wide range of people are covered by the Labor Law, including migrant workers and corporate board members. The Labor Law defines an employer as individuals, entrepreneurs, legal entities, or other bodies that employ a work force by paying wages or other forms of remuneration (Labor Law, Article 1, Paragraph 4; the 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 the 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 should there be any stipulations under the individual work agreement that run contrary to the collective work agreement, then those particular provisions in the individual work agreement shall be null and void by law (Labor Law, Article 127, Paragraph 2).

   When an employer hires a worker/laborer, there are three types of agreement as follows: (ⅰ) work agreement without a fixed term, (ⅱ) fixed-term work agreement, and (ⅲ) daily employment contract.

   It was assumed that, in most cases, an employer needs to hire its workforce directly because the previous Labor Law prohibited an employer from using workers from enterprises that provide worker and laborer services (a contractor) for work in its core business activities (previous Labor Law, Article 66). However, the Omnibus Law removed the above restrictions and provides for an outsourcing company (perusahaan alih daya) in Article 66 of the Act. Because the law does not stipulate any restrictions on outsourcing, such as limiting it to major operations, outsourcing may be more widely used in the future³.

   A work agreement shall be made in two equally legally binding copies, one 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).

3. 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 concerned must 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). It should also 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 foreign language subsequently arise, then the Indonesian version of the agreement shall be regarded as the authoritative one (Labor Law, Article 57, Paragraph 2).

   A Laborer who contracts under a work agreement receives the following benefits

   Maternal leave	1.5 months of rest before the time that they are estimated by an obstetrician or a midwife to give birth, and another 1.5 months of rest thereafter (Labor Law, Article 82).
   Working hours	8 hours a day and 40 hours a week for 5 workdays in a week; or 7 hours a day and 40 hours a week for 6 workdays in a week (Labor Law Article 77, Paragraph 2)
   Paid leave (holidays)	Paid leave for public holidays (Minister of Manpower and Transmigration, Decree No.233 of 2003)
   Annual paid leave	No less than 12 workdays if the laborer works for 12 consecutive months (Labor Law, Article 79, Paragraph 3)
   Medical leave	The percentage of ordinary wages payable to workers who have taken ill shall be determined as follows (Labor Law, Article 93, Paragraph 3, Paragraph 2, Item a).
   		For the first 4 months	100%
   		For the second 4 months	75%
   		For the third 4 months	50%
   		For subsequent months	25%

   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)⁴. 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 as set forth below (Labor Law, Article 59, Paragraph 1, Government Regulation No. 35 of 2021, Articles 4 and 5). An employer shall register such an agreement online at the Ministry of Manpower within three business days after the individual work agreement has been signed (Government Regulation No. 35 of 2021, Article 14, Paragraph 1). If online registration is not available, registration must be done in writing within seven business days from the signing of the agreement (Government Regulation No. 35 of 2021, Article 14, Paragraph 2).Unless reservations exist in either the collective agreement, the individual work agreement, or the enterprise rules and regulations, an employer does not have to provide severance pay except for Compensation Pay (Labor Law, Article 61A, Paragraph 1).

   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 3).

   Classification of permissible work under a work agreement for a specified period of time is as follows (Labor Law, Article 59, Paragraphs 1 and 2, Government Regulation No. 35 of 2021, Articles 4 and 5):

   (1) Classification by period of time

   1. a. Work presumed to be completed in a short period of time
   2. b. Seasonal work
   3. c. Work related to new products, new businesses, or auxiliary products in the testing stage

   (2) Classification by the nature of the work

   1. a. Work that can be completed at once
   2. b. Temporary work

   (3) Other work that is not permanent in type, nature, or activity

   Work based on the classification according to (1) above may be performed for a maximum of five years (Government Regulation No. 35 of 2021, Article 8).

   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 three consecutive months, the work agreement for a specified period of time shall become a work agreement for an unspecified period of time (Government Regulation No. 35 of 2021, Article 10). In the case of a daily employment contract, the employer shall register such an agreement online at the Ministry of Manpower within three business days after the individual work agreement has been signed (Government Regulation No. 35 of 2021, Article 14, Paragraph 1). If online registration is not available, registration must be done in writing within seven business days from the signing of the agreement (Government Regulation No. 35 of 2021, Article 14, Paragraph 2). In a work contract, it is necessary to specify (ⅰ) the name and the location of the enterprise, (ⅱ) the name and address of the worker, (ⅲ) the content of the work, and (ⅳ) the amount of wages and remuneration (Government Regulation No. 35 of 2021 Article 11).

   Government Regulation No. 35 of 2021, which is the implementing regulation of the Omnibus Law, provides for compensation. Compensation is a sum of money paid to a contract employee based on a work agreement for a specified period of time at the end of the contract. Employers are required to pay compensation at the end of a work agreement for a specified period of time (Government Regulation No. 35 of 2021, Article 15, Paragraph 2). Compensation shall be paid to workers who have worked continuously for at least one month (Government Regulation No. 35 of 2021, Article 15, Paragraph 3). If a work agreement for a specified period of time is extended, compensation will be paid first at the end of the previous contract, and then at the end of the extended period, Compensation calculated according to the extended period will be paid (Government Regulation No. 35 of 2021, Article 15, Paragraph 4). The provisions regarding compensation are not applicable to foreign workers.

   Compensation is calculated using the following formula (Government Regulation No. 35 of 2021, Article 16, Paragraph 1).

   Contract Period

   Compensation

   1 month or more but less than 12 months

   (Term of office x wages for 1 month)/12

   12 months

   Wages for 1 month

   More than 12 months

   (Term of office x wages for 1 month)/12

   The above "wages" that will be the basis for calculating compensation will consist of the following (Government Regulation No. 35 of 2021, Article 16, Paragraphs 2, 3, and 4):
   a. Basic salary and fixed allowances
   b. Wages without allowances if the wage structure of the company does not specify the form of basic salary and fixed allowances
   c. Base salary if the wage structure of the company consists of base salary and variable allowances

4. Probation Period

   A work agreement for an unspecified period of time may only require a probation period for no longer than three months (Labor Law, Article 60). If 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).

   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).

5. Working hours

   The working hours shall be arranged as follows: 7 hours a day for a total of 40 hours a week for six workdays in a week or 8 hours a day for a total of 40 hours a week for five workdays a week (Labor Law, Article 77, Paragraph 2).

   Entrepreneurs are under an obligation to allow laborers to take a break and leave. The period of rest or break between working hours shall be no shorter than half an hour after working for four 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).

6. Collective work agreement

   A collective work agreement is an agreement resulting from negotiations between an employer and a labor union.⁵ 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, Paragraphs 1 and 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 one collective work agreement can be made that shall apply to all laborers working in the enterprise in question (Labor Law, Article 118).⁶ 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, Paragraphs 1 and 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 two years from commencement and the time that the collective work agreement remains in force may be extended for no longer than one year based on a written agreement between the entrepreneur and the trade/labor union(s) (Labor Law, Article 123, Paragraphs 1 and 2).

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:

   Act No. 21 of 2000 Concerning Trade Union/Labor Union

   The law stipulates that a properly registered Trade Union/Labor Union has 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 related 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).

   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, Paragraphs 1 and 2).

   Act No. 2 of 2004 Concerning Industrial Relations Disputes Settlement (Industrial Relations Disputes Settlement Law) applies to the issues related 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 the 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 (Partially amended by the Omnibus Law)

   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 2011.⁷ Under the new legislation, foreign laborers who are working in Indonesia for more than six months, as well as Indonesian laborers, are obligated to join the Old Age Security Program, Pension Security Program, Health Care Security,⁸ Occupational Accident Security Program, and Death Security Program. Laborers are required to fund these insurance programs at a specified rate, excluding worker's accident compensation insurance, which employers are required to fund, excluding death insurance.

   In addition to the above, the Omnibus Law added unemployment benefits (jaminan kehilangan pekerjaan). Workers are provided with unemployment insurance, cash benefits, employment support, and vocational training to maintain a proper standard of living. Unemployment benefits are limited to six months of salary (the Omnibus Law, Article 82).

3. Occupational safety of workers and social welfare

   Act No. 1 of 1970 Occupational Safety and Health

4. Foreign workers

   Act No. 6 of 2011 Concerning Immigration (Partially amended by the Omnibus Act)

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

   Government Regulation No. 34 of 2021 on the Use of Foreign Workers in Indonesia

   This government regulation implemented on February 2, 2021, replaced Presidential Regulation No. 20 of 2018 of the same name, which provided for the use of work permits for foreign workers. It is noteworthy that the scope of the Expatriate Manpower Utilization Plan (RPTKA), which does not require approval by the Ministry of Manpower, has been expanded, which was also stipulated in Presidential Regulation No. 20 of 2018.

   Decision of the Minister of Manpower and Transmigration No. 228 of 2019

   This ministerial decision lists in the appendix the positions that expatriates are permitted to work. Accordingly, as a rule, expatriates shall select the position settled in the appendix. Provided, however, this ministerial decision prescribes that the minister may approve the employment of expatriates even when the positions required by the employers are not listed in the appendix. This decision also prescribes that the positions open for expatriates and the requirements of the positions shall be evaluated at least every two years or whenever necessary.

Duty to prepare enterprise rules and regulations

1. Duty

   Every enterprise that employs no less than 10 workers/laborers is under an obligation to create a set of enterprise rules and regulations⁹ 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). A foreign-owned enterprise must create such rules and regulations regardless of the number of workers/laborers. 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 enterprise rules and regulations are only effective for a maximum of two years, both interviews and recommendations of representatives of workers are required, enterprise rules and regulations must be written in the Indonesian language, enterprise rules and regulations must be legalized by the minister or the appointed official, and an employer must inform and explain its enterprise rules and regulations to its laborers.

   As for priority in the application of different laws, agreements, rules, and regulations, the order of precedence in terms of binding effect is as follows: (ⅰ) labor related legislation that includes labor laws, (ⅱ) a collective work agreement, (ⅲ) an individual work agreement, and (ⅳ) the enterprise rules and regulations.

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):

   1. (ⅰ) The rights and obligations of the entrepreneur
   2. (ⅱ) The rights and obligations of the worker/laborer
   3. (ⅲ) Working conditions/requirements
   4. (ⅳ) Enterprise discipline and code of conduct
   5. (ⅴ) The period of validity (maximum of two 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, Paragraphs 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 official¹⁰ to 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). The government authorities have to examine the enterprise rules and regulations within six business days of the acceptance of them (Minister of Manpower Regulation, No. 28 of 2014, Article 8, Paragraph 5).

   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 the 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 for disciplinary action, warning letters, confidentiality clauses, non-compete clauses, and matters concerning working conditions, such as wages, paid holidays, and bonuses.

Dissemination

The entrepreneur is under the obligation to communicate and explain to workers/laborers all of the enterprise rules and regulations and of all changes made to the 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.

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 the minister 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).

Definition of wages

1. Wages

   Wages consist of (ⅰ) fixed pay, consisting of base salary and fixed allowance, (ⅱ) variable compensation, and (ⅲ) overtime pay. 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).

   Fixed pay

   There is no legislation that stipulates basic salary and fixed allowance. For this reason, an employer is allowed to classify transportation expenses as either a component of the basic salary or as the fixed allowance. Also an employer is allowed to define variable compensation as fixed allowance.

   Variable compensation

   Variable compensation is remuneration subject to change according to attendance/absence per month or the laborer’s performance. The sales allowance is regarded as a type of variable compensation. Most enterprises offer a perfect attendance allowance as variable compensation, which is not paid once the laborer is late for work.

   Overtime payment

   Overtime payment is provided if a laborer works for more than 8 hours a day (in the case of working five days a week) or works for more than 7 hours a day (in the case of working 6 days a week) or over a total of 40 hours in a week.

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. 36 of 2021 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 structures and scales by considering the laborers' job scope, responsibilities, and difficulties (Minister of Manpower Regulation No. 1 of 2017, Article 2, Paragraph 1)

3. Overtime pay

   The working hours shall be 7 hours a day for a total of 40 hours a week for six workdays in a week or 8 hours a day for a total of 40 hours a week for five workdays in a week (Labor Law, Article 77, Paragraph 2). The maximum overtime work permitted is 4 hours per day and a cumulative total of 18 hours per week with the consent of the laborers (Labor Law, Article 78, Paragraph 1, Item b). Entrepreneurs who require their workers/laborers to work overtime are under an obligation to pay overtime pay. On the other hand, Government Regulation No. 35 of 2021 stipulates that persons bearing certain duties, such as executives and managers, can be excluded by benefiting from overtime pay (Government Regulation No. 35 of 2021, Article 27). However, because the above government regulation does not define such persons clearly, employers are advised to make the relevant inquiries of the government authority.

   The basic wage is defined as the calculation of the quotient of dividing the monthly wage by 173 (monthly wage/173). Overtime pay is calculated by using the basic wage as a multiplicand, with a multiplier applied according to the following chart:

   	Subject	Hour	Overtime allowance (ratio with basic salary)
   Weekday	All laborers	The first 1 hour	×1.5
   		Subsequent 2 hours	×2
   Weekend/holidays	Laborers who work 5 days a week	The first 8 hours	×2
   		9th hour	×3
   		10-11th hours	×4
   	Laborers who work 6 days a week (Except holidays)	The first 7 hours	×2
   		8th hour	×3
   		9-10th hours	×4
   	Laborers who work 6 days a week (Including holidays)	The first 5 hours	×2
   		6th hour	×3
   		7-8th hours	×4

   On top of that, if overtime work exceeds three hours a day, the employer is required to provide laborers with food and drink, which contain more than 1400 kcal (Government Regulation No. 35 of 2021, Article 29 Paragraph 1, Item c).

Manner of payment

1. Manner of payment

   Wages shall be paid in Indonesian rupiah, and an employer shall issue a detailed statement (Government Regulation No. 36 of 2021, Article 54).

2. Payment period

   A worker/laborer may make an official request of the institute for the settlement of industrial relations disputes to terminate the employment relationship with the employer, if the employer has not paid wages at the prescribed time for three consecutive months or more (Labor Law, Article 154A, Paragraph 1, Item g, point (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, Paragraphs 2 and 3, Item a). Entrepreneurs are prohibited from paying wages lower than the minimum wages (Labor Law, Article 88E, Paragraph 2).

. In Indonesia, the minimum wages are decided and publicized in each province, district, and city annually by the end of November. Therefore, it is recommended that an employer should make inquiries in each region regarding the applicable minimum wage.¹¹ Published minimum wages are revised annually and come into force on 1 January of the following year.

The minimum wage consists of the provincial minimum wage (UMP) and the Regency/city-level minimum wage (UMK) (Labor Law Article 88C, Paragraph 1, Paragraph 2¹²). The minimum wage formula takes into account the economic growth rate, inflation rate, and certain indicators (Labor Law, Article 88D, Paragraph 2¹³).

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 Rp 100,000,000 and a maximum of Rp 400,000,000 (Labor law, Article 185).

Retirement benefits

Retirement benefits include Severance Pay, Reward for Service, Compensation Pay, and Detachment Money. The method of calculation of retirement benefits is defined in the Labor Law. (Here, "wages" mean fixed pay that includes basic salary and fixed allowance.) Since specific formulae for each payment is stipulated in the Labor Law for each reason for 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 minimum be at least as follows (Labor Law, Article 156, Paragraph 2):

   Length of service	Amount of payment
   Less than 1 year	1 months’ wages
   1 year or more but less than 2 years	2 months’ wages
   2 years or more but less than 3 years	3 months’ wages
   3 years or more but less than 4 years	4 months’ wages
   4 years or more but less than 5 years	5 months’ wages
   5 years or more but less than 6 years	6 months’ wages
   6 years or more but less than 7 years	7 months’ wages
   7 years or more but less than 8 years	8 months’ wages
   8 years or more	9 months’ wages

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). The reward is required to be paid in accordance with the number of years of service of the employee:

   Length of service	Amount of payment
   3 years or more but less than 6 years	2 months’ wages
   6 years or more but less than 9 years	3 months’ wages
   9 years or more but less than 12 years	4 months’ wages
   12 years or more but less than 15 years	5 months’ wages
   15 years or more but less than 18 years	6 months’ wages
   18 years or more but less than 21 years	7 months’ wages
   21 years or more but less than 24 years	8 months’ wages
   24 years of more	10 months’ wages

3. Compensation Pay

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

   • Entitlement to paid annual leave that has not expired that the worker/laborer has not taken
   • Costs or expenses of transporting the worker/laborer and family back to the point of hire where the person was recruited and hired to work for the enterprise (if not already reimbursed)
   • 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 voluntarily or when the employer terminates laborers (previous Labor Law, Article 162, 158, 168). Since the amount of the 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 such employment. In addition, some employers voluntarily provide certain allowances in the collective work agreement for those employees who were terminated for disciplinary reasons or absenteeism.

Bonus and religious festivity allowance

1. Bonuses

   The Labor Law does not contain any provisions regarding bonuses. Therefore, an employer is not obligated to pay bonuses, unless the employer has a collective work agreement or an individual work agreement that contains provisions stating that the employer will pay a bonus.

2. Religious festivity allowance

   In Indonesia, instead of providing bonuses, 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 seven days in advance of each religious festivity, in practice, it is common that the allowance is paid before Idul Fitri Day.

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 2024 are as follows:

   New Year’s Day	1 January
   Isra’ Mi’raj Prophet Muhammad	8 February
   Chinese New Year’s Day	10 February
   Hindu New Year	11 March
   Good Friday	29 March
   Easter	31 March
   Hari Raya Idul Fitri	10-11 April
   May Day	1 May
   Ascension of Jesus Christ	9 May
   Waisak Day	23 May
   Pancasila Day	1 June
   Muslim Day of Sacrifice (Idul Adha)	17 June
   Islamic New Year	7 July
   Indonesian Independence Day	17 August
   Prophet Muhammad’s Birthday	16 September
   Christmas Day	25 December

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 4).

3. Holiday for prayer

   Entrepreneurs are under an obligation to provide workers with adequate opportunities to pray to and/or worship 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 for the following reasons (Labor Law, Article 93, Paragraph 2, Item e).

   Reasons of leave		Marriage
   Marriage	Himself or herself	3 days
   	Children	2 days
   Circumcision ceremony	Children	2 days
   Baptismal ceremony	Children	2 days
   Childbirth/Miscarriage	Spouse	2 days
   Death	Spouse, parent, parent-in-law, children, children-in-law	2 days
   	Other member of the household	1 days

5. Paid annual leave

   Entrepreneurs are under an obligation to grant 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 3). 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 4). In addition to the above annual leave, the company may offer a long-term holiday as stipulated in the employment contracts, work regulations, or collective agreements (Labor Law, Article 79, Paragraph 5).

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 because the employee took medical leave of one year or more.

   The first 4 months	100%
   The second 4 months	75%
   The third 4 months	50%
   Subsequent months	25%

   An employer is required to pay an employee's wages if the employee is absent from work in order to vote in an election.

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 employees; thus, the employer may not dismiss employees at its discretion. Also, in order to fire 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 a company is obliged to dismiss a worker, the company must notify the worker/laborer and/or the union of the purpose and the reason for the dismissal (Labor Law, Article 151, Paragraph 2). If the worker refuses the dismissal after the above notice, any issue on the termination of the employment relationship must be resolved through bilateral negotiations between the company and the worker and/or the union (Labor Law, Article 151, Paragraph 3). If the negotiation fails to result in any agreement, termination of the employment relationship must be made in accordance with the dispute resolution mechanism of the industrial dispute resolution agency (Labor Law, Article 151, Paragraph 4). During the process of resolving a labor dispute, the entrepreneur will pay all wages and entitlements that the affected worker/laborer should have received (Labor Law, Article 157A, Paragraph 1).

   Article 154A of the Labor Law, as amended by the Omnibus Law, stipulates the following grounds for dismissal:

   1. a. When a company is merged, integrated, acquired or split, and the worker is not willing to continue the employment relationship with the employer or the employer is not willing to retain the worker
   2. b. When a company closes or improves efficiency (efisiensi) without closing due to losses
   3. c. When a company closes due to two-years consecutive losses
   4. d. When a company closes due to force majeure
   5. e. When a company fails to perform its payment obligation
   6. f. When a company declares bankrupt
   7. g. When a worker requests the termination of the employment relationship due to any of the following acts by the company:
      - Abused, humiliated, and/or threatened the worker
      - Persuaded and ordered the worker to act in violation of the law
      - Failed to pay the wages by the specified date for three consecutive months or more even if the entrepreneur paid the wages on time thereafter
      - Failed to fulfill obligations promised to the worker
      - Ordered the worker to do any work other than assigned duties
      - Had the worker engaged in work that endangered the life, safety, health and/or morals of the worker and that was not included in the employment contract
      
   8. h. Following a decision by the Labor Relations Dispute Resolution Agency, the entrepreneur has not committed any of the actions mentioned in g above with respect to the application submitted by the worker, and the entrepreneur has decided to terminate the employment relationship
   9. i. When a worker retires for personal reasons after satisfying the following conditions:
      1. Submits a written resignation notice 30 days before the intended retirement date
      2. The reason for retirement is not related to work
      3. Continues to carry out its obligations until the day of resignation
      
   10. j. When a worker is absent from work for more than five consecutive business days without a written explanation with a valid certificate and is properly summoned twice by an entrepreneur in writing
   11. k. When a worker has violated any provisions of an employment contract, rules of employment, or collective bargaining agreement and, unless otherwise provided in the employment contract, rules of employment, or collective bargaining agreement, receives three warning letters that are effective for six months, respectively
   12. l. When a worker is detained by the authorities because of the alleged commission of a criminal offense and is unable to do business after six months thereafter
   13. m. When a worker/laborer experiences a long-term illness or disability due to an occupational accident and is unable to resume work after exceeding the 12-months’ limit
   14. n. When a worker reaches retirement age
   15. o. When a worker dies

   There are, however, circumstances elucidated below where notice to workers and/or labor unions is not necessary.

   ・The following cases as defined in Article 151A of the Labor Law:

   1. a. When a worker/laborer retires voluntarily
   2. b. When the period specified in the work agreement for a specified period of time has expired
   3. c. The affected worker/laborer has reached retirement age as stipulated under work agreements, enterprise rules and regulations, collective work agreements, or laws and regulations
   4. d. The affected worker/laborer dies

2. The process of dismissal

   As stated above, the entrepreneur may only terminate the employment of the worker/laborer after receiving a decision from the institute for the settlement of industrial relations disputes (Labor Law, Article 151, Paragraph 4).

   Making an effort to prevent termination of employment by the entrepreneur

   (The labor law, Article 151, Paragraph 1)

   Negotiation between the entrepreneur and trade/labor union

   (The labor law, Article 151, Paragraph 2)

   Signing of an agreement

   (Cf: The labor law, Article 151, Paragraph 3)

   Registration at the institute for the industrial relation dispute settlement

   (Industrial Relations Disputes Settlement Law, Article 7)

   In cases where a worker/laborer resigns voluntarily, 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 employer no less than 30 days prior to the date on which the person will cease to work (Labor Law, Article 154A, Item i, point (1)).

   Even when a worker/laborer resigns voluntarily, 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. Points to note

   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

   1. a. The worker/laborer is absent from work because the person 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
   2. b. The worker/laborer is absent from work because the person is fulfilling his/her obligations to the State in accordance with what is prescribed in the valid statutory legislation
   3. c. The worker/laborer is absent from work because the person is practicing what is required by his/her religion
   4. d. The worker/laborer is absent from work because the person is getting married
   5. 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
   6. f. The worker/laborer is related by blood and or through marriage to another worker in the enterprise
   7. g. The worker/laborer establishes, becomes a member of, and/or an administrator/official of a trade/labor union, or 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
   8. h. The worker/laborer reports to the authorities a crime committed by the entrepreneur
   9. i. Because the worker/laborer is of a different belief, religion, political orientation, ethnicity, race, social group, sex, physical condition, or marital status
   10. 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

Ordinary dismissal

In Indonesia, terminating a worker/laborer by way of a so-called 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.

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 that provide grounds for the issuing of each escalating stage of a warning letter in the individual work agreement, the enterprise's rules and regulations, or the enterprise's collective work agreement (e.g., pay reduction¹⁴). 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 154A, Paragraph 1, Item k). It should be noted that unlike Japan, even punitive dismissals require permission from the institute for the settlement of industrial relations disputes. 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 six months from the issuing of the first warning letter, the employer can issue another warning letter in accordance with the table below. If any further violation is committed within six months after issuing the third warning letter, the employer may then make a disciplinary dismissal. The six-month period is set such that there are opportunities for the laborer in question to be reevaluated. If the laborer does not commit any such violation during the six–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 154A, Paragraph 1, Item k).

   In relation to the contents of the warning letters, an employer 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.

   An entrepreneur may terminate the employment of a worker/laborer if the worker/laborer has been absent from work for no less than five consecutive workdays without submitting a written account supplemented with valid evidence to the entrepreneur. The entrepreneur must also have properly summoned the person twice in writing as such absenteeism may disqualify the worker/laborer in question from continuing employment (Labor Law, Article 154A, Paragraph 1, Item j).

Dismissal on grounds of reorganization

The labor law strictly defines the situations where an entrepreneur can dismiss an employee on the grounds of reorganization (Labor Law, Article 154A, Paragraph 1, Item k). Where an employer temporarily dismisses laborers because the enterprise is encountering financial difficulties (a so-called layoff), the employer may be required to pay all fixed pay, including basic salary and fixed allowance (Circular Letter of the Minister of Manpower and Transmigration, No. 5 of 1998).

Grounds of reorganization

1. a. When the company closes or improves efficiency without closing due to losses
   (Labor Law, Article 154A, Paragraph 1, Item b)
2. b. When the company closes due to two years of consecutive losses
   (Labor Law, Article 154A, Paragraph 1, Item c)
3. c. Closure of the company due to force majeure
   (Labor Law, Article 154A, Paragraph 1, Item d)
4. d. When the company fails to perform its payment obligation
   (Labor Law, Article 154A, Paragraph 1, Item e)
5. e. Bankruptcy of the company
   (Labor Law, Article 154A, Paragraph 1, Item f)

Dismissal allowance

For information related to dismissal allowance, refer to Chapter 4, "Overview of the wage system (bonus, retirement benefit, and overtime pay) in Indonesia." 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.

General information

Regarding the hiring of foreign nationals, it should be noted that an entrepreneur and a worker/laborer 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 the previous modes of operation and generated disruption in the field.

In this regard, on April 1, 2021, the government issued Government Regulation No. 34 of 2021 on the Utilization of Foreign Workers in Indonesia. Government Regulation No. 34 of 2021 revoked Presidential Regulation No. 20 of 2018 on Utilization of Foreign Employees

This government regulation implemented on April 1, 2021, replaced Presidential Regulation No. 20 of 2018 on the Utilization of Foreign Workers, which provided for the use of work permits for foreign workers. It is noteworthy that the scope of the Expatriate Manpower Utilization Plan (RPTKA), which does not require approval by the Ministry of Manpower, has been expanded, which was also stipulated in Presidential Regulation No. 20 of 2018.

According to the Government Regulation 34 of 2021, 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 online (Minister of Justice and Human Rights Regulation No. 34 of 2021 on Visa and Stay Permits in Adapting to New Customs, Article 5, Paragraph 3, and Article 6, Paragraph 3). ITAS will be given to foreign nationals at the immigration inspection gate.

Visas regarding immigration

This chapter introduces visas for the purpose of work or business. To work in Indonesia, acquiring a work visa is necessary. It should be noted that even for a business trip, a work visa and a work permit will be necessary in certain situations, such as (ⅰ) business instruction at a factory, (ⅱ) technical guidance, and (ⅲ) 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 passports, residency permits, or valid 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 Tokyo¹⁵ is recommended.

As mentioned above, Government Regulation 34 of 2021 simplifies the work and the stay permit application process to employ a foreign employee. However, it should be noted that the details of procedures will be further regulated in the regulations to be issued by the Ministry of Manpower and Transmigration and the Ministry of Law and Human Rights. The following description is pursuant to the provisions now in force.¹⁶

1. Work visa (E23)

   This is a visa for the purpose of working in Indonesia. It is valid for a maximum of one year.¹⁷ The documents necessary to apply for this visa differ according to the duration of the visit. It is necessary for foreign-owned enterprises to apply at the Indonesia Investment Coordinating Board or Regional Capital Investment Coordination Board. It is also noted that getting a VBS number from the Directorate General of Immigration and a recommendation from the Department of Manpower and Transmigration is a precondition to getting the visa.

   The process of issuing a work visa is complicated compared to neighboring countries. Those who are applying for a work 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 Visit Visa (D2, D17)

   This type of visa is issued for one year/two years/five years, 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.

   • D2: Business, attend meetings, conduct purchases of goods
   • D17: Conduct audits, production quality control, or inspection at company branches in Indonesia

3. One-Way Visit Visa(C2, C17, C19, C20, etc.)

   This type of visa is for business, excluding work purposes.

   • C2: Business, attend meetings, conduct purchases of goods
   • C17: Conduct audits, production quality control, and inspections at company branches in Indonesia
   • C19: Provide after-sales services for sold products
   • C20: Installing and repairing machines

4. Visa on Arrival (B2/VOA)

   This type of visa is issued for visitors from certain countries, including Japan when they apply online in advance or upon arrival in designated Indonesian seaports or airports. This visa is valid for 30 days and 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 purposes.

Working permit

Workers with 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 and Paragraph 5). Making inquiries of the government authority if there are any regulations is recommended because the government may pass different regulations for different industries. 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 in a higher position.

When an employer hires a worker with foreign citizenship, the employer needs to submit an Expatriate Manpower Utilization Plan (RPTKA) to the Ministry of Manpower for validation and pay DKP-TKA (see the Labor Law, Article 47, Paragraph 1, Government Regulation No. 34 of 2021, Minister of Manpower Regulation No. 8 of 2021). Previously, only diplomatic missions abroad were exempt from the obligation to submit an Expatriate Manpower Utilization Plan (RPTKA), but this has been expanded by the Omnibus Law to (i) directors or commissioners holding shares in the company, (ii) overseas mission staff, and (iii) foreign workers needed by employers for emergencies, vocational training, certain start-ups, and business visits. With the above validation, the employer shall apply for notification (notifikasi). After the employer obtains the notice (notifikasi) and submits the proof of payment for the DKP-TKA, the Immigration Bureau will inform the employer of the temporary stay visa fee by e-mail. After the payment of the fee, an electronic visa (e-visa) will be issued upon examination.¹⁸ The worker enters Indonesia within 90 days after the issue of the electronic visa and will be required to obtain a temporary stay permit (ITAS) at the airport.
Assuming that the notice is given, the foreign worker will apply on the Ministry of Labor website. The above procedure requires the submission of various documents, such as a copy of the working agreement, as described below (Government Regulation No. 34 of 2021, Minister of Manpower Regulation No. 8 of 2021).¹⁹

• Business identification number and/or business license of the Employer of the foreign employee (Tenaga Kerja Asing [TKA])
• Deed of establishment and/or amendment from the authorized institution
• Proof of compulsory company manpower report (Wagib Lapor Ketenagakerjaan)
• Copy of the working agreement
• Chart of the company’s organizational structure
• Statement letter on the appointment of an understudy worker (an Indonesian worker who will work as an assistant for the purpose of transfer of technology and skills possessed by the foreign worker)
• Statement letter to implement education and training for Indonesian workers in accordance with the qualifications for position which is occupied by TKA
• Statement letter to facilitate Indonesian language education and training to TKA
• Copy of the passport
• Graduation certificate, curriculum vitae, and resume
• Bank balance certificate of TKA or employer of TKA
• Proof of an insurance policy of the foreign worker

It should be noted that the procedure and required documents stated above may be changed pursuant to future implementing regulations.

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 because 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 the 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 one 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 since it may differ for varying corporate personalities and since the decision is at the discretion of the Department of Manpower and Transmigration.

2. Limitation of foreign workers

   No worker with foreign citizenship is allowed to occupy positions related to human resources and/or occupy certain positions (Labor Law, Article 42, Paragraph 5). Also, these foreign workers are not allowed to work under dual employment except for certain positions (Minister of Manpower Regulation No. 8 of 2021).

3. Others

   In Indonesia, foreign workers who work for more than six months in Indonesia are obligated to join the social security system and to obtain taxation identification numbers (Nomor Pokok Wajib Pajak [NPWP]) (Law No. 7 of 1983 on Income Tax [Amended by the Omnibus Law]).