×

Human Resources in Indonesia

Employment and labor laws in Indonesia

In general, Indonesian employment law is governed by Labor Law No. 13/2003, dated March 25, 2003 (the Labor Law), as revised by Job Creation Law No. 11/2020, issued November 2, 2020. (the Job Creation Law). The Labor Law (Law No 13 of 2003) regulates all employment in Indonesia. 

Employer’s must fulfil the following rights for employees: 

  • Receive the minimum wage, this varies depending on sector and province
  • Receive social security, which includes pension, healthcare, life insurance, accident insurance, and old age benefits
  • Receive religious holiday allowance (1 month’s salary)
  • Receive statutory absence or payment when the employee does not take annual leave; and
  • Receive payment for overtime. 

Indonesia’s new Job Creation Law, or the Omnibus law has also made changes to fixed term contracts in order to better organize the labor pool in Indonesia.

Read more about the Employment and labour laws in Indonesia, in this section

Hiring employees in Indonesia

On March 31, 2021, Indonesia’s Ministry of Manpower issued Regulation No. 8 of 2021 (MOM Reg 8/2021) on the Employment of Foreign Workers. MOM Reg 8/2021 is an implementing regulation to GR 34/2021 and provides in detail the requirements for businesses to fulfil in order to hire foreign workers.

[video file='https://cdn.jwplayer.com/videos/wCBKyogT-sZcHHUE7.mp4' image='https://resource.dezshira.com/resize/900x506/Misc/banners/web_1.jpg' title='Tapping into ASEAN’s Vibrant Talent Pool: Hiring in Singapore, Vietnam, and Indonesia']

MOM Reg 8/2021 revokes MOM Reg 10/2018 and has been enforced since April 1, 2021.

For a local company to employ a foreign worker, they must prepare a Foreign Worker Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing (RPTKA)) — a document that details the specific work, position, and length of employment the foreign employee will undertake in Indonesia. The RPTKA now also serves as the basis for the MOM to grant visas and stay permits.

Read our guide to hiring employees in Indonesia here.

 

Business visas and employment permits

You may need to apply for an Indonesia business visa if you need to travel to Indonesia for business. Indonesia offers both single-entry and multiple-entry business visas.

The Indonesia business visa is provided to foreigners who wish to attend meetings, conferences, sign a contract, or engage in any other business-related activity in Indonesia. These visas, however, do not entitle you to work for an Indonesian employer.There are a variety of visas foreign visitors can apply for depending on their purpose of visit.

Further, to better define the permitted position for expatiates in Indonesia, Indonesia’s Ministry of Labor issued Regulation No. 228 of 2019 (Reg 228, 2019). The new regulation widens the number of positions open to expatriate workers, consolidates the list of positions into one, and simplifies the approval process for foreigners and their employers. Other changes have also been made to the immigration laws under the new Omnibus Law.

Read more about the new regulations in this section.

Minimum wages in Indonesia

On October 15, 2019, the Minister of Labor issued circular B-M 308, 2019, which mandates provincial governors throughout Indonesia to increase their provinces’ minimum wage by 8.51 percent, starting from January 1, 2020.

Indonesia has now increased the average minimum wage of each province by 1.09 percent for 2022. The figure was obtained through the new guidelines on minimum wage under Government Regulation 36 of 2021 (GR 36/2021) — one of the implementing regulations of Indonesia’s Omnibus Law.

[tips title="Did You Know"]Companies are prohibited from paying their workers – which includes those that are hired for less than one year – below the prescribed minimum wage.[/tips]

As the minimum wage for each province differs, foreign investors should seek the help of registered local advisors to help understand how these latest changes will affect their operations.

To gain more insights about the minimum wages in Indonesia, read this section

Terminating employees

Indonesia’s Omnibus Law has made significant changes to the country’s employment laws, most notably on employee termination.

Prior to the changes in the Omnibus Law, employers had no right to unilaterally terminate employment in any circumstance, unless the termination was agreed upon by both parties through negotiations. The employer would then be able to obtain an approval for the termination from the labor courts and the employee was entitled to up to six months’ salary.

Under the latest changes, the employer can now notify the employee in writing, setting out the reasons for termination, and the termination payments and entitlements at least 14 business days before the date of termination.

Click here to read more about the employee terminating policies in Indonesia.

Payroll in Indonesia

When handling payroll in Indonesia, employers must adhere to strict guidelines. Employers must withhold tax payments and social security contributions from each pay cycle to ensure payroll compliance.

Social insurance in Indonesia

Indonesia’s social security programs are run by two organizations – the Social Security Administrator for Health (BPJS Kesehatan) for healthcare and the Workers Social Security (BPJS Ketenagakerjaan) for pensions. 

The government will raise the taxable wage cap for the national pension plan program from March 2020. 

The government launched its ambitious universal healthcare and pension programs in 2014. Since its inception, the healthcare program has become the biggest in the world with more than 185 million participants. Registered Indonesians and expatriates are eligible for free health services ranging from dental care to medicines to physiotherapy. Further, patients are also eligible for free emergency and chronic care, in addition to organ transplants. 

To know more about social insurance in Indonesia, read this section.

Public holidays

Indonesia’s government entitles its citizen to some public holidays. In addition to official public holidays, the government also provides joint leaves (collective leave days).

In April 2021, Indonesia’s Ministry of Manpower issued M/6/HK.04/IV/2021 on the implementation of the payment of the religious holiday allowance (Tunjangan Hari Raya – THR) no later than one week before the start of the religious holiday.

The THR is a yearly bonus given to employees at least one week before the start of the religious holiday observed by the employee (based on the employee’s religion), equivalent to one month’s salary (based on the period of employment).

Read the Guide to Indonesia’s Public Holidays & Festivals for detailed insights.

Download this guide on PDF

Find Other Guides and Magazines:

magazines

Your Insights & Resources Library for Asia

Asiapedia is a collection of resources based on what we have learned about doing business in Asia. It’s the product of more than 300 team members collaborating across 28 offices in Asia, Europe, and North America.

or
Back to top