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Labour Law

1. Status of employee

A worker/labourer are any person who works and receives wages or other forms of remuneration.

• Permanent Employee (Unspecified Time)

A work agreement for an unspecified time may require a probation period for no longer than 3 (three) months. During the probation period, the entrepreneur is prohibited from paying wages less than the applicable minimum wage.

• Contract Employee (Specified Time)

A work agreement for a specified time shall be made in writing and must be written in the Indonesian language with Latin alphabets. A work agreement for a specified time, if not made in writing and written in the Indonesian language with Latin alphabets, shall be regarded as a work agreement for an unspecified time.

2. Regulation for foregin workers

Every employer that employs foreign worker is under an obligation to obtain written permission from Minister. The obligation to obtain permission from Minister does not apply to representative offices of foreign countries in Indonesia that employ foreign citizens as their diplomatic and consular employees. An employer who is an individual person is prohibited from employing foreign worker. Foreign worker can be employed in Indonesia in employment relations for certain positions and for a certain period of time only. Foreign workers whose working period has expired and cannot be extended may be replaced by other foreign workers.

Employers of foreign worker must have plan concerning the utilization of foreign worker that are legalized by the Minister or appointed official. The provision does not apply to government agencies, international agencies and representative diplomatic offices of foreign countries. The plan for the utilization of foreign worker is a requirement to get working permit (IMTA). The plans for the utilization of foreign worker shall at least contain these following informations :

a. The reasons why the service of foreign worker is needed or required.
b. The position and or occupation of the foreign worker within the organizational structure of the enterprise.
c. The timeframe set for the use of the foreign worker; and
d. The appointment of Indonesian worker as associate for the foreign worker.

Employers of foreign worker are under an obligation to obey the prevailing regulations concerning occupations and competence standards.

Employers are obliged to pay compensation for each of foreign worker that they employ. The obligation to pay compensation does not apply to government agencies, international agencies, social and religious undertakings and certain positions in educational institutions.

Employers who employ foreign worker are under an obligation to repatriate the foreign worker to their countries of origin after their employment comes to an end.

The employer of foreign labor (TKA) shall have Rencana Penggunaan Tenaga Kerja Asing (RPTKA) that approved by the Minister. The RPTKA is the basic requirement to get IMTA.

To get the RPTKA the employer of TKA have to request an application online to Directorate general through Director with uploading some documents, which are :

a) The reason of the use of TKA
b) RPTKA form that being filled
c) Business license
d) Deed and the decision letter of ratification of the establishment the authorized agency
e) The chart of company’s organization structure
f)  Position recomendation that will possessed by the TKA
g) The information about the company’s domiciile from local government
h) NPWP of the TKA
i)  Letter of appointment of the domestic labor companion and the plan of companion program
j)  Statements to perform the education and job training
k) The evidence of manpower report that still valid according to Law Number 7 of 1981

If the documents are complete, there will be a feasibility assessment by the Minister, and there will be a field verification if necessary. If the result of the feasibility assessment fulfill the requirement, within 3 working days the Directorate general or Director shall issuing the decision of validation RPTKA.

After that we can process the procedure to get IMTA. The employer of TKA shall request the application online to the Director with uploading some documents, which are :

a) DKP-TKA Proof of payment through government bank appointed by the Minister, US $ 100 per position per month and shall be conversion to rupiah, and being paid for 1 mont full
b) The decision of ratification RPTKA
c) TKA’s passport
d) TKA’s coloured photos 4×6
e) Letter of appointment of the domestic labor companion
f)  Have an appropriate education with the requirement positon that will be possessed by the TKA
g) Have a sertificate of competence or have a working experiences that fit the position that will be possessed at least 5 years
h) Draft of employments contract
i)  Evidence of insurance police in insurance company Indonesian legal entity
j)  Recomendation from the authorized agency if necessary for the TKA

For the directions, commissioners, member of builder and member of supervisor, shall too upload the deed and the decision letter of ratification of establishment from the authorized agency.

For the employer of TKA as a foreign representative, intenational agency, international organization, foreign representative office shall get the recomendation from the authorized agency.

In case the requirements are being fulfilled, the Director shall issuing the IMTA within 3 working days.

3. Employment agreement

Work agreement is an agreement made between a worker/labourer and an entrepreneur or an employer that specifies work requirements, rights and obligations of the parties.

A work agreement shall be made based on:

a. The agreement of the parties;
b. The capability or competence to take legal actions;
c. The availability/existence of the job which the parties have agreed about;
d. The notion that the job which the parties have agreed about is not against public order, morality and what is prescribed in the prevailing laws and regulations.

If a work agreement, which has been made by the parties, turns out to be against what is prescribed under point a and point the agreement may be abolished/cancelled.

If a work agreement, which has been made by the parties, turns out to be against what is prescribed under point c and point d, the agreement shall be declared null and void by law.

Everything associated with, and/or the costs needed for, the making of a work agreement shall be borne by, and shall be the responsibility of, the entrepreneur. A written work agreement shall at least include:

a. The name, address and line of business;
b. The name, sex, age and address of the worker/ labourer;
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/ labourer;
g. The date the work agreement starts to take effect and the period during which it is effective;
h. The place and the date where the work agreement is made; and
i. The signatures of the parties involved in the work agreement.

The provisions in a work agreement as mentioned under point e and point f are concerned must not against the company regulations, the collective labour agreement and prevailing laws and regulations.

A work agreement shall be made in 2 (two) counterparts which have the same legal force, 1 (one) copy of which shall be kept by the entrepreneur and the other by the worker/ labourer. A work agreement cannot be withdrawn and/or changed unless the parties agreed otherwise.

A work agreement may be made for a specified time or for an unspecified time. A work agreement for a specified time shall be made based on:

a. A term; or
b. The completion of a certain job.

A work agreement comes to an end if:

a. The worker dies; or
b. The work agreement expires; or
c. A court decision and/or a resolution or order of the industrial relations disputes settlement institution, which has permanent legal force or
d. There is a certain situation or incident prescribed in the work agreement, the company regulations, or the collective labour agreement which may effectively result in the termination of employment.

A work agreement does not end because the entrepreneur dies or because the ownership of the company has been transferred because the company has been sold, bequeathed to an heir, or awarded as a grant. In the event of a transfer of ownership of an enterprise, the new entrepreneur shall bear the responsibility of fulfilling the entitlements of the worker/ labourer unless otherwise stated in the transfer agreement, which must not reduce the entitlements of the worker/ labourer. If the entrepreneur, individual, dies, his or her heir may terminate the work agreement after negotiating with the worker/ labourer. If a worker/ labourer die, his or her heir has a rightful claim to acquire the worker’s entitlements according to the prevailing laws and regulations or to the entitlements that has been prescribed in the work agreement, the company regulations, or the collective labour agreement.

4. Permanet employee and contract employee (difrence)

• Permanent Employee (Unspecified Time)

A work agreement for an unspecified time may require a probation period for no longer than 3 (three) months. During the probation period, the entrepreneur is prohibited from paying wages less than the applicable minimum wages.

If a work agreement for an unspecified time is made orally, the entrepreneur is under an obligation to issue a letter of appointment for the relevant worker/ labourer.

The letter of appointment shall at least contain information concerning:

a. The name and address of the worker/ labourer;
b. The date the worker starts to work;
c. The type of job or work; and
d. The amount of wages.

• Contract Employee (Specified Time)

A work agreement for a specified time shall be made in writing and must be written in the Indonesian language with Latin alphabets. A work agreement for a specified time, if not made in writing and written in the Indonesian language with Latin alphabets, shall be regarded as a work agreement for an unspecified time. If a work agreement is written in both the Indonesian language and a foreign language and then differences in interpretation arise, then the Indonesian version of the agreement shall prevail.

a. A work agreement for a specified time can only be made for a certain job, which, because of the type and nature of the job, will finish in a specified time, that is : Work to be performed and c0mpleted at once or work which is temporary by nature;
b. Work whose completion is estimated time which is not too long and no longer than 3 (three) 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.

A work agreement for a specified time cannot be made for jobs that are permanent by nature. A work agreement for a specified time can be extended or renewed. A work agreement for a specified time may be made for a period of no longer than 2 (two) years and can only be extended one time that is not longer than 1 (one) year. Entrepreneurs who intend to extend work agreement for a specified time shall notify the said workers/ labourers of the intention in writing within a period of no later than 7 (seven) days prior to the expiration of the work agreements. The renewal of a work agreement for a specified time can only be made after a grace period of 30 (thirty) days is over since the work agreement for a specified period comes to an end; the renewal of a work agreement for a specified time can only be made once that is no longer than 2 (two) years. Any work agreement for a specified time that does not fulfill the requirements shall, by law, become a work agreement for an unspecified time.

A work agreement for an unspecified time may require a probation period for no longer than 3 (three) months. During the probation period, the entrepreneur is prohibited from paying wages less than the applicable minimum wage.

5. Probation

A requirement for a probationary period must be stated in a work agreement. If the work agreement is made orally, the requirement for a probationary period must be made known to the worker and stated in the worker’s letter of appointment. If the work agreement or the letter of appointment is silent about probationary period, probationary period shall be considered non-existent.

A work agreement for a specified time cannot stipulate probation. If a work agreement stipulates the probation, it shall then be declared null and void by law.

A probation period on work agreement for an unspecified time may require for no longer than 3 (three) months. During the probation period, the entrepreneur is prohibited from paying wages less than the applicable minimum wage.

6. Outsourcing (Perjanjian Kerja Waktu Tertentu “PKWT”)

PKWT for an outsourcing or for a temporary work is an agreement based on the completion of certain work. PKWT is been made at least for 3 years. If the work done within less than 3 years, the agreement null and void by law at the time they finish the work. On an agreement that made based on the completion of certain work, the boundaries of the finished work shall be stated. If the work doesnt finish yet, can make a renew agreement. The renew of agreement can be done after the grace period 30 days after the end of the agreement. On the grace period of time there is no a working relations between the entrepreneurs and the workers/labourers. The parties can regulated any regulations on the agreement.

An enterprise may hand over the part of its work to another enterprise (legal entity) under a written agreement of contract of work or a written agreement for the provision of worker/labour.

The hand over the part of work to another enterprise shall be performed under a written agreement of chartering work. Work that may be hand overes must fulfill the following requirements :

a. The work can be done separately from the main activity;
b. The work is to be undertaken under either a direct or an indirect order from the party commissioning the work;
c. The work is an entirely auxiliary activity of the enterprise; and
d. The work does not directly inhibit the production process.

The protection and working conditions provided to workers/ labourers at the other enterprise shall at least the same as the protection and working conditions provided at the enterprise that commissions the contract or in accordance with the prevailing laws and regulations.

7. Clause for Women workers

It is prohibited to employ female workers/ labourers aged less than 18 (eighteen) years of age between 11 p.m. until 7 a.m. Entrepreneurs are prohibited from employing pregnant female workers/ labourers who, according to a doctor’s certificate, are at risk of damaging their health or harming their own safety and the safety of the baby that are in their wombs if they work between 11 p.m. until 7 a.m.

Entrepreneurs who employ female workers/ labourers to work between 11 p.m. until 7 a.m. are under an obligation:

a. To provide them with nutritious food and drinks. The food and drinks can not be changed with money;
b. To maintain decency/ morality and security in the workplace.
c. To provide a clean toilet; and
d. To provide a transportation.

Entrepreneurs are under an obligation to provide returned/ roundtrip transport for female workers/ labourers who work between 11 p.m. until 5 a.m. Female workers/labourers who feel pain during their menstruation period and notify the entrepreneur about this are not obliged to come to work on the first and second day of menstruation. The implementation shall be regulated in work agreements, the company regulations or collective labour agreements.

8. Working hours

Every entrepreneur is under an obligation to observe the provision concerning working hours. The working hours cover:
a. 7 (seven) hours a day and 40 (forty) hours a week for 6 (six) workdays in a week; or
b. 8 (eight) hours a day, 40 (forty) hours a week for 5 (five) workdays in a week;
The provisions concerning the working hours do not apply to certain business sectors or certain types of work.

9. Overworking hours

Entrepreneurs who require their workers/ labourers to work longer than the working hours must meet these following requirements:

a. Approval of the relevant worker/labourer;
b. Maximum overtime work of 3 (three) hours in a day and 14 (fourteen) hours in a week.
Entrepreneurs who require their workers/ labourers to work overtime are under an obligation to pay overtime pay. The provisions concerning overtime do not apply to certain business sector or certain jobs.

10. Annual leave

Entrepreneurs are under an obligation to allow their workers/ labourers to take a rest and leave. The period of rest and leave shall include:

a. The period of rest between working hours at least half an hour after working for 4 (four) hours consecutively and this period of rest shall not be inclusive of working hours. The weekly period of rest is 1 (one) day after 6 (six) workdays in a week or 2 (two) days after 5 (five) workdays in a week.
b. The yearly period of rest is 12 (twelve) workdays after the worker/labourer works for 12 (twelve) months consecutively; and
c. A long period of rest of no less than 2 (two) months, which shall be awarded in the seventh and eighth year of work each for a period of 1 (one) month to workers/ labourers who have been working for 6 (six) years consecutively at the same enterprise on the condition that the said workers/ labourers will no longer be entitled to their annual period of rest in 2 (two) current years. This provision shall henceforth be applicable every 6 (six) years of work.

The application of the provision concerning the period of rest shall be regulated in a work agreement, the company regulations or the collective labour agreement. The provisions concerning the long period of rest only apply to workers/labourers who work in certain enterprises.
While taking a long period of rest, workers/ labourers are given compensation pay for their entitlement to the eighth year’s annual leave amounting to half their monthly salary. Enterprises that have already applied a long period of rest that is better than the one stipulated under this act are not allowed to reduce it.

11. Discretion as employer for religion

Entrepreneurs are under an obligation to provide workers with adequate opportunity to perform their religious obligations. What is meant by the provision of adequate opportunity shall refer to the provision of a place for praying to and worshipping God that enables workers/labourers to properly perform their religious obligations/ rituals, in which the enterprise’s conditions and financial ability for the provision of such a place shall be taken into account. In order to improve the welfare of the workers/labourers and their families, the entrepreneur shall provide welfare facilities. Welfare facilities shall refer to, for instance, family planning service, babysitting facilities, housing facilities for workers/labourers, special rooms for prayer or other religious facilities, sports facilities, canteens, policlinic and other medical/ health facilities, and recreational facilities.

Every worker/ labourer has the right to receive protection on treatment that shows respect to human dignity and religious values. The entrepreneur shall be obliged to pay the worker/labourer’s wages if the worker/labourer does not perform work because of the workers/labourers cannot perform their work because they are performing religious obligations ordered by their religion.

12. Minimum salary

The minimum wages may consist of:

a. Provincial or district/city-based minimum wages;
b. Provincial or district/city-based sectoral minimum wages.

Sector-based minimum wages can be established for business groups by sector and their breaking down according to business classification by sector nationwide (Indonesia), by district/ city or province. Such sector-based minimum wages in any given area must not be lower than the regional minimum wages applicable to the area in question.

The establishment of minimum wages shall be directed towards meeting the need for decent living. The minimum wages shall be determined by Governors after considering recommendations from Provincial Wages Councils and/ or District Heads/Mayors.

Entrepreneurs are prohibited from paying wages lower than the minimum wages. Entrepreneurs who are unable to pay minimum wages may be allowed to make postponement. Procedures for postponing paying minimum wages shall be regulated with a Ministerial Decision.

13. Fix salary and no fixed salary

Every worker/ labourer has the right to earn a living that is decent from the viewpoint of humanity. In order to enable the worker to earn a living that is decent from the viewpoint of humanity, the Government shall establish a wages policy that protects the worker/labourer. The wages policy that protects workers/labourers shall include :

a. Minimum wages; The Government shall establish/set minimum wages based on the need for decent living by taking into account productivity and economic growth. The minimum wages may consist of :

• Provincial or district/city-based minimum wages;
• Provincial or district/city-based sectoral minimum wages.

Sector-based minimum wages can be established for business groups by sector and their breaking down according to business classification by sector nationwide (Indonesia), by district/ city or province. Such sector-based minimum wages in any given area must not be lower than the regional minimum wages applicable to the area in question.

b. Overtime pay;
c. Paid-wages during the absence;
d. Paid-wages because of activities outside of his job that he has to carry out;
e. Wages payable because he uses his right to take a rest;
f. The form and method of the payment of wages;
g. Penaltys and deductions from wages;
h. Other matters that can be calculated with wages;
i. Proportional wages structure and scale;
j. Wages for the payment of severance pay; and
k. Wages for calculating income tax.

The establishment of minimum wages shall be directed towards meeting the need for decent living. The minimum wages shall be determined by Governors after considering recommendations from Provincial Wages Councils and/ or District Heads/Mayors.

Entrepreneurs are prohibited from paying wages lower than the minimum wages. Entrepreneurs who are unable to pay minimum wages may be allowed to make postponement.

The amount of wages set based on an agreement between the entrepreneurs and the worker/ labourer or trade/ labour union must not be lower than the amount of wages set under the prevailing laws and regulations. In case the agreement sets a wages that is lower than the one that has to be set under the prevailing laws and regulations or against prevailing laws and regulations, the agreement shall be declared null and void by law and the entrepreneur shall be obliged to pay the worker/ labourer a wages according to the prevailing laws and regulations.

Entrepreneurs shall formulate the structure and scales of wages by taking into account the level, position, years of work, education and competence of the worker/ labourer. Entrepreneurs shall review their workers/labourers’ wages periodically by taking into account their enterprise’s financial ability and productivity.

No wages will be paid if workers/labourers do not perform work. However, the provision shall not apply and the entrepreneur shall be obliged to pay the worker/labourer’s wages if the worker/labourer does not perform work because of the following reasons:

a. The workers/labourers are ill so that they cannot perform their work; The amount of wages payable to workers who are taken ill shall be determined as follows:

• For the first four months, they shall be entitled to receive 100 % (one hundred percent) of their wages;
• For the second four months, they shall be entitled to receive 75 % (seventy five percent) of their wages;
• For the third four months, they shall be entitled to receive 50 % (fifty percent) of their wages; and
• For subsequent months, they shall be entitled to receive 25 % (twenty five percent) of their wages prior to the termination of employment by the entrepreneur.

b. The female workers/labourers are ill on the first and second day of their menstruation period so that they cannot perform their work;
c. The workers/labourers have to be absent from work because they get married, marry of their children, have their sons circumcised, have their children baptized, or because the worker/ labourer’s wife gives birth or suffers from a miscarriage, or because the wife or husband or children or children-in-law(s) or parent(s) or parent-in-law(s) of the worker/labourer or a member of the worker/labourer’s household dies.
d. The workers/labourers cannot perform their work because they are carrying out or fulfilling their obligations to the State;
e. The workers/labourers cannot perform their work because they are performing religious obligations ordered by their religion;
f. The workers/labourers are willing to do the job that they have been promised to but the entrepreneur does not employ them, because of the entrepreneur’s own fault or because of impediments that the entrepreneur should have been able to avoid;
g. The workers/labourers are exercising their right to take a rest;
h. The workers/labourers are performing their trade union duties with the permission from the entrepreneur; and
i. The workers/labourers are undergoing an education program required by their enterprise.
The amount of wages payable to workers/ labourers during the period in which they have to be absent from work for reasons specified under point c of subsection (2) shall be determined as follows :
a. If the workers/labourers are get married, shall be entitled to receive a payment for 3 (three) days;
b. If the workers/labourers marry of their children, shall be entitled to receive a payment for 2 (two) days;
c. If the workers/labourers’ child are circumcised, shall be entitled to receive a payment for 2 (two) days;
d. If the workers/labourers’ children are baptized, shall be entitled to receive a payment for 2 (two) days;
e. If a workers/labourers’ wife gives birth or suffers a miscarriage, shall be entitled to receive a payment for 2 (two) days;
f. If the workers/labourers’ spouse, or because either one parent or one of parent-in-law, or because one of children or children-in-law dies, shall be entitled to receive a payment for 2 (two) days; and
g. If a member of the worker/labourer’s household dies, shall be entitled to receive a payment for 1 (one) day.

If a wages is composed of basic wage and fixed allowances, the amount of the basic wage must not be less than 75% (seventy five percent) of the total amount of the basic wages and fixed allowances.

Violations by the worker/ labourer, either by willful misconduct or negligence, may result in the imposition of a penalty. Entrepreneurs who pay their workers/ labourers’ wages late either by willful misconduct or negligence shall be ordered to pay a penalty whose amount shall correspond to a certain percentage from the worker/labourer’s wages. The government shall regulate the imposition of penalty on the entrepreneur and or the worker/ labourer in the payment of wages. In case the enterprise is declared bankrupt or liquidated based on the prevailing laws and regulations, the payment of the enterprise’s workers/ labourers’ wages shall take priority over the payment of other debts.

Any claim for the payment of the worker/ labourer’s wages and all other claims for payments that arise from an employment relation shall expire after the lapse of 2 (two) years since such the right is arose.

14. Penalty to employee

The penalty for violation only can be done if it is regulated in the written agreement/working agreement. The amount of the penalty shall be determined and stated on Indonesian rupiah. The penalty that charged from the entrepreneurs to their workers/labourers, either directly nor undirectly, shall not be used for company interest.

15. Penalty to employer especialy for delay payment salary

Entrepreneurs who pay their workers/ labourers wages late either by willful misconduct or negligence shall be ordered to pay a penalty whose amount shall correspond to a certain percentage from the worker/labourer’s wages. The government shall regulate the imposition of penalty on the entrepreneur and or the worker/ labourer in the payment of wages.
The wages shall be paid to the workers/labourers directly on time in accordance to the working agreement. The penalty for violation only can be done if it is regulated in the written agreement/working agreement. The amount of the penalty shall be determined and stated on Indonesian rupiah.

16. Company regulation

Company regulations is a set of rules and regulations made in writing by an entrepreneur that specifies work requirements and the enterprise’s discipline and rule of conduct.
Every enterprise which employs at least 10 (ten) workers/labourers is under an obligation to establish a set of company regulations that shall come into force after legalized by the Minister or appointed official. The obligation to have a set of legalized company regulations however, does not apply to enterprises already having collective labour agreements.

Entrepreneurs shall formulate the rules and regulations of their enterprise and shall be responsible for them. Companies regulations shall be formulated by taking into account the recommendations and considerations from the worker/ labourer’s representatives of the enterprise. If a trade/ labour union have already been established in the enterprise, the worker/ labourer’s representatives shall be the trade/ labour union’s officials. If there is no trade/ labour union in the enterprise, the worker/ labourer’s representatives shall be the workers/ labourers who hold a position in, or are members of, the bipartite cooperation institution and or has been democratically elected by the workers/ labourers in the enterprise to represent them and act on behalf of their interests.

Company regulations shall at least contain:
a. The rights and obligations of the entrepreneur;
b. The rights and obligations of the worker/ labourer;
c. Working conditions;
d. Enterprise discipline and rule of conduct; and
e. The period of the validity of the company regulations.
Company regulations shall not against the prevailing laws and regulations. The company regulations is valid for 2 (two) years and shall be renewed upon its expiration. During the validity of the company regulations, if the trade union within the enterprise request negotiation of the drafting of the collective labour agreement, the entrepreneur is obligated to do so. If the negotiation fails to reach an agreement, then the existing company regulations shall remain valid until its expiration.

Legalization of company regulations by the Minister or appointed official must have performed within a period of no longer than 30 (thirty) workdays after the draft of the company regulations is received. If the company regulations have met the requirements and the period of 30 (thirty) workdays for legalizing them has elapsed but the Minister or the appointed official has not legalized them yet, then the company regulations shall be assumed to have been legalized. If the company regulations have not fulfill the requirements yet, the Minister or the appointed official must give a written notification to the entrepreneur the correction to the company regulations. Within a period of no later than 14 (fourteen) workdays after the date on which the written notification is received by the entrepreneur, the entrepreneur is under an obligation to resubmit the corrected version of the company regulations to the Minister or appointed official.

Any changes to the company regulations prior to its expiration can only be made on the basis of an agreement between the entrepreneur and the worker/ labourer’s representatives. The company regulations resulting from the agreement shall be legalized by Minister or appointed official.
The entrepreneur is under an obligation to notify and explain, as well as deliver, the contents of the company regulations or its changes to the worker/ labourer.