1.     What are the different categories of workers in Indonesia?

The Manpower Law generally recognized 2 (two) types of workers in Indonesia:

A. Permanent Worker

(i)     is employed for an indefinite period, continuous work and permanent in nature; and

(ii)    is entitled to termination packages which primarily consists of severance pay, service reward pay and replacement rights.

B. Contracted Worker

(i)      is employed for a definite period, for the works completed at once, or is temporary in nature, completion of the work is less than three years, seasonal work or work related to a new activity or product or an additional product that is experimental phase; and

(ii)      is entitled for termination compensation in the form of the remainder of his monthly salaries for the rest of his employment period, if there is still any left, provided that the employer terminates the contract.

The Manpower Law recognizes the permanent worker as the default position. If there is any contravention in any of the requirements of a contracted worker, the law would gravitate towards causing such worker to be a permanent worker.

2.     What formalities are required for an employment agreement to be valid?

An employment agreement in Indonesia can be made verbally or in writing, however, we normally suggest the employment agreement to be made in writing. Any employment agreement must be made based on a) the agreement of both sides; b) the capability or competence to take legally-sanctioned actions; c) the availability/existence of the job which both sides have agreed about; and d) the notion that the job which both sides have agreed about does not run against public order, morality and what is prescribed in the valid legislation.

A definite employment agreement must be executed in Indonesian language and in writing. If the worker is foreigner, the employment agreement must be executed in bilingual, where the Indonesian language shall prevail. Further, foreign workers normally be deemed as an employment for definite period. An employment with definite employment agreement shall be registered at the Ministry of Manpower Office (“MoM”).

The employment agreement must contain at least: a) name, address and line of business of the employer; b) name, sex, age and address of the worker; 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 employer and the employee; g) the date when the agreement starts to take effect and the period during which it is effective; h) the place and the date where the employment agreement is made; and i) the signatures of the parties involved in the employment agreement.

3.     What are the requirements and restrictions on hiring foreign workers?

There are several restrictions on hiring foreign workers as expatriates in Indonesia.

Only for a Specified Period, Certain Position and Employer Restriction

An expatriate can only be hired as a contracted worker for certain positions as permitted under the Manpower Law and regulations. The expatriate is prohibited to hold any position, which is related to human resources matters.

In general, foreign investment companies could hire the expatriates subject to certain restrictions. The employer must appoint a local Indonesian worker to accompany such expatriate for the purpose of knowledge transfer (not applicable if the expatriate occupies certain positions, such as director or commissioner).

The employer must pay an expatriate fee of currently USD 1,200.

Governing Authorities

Hiring the expatriate must be liaised with three governing authorities, which are:

(i)       Ministry of Manpower (“MoM”) related to the process of Manpower Plan;

(ii)      Ministry of Law and Human Rights (“MoLHR”) to proceed the expatriate’s immigration documents as required to enter and stay in Indonesia;

(iii)     Ministry which governs the employer’s activity of which the expatriate is employed (“Technical Ministry”). Certain employers which engage in line of businesses which are highly regulated usually require specific approvals from the Technical Ministry, such as in the extractive industries or financial institutions.

Permit Documents

The employer shall be responsible in obtaining the approval to the Manpower Plan from the MoM. The Manpower Plan legitimizes the employer to employ the expatriate. Once the Manpower Plan is secured, the employer will request a Notification (Notifikasi) from the MoM to proceed the immigration documentations from the MoLHR, such as Visa for a Limited Stay Permit (VITAS). For foreign investment companies, their foreign shareholders can occupy the positions of a director or a commissioner without a Manpower Plan.

Online Processing

All the permit documents are processed online in the MoM, MoLHR and the Online Single Submission (OSS) systems.

4.     How is the outsourcing regulated in Indonesia?

There are 2 (two) outsourcing concept in Indonesia:

(i)      Contract of Work, is an agreement made by and between assignor company and assignee company;

(ii)      Labor Service Provider, the agreement is made by and between the assignor company and the labor service provider company.

The main difference between those two is the type of work which is going to be assigned. Type of work which can be outsourced through Contract of Work must fulfill the following requirements: (i) conducted separately from the primary activity; (ii) conducted with direct order or without direct order from the assignor; (iii) it must be categorized as a supporting activity in general under business flowchart set out by business association; (iv) does not directly hinder the production process. To put it simply, the only activities that permitted to be outsourced are activities which are published as supporting activities under the business flowchart set out by association.

Type of work which can be outsourced through labor service provider is not set through business flowchart but already stipulated specifically by law, such as: (i) Cleaning; (ii) Catering for workers; (iii) Security; (iv) Supporting Worker in Mining and Oil & Gas Industry; (v) Transportation service for workers. However, there are discrepancies between the work limitations as set out by the Manpower Law and the MoM decree. The MoM decree limits the works only to the abovementioned.

5.     How is the process of Industrial Dispute in Indonesia?

There are only 4 type of industrial relation dispute in Indonesia: (i) Rights dispute; (ii) Interest dispute; (iii) Employment termination dispute; (iv) Union dispute. The disputes are resolved through the mechanism commencing from bipartite, tripartite until the industrial relation court. For a tripartite, the disputants can opt between mediation, arbitration and conciliation. Normally, however, the parties will choose mediation for a tripartite dispute.