Forums For Adjudicating Employment Disputes
There are 4 (four) types of industrial disputes i.e. disputes of right, disputes of interest, disputes over termination, and disputes among labour unions.
The dispute between an employee and employer shall first be resolved through bipartite negotiation. If there is no consensus reached in the bipartite negotiation, any of the parties may submit a request to the relevant manpower services (the authorized institution in manpower under the laws, whether in province region level, or city/regency level), so the dispute can be resolved by conciliation (for the dispute of interest, dispute over termination and dispute among union labours) with third party registered in the list of manpower services as conciliator as agreed by the parties, or by arbitration (for the dispute of interest and dispute among union labours). If no agreement is reached by the parties for settlement through conciliation (including to appoint the conciliator) or arbitration, the dispute shall be resolved by mediation, which manpower services official shall act as the mediator. If the dispute cannot be resolved through conciliation or mediation, the disputes shall be settled through the Industrial Relation Tribunal (Pengadilan Hubungan Industrial). If the parties choose the settlement by arbitration, the arbitration will result in a final and binding award to the parties.
The industrial relation tribunal has the authority to adjudicate all industrial disputes, while the arbitration only covers the settlement of (i) disputes of interest, and (ii) disputes among the labour unions (based on agreement between the parties). There are legal remedies in the form of cessation and civil request to the Supreme Court regarding disputes of right and disputes over termination.
The Main Sources Of Employment Law
The main sources of employment law include (i) Law No. 13 Year 2003 concerning Manpower (“Manpower Law”) which govern the working relationship between the employer and the employee, which has been amended by Law No. 11 Year 2020 concerning Job Creation Law (“Job Creation Law”) which govern amendment of several laws in to accommodate investment in Indonesia (ii) Law No. 21 Year 2000 concerning Labour Union (“Labour Union Law”) which govern the incorporation, right and obligation of a labour union, (iii) Law No. 2 Year 2004 concerning the Settlement of Industrial Relation Dispute which govern the settlement of industrial disputes; (iv) Law No. 40 Year 2004 concerning National Social Security System (“Social Security Law”) which govern national security system in Indonesia including social security for labour; and (v) Law No. 18 Year 2017 concerning Protection of Indonesian Migrant Worker (“Migrant Worker Law”) which provide requirements, procedures, labour rights and protection in the placement of Indonesian workers abroad.
Please note that there are several provisions in the Manpower Law which have been annulled by Constitutional Court Judgment.
National Law And Employees Working For Foreign Companies
The Manpower Law will apply to all national employees who work either for a local company or a foreign company in Indonesia as a mandatory rule.
National Law And Employees Of National Companies Working In Another Jurisdiction
Any placement of Indonesian employees abroad shall be made in full compliance of the Migrant Worker Law, including the fulfilment of the rights of the employees under the Migrant Worker Law, and the fulfilment of requirement for the written working agreement. National Companies shall comply with the Manpower Law, however, the use of law in other jurisdiction is permitted, as long it will not contradict with the Manpower Law or provide more benefits to the employees compared with the benefits provided under Manpower Law.
There is no regulation under Indonesian manpower laws which provide specific regulation concerning Data Privacy of the employees. However, the regulation of data privacy is included in the “Information and Electronic Transaction Law”, and the specific law for the protection of the data privacy is in progress to be issued, which in principle, a party must obtain an approval from the owner of the data if the party intends to use the data.
Legal Requirements As To The Form Of Agreement
The working agreement can be made in writing or verbally. However, there are several working agreements that should be made in writing as required by the relevant regulation, such as a definite period of employment, agreement between the employees and the outsourcing company, and cross country interwork (antar kerja antar negara).
The probation period is limited to 3 (three) months and can only be applied to an indefinite period of employment. The probationary period shall be clearly stipulated in a working agreement, or where there is no working agreement the employee has been informed verbally and it has been stipulated in an assignment letter. During the probation period, the employer may terminate the employee, by providing 7 (seven) days prior notice and without obligation to pay the “Termination Compensation” (consisting of severance pay, long service pay, rights compensation and/or separation pay) provided that the termination clause for the probationary period has been agreed upon by both parties beforehand.
Hours Of Work
Subject to certain business sector and works, the maximum hour of work is 40 (forty) hours in a week. The arrangement could be 7 (seven) hours in a day for 6 (six) workdays in a week or 8 (eight) hours a day for 5 workdays in a week.
There is limitation for overtime which is no later than 4 (four) hours in a day or 18 (eighteen) hours in a week. Please note that the employer is prohibited from employing female employees under 18 (eighteen) years old for night shifts (from 23.00 P.M until 07.00 A.M). The same also applies to pregnant employees whose obstetrician has provided a recommendation or statement that the night shift would be harmful to her safety and health. There are also several regional regulations that prohibit women from being employed on night shifts, except in specific kinds of work such as nurseries.
Pursuant to Ministry of Manpower and Transmigration Regulation No. 102/MEN/ VI/2004 regarding Overtime Working and Overtime Working Payment (“Minister Regulation 102/2004”), an employee who is responsible as a decision maker, planner, executor of the company to running its business, is not eligible for overtime payment due to the nature of the position.
Special Rules For Part-time Work
There are no specific rules for part-time work. There are only 2 types of working agreement under Indonesian law: (1) indefinite period working agreement; and (2) definite period working agreement. Definite period working agreement is limited only for temporary work, which are: (i) works that the completion can be estimated (which shall be a short period); (ii) seasonal work; (iii) work which related with new product, new activity, or additional product which still on trial; (iv) one-time job: or (v) work which is temporary in nature.
There is a minimum wage that shall be fulfilled by the employer to its employee, including during the probation period. The minimum wage is determined by the Governor of each province in Indonesia, and will be evaluated annually. Thus, the minimum wage will vary depending on the province. The minimum wage applies only for the employees who work less than a year for the relevant employer. The employer shall arrange the scale and structure of wage that shall be shown to the authorized institution, and submit a statement letter that the scale and structure of wage has been determined by the employer. Such scale and structure of wage shall be shown by the employer to the employee subject to the relevant position of such employee. The wage of the employees who work more than a year for the relevant employer shall refer to the scale and structure of wage determined by the employer.
The employee is entitled to a minimum period of 12 (twelve) workdays of rest per year after working for 1 (one) year consecutively. The long rest can be provided in accordance with the employment contract and/or company regulation or collective labour agreement. The employer may apply different entitlements to rest periods depending on the position of the relevant employee, subject to the minimum rest period as mentioned before.
The minimum age is 18 (eighteen) years old. However there is an exemption for aged 13 (thirteen) years old to 15 (fifteen) years old limited only for light work to the extent that the job does not disrupt any physical, mental and social developments, which shall be in full compliance with specific requirements such as: has been permitted by their parents (or guardians) subject to working agreement signed between employer and parents (or guardians), maximum 3 (three) working hours, and other specific rules and regulations in relation thereto. The maximum age will depend on the employer’s policy which shall be stipulated in the company regulation and/or collective labour agreement.
The Manpower Law provides non-discrimination regulation in which all workers shall have the equal rights and opportunities to find a job including equal treatment to persons with disabilities. The employer is obliged to provide protection to the said employee, including to provide accessibility, working tools and safety equipment in accordance with the type and severity of their disability.
Location Of Work/Mobility
The location of work shall be specified in the working agreement or verbally for the unwritten working agreement, and/or company regulation or collective labour agreement. Mobility clauses shall be stated in the written working agreement, and/or company regulation or collective labour agreement.
The employer is obliged to register the employee for the labour social security system in accordance with Social Security Law, in which the pension security is included as part of labour social security. The pension security contribution is 3% (three percent) of the total salary (basic wage and fixed allowances) in monthly basis, in which from such of the 3% (three percent), the 2% (two percent) shall be paid by the employer and the remaining 1% (one percent) shall be paid by the employee to the Social Security Provider Agency (Badan Penyelenggara Jaminan Sosial Tenaga Kerja – “BPJS”). The employee has the rights to request his/her pension security from the BPJS when the pension age has been reached (notwithstanding he/she is still working), which pursuant to the implementation regulations of the Social Security Law, it has been determined that the pension age is 57 (fifty-seven) years old. If the employment is terminated due to pension, the employer shall pay specific Termination Compensation as in accordance with the law, however, the employer contribution in the pension security can be calculated as part of the Termination Compensation.
Other than pension security, there is also old age security which is also part of the labour social security. The old age social security contribution is 5.7% (five-point seven percent) of the total salary in monthly basis, in which 3.7% (three point seven percent) shall be paid by the employer, and the remaining 2% (two percent) shall be paid by the employee.
Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
There are specific regulations for pregnancy and maternity, but there are no specific regulations for paternity and adoption. However, the employee is entitled to be absent from work because of getting married, attending a marital ceremony of their children, having their children circumcised or baptized, or because the employee’s wife gives birth to a baby, or suffers miscarriage, or because the spouse, children-in-law, parents or parenting-law of the employee or a member of the employee’s household passes away.
Female employees are entitled to a 1,5 (one and a half) months period of rest before and after giving birth, based on the time calculation by the obstetrician or doctor. This maternity leave may be extended with the recommendation from a doctor or obstetrician. In addition, the employer is obliged to provide proper opportunities to female employees whose babies still need breastfeeding, to breast-feed their babies during working hours.
The working agreement in writing should include (i) the name, address, and business type of the company (employer), (ii) name, gender, age, and address of the employee, (iii) position and scope of work, (iv) location of work, (v) salary and method of payment, (vi) the work requirements including the rights and obligations of the employer and the employee, (vii) commencement and the period of the working agreement, and (viii) date and place of the working agreement made and undersigned by the parties.
Any fees, costs, and matters related to the making of the working agreement shall be borne by the employer.
The working agreement is irrevocable. and cannot be amended unless agreed to by both parties.
The working agreement should not contravene with prevailing company regulations, collective labour agreements, laws and regulations. Otherwise, the provisions in the working agreement will be void and the provisions in the prevailing regulations will be applied.
The parties are free to include any other terms and conditions to the working agreement, to the extent that it will not contravene and/or violate the prevailing laws and regulations.
Types Of Agreement
There are 2 (two) types of working agreement which are an indefinite period working agreement (“Indefinite Working Agreement”) and a definite period working agreement (“Definite Working Agreement”). The probation period is up to a maximum of 3 (three) months and is only applicable to Indefinite Working Agreements (see “probation period” above”).
A Definite Period Working Agreement is limited only for temporary work, which are: (i) works that the completion can be estimated (which shall be a short period); (ii) seasonal work; (iii) work which related with new product, new activity, or additional product which still on trial; (iv) one-time job: or (v) work which is temporary in nature. The maximum period for a Definite Working Agreement is limited to 5 (five) years (including any of its extension and/or renewal).
There are rules applicable to secrecy and/or confidentiality in employment relationships. The employee shall protect the trade secrets of the employer (company) during and/or after the employment relationship. The employer may include a non-solicitation and/or non-competition clause in the working agreement (see “Restrictive Future Activities below”). In general, the Indonesian Penal Code has categorized disclosure of any restricted information by the employee as a criminal action with a maximum 9 (nine) months’ imprisonment. There are also several specific laws governing the disclosure of restricted information.
Ownership of Inventions/Other Intellectual Property (IP) Rights
The person who creates inventions or other intellectual property (IP) rights is the owner of the said invention or IP rights even though such inventions or other intellectual property (IP) rights were found during working hours, unless agreed otherwise in an agreement made between the employer and the employee.
There are no specific regulations under Indonesian law regarding pre-employment including related requirements which shall be met by the applicants or related to background of the applicants. The employer may set their own requirements, provided that the requirements do not practice discrimination. However, it is allowed for the employer to require the applicant to submit the “SKCK” (statement letter of criminal record issued by the police department) which provides information on whether the applicant has a criminal record or not.
In respect of “Pre-Employment”, the government recently issued new regulation which provides pre-employment facility by the issuance of the “Pre-Employment Card”. The Pre-Employment Card can be requested by any unemployment. The holder of the Pre-Employment Card is entitled to receive a certain amount of financial assistance to attend training which is held by certain training institutions in accordance with the laws and regulations.
Foreign employees can only be employed for certain positions and periods of time. The employer is obliged to submit the plan to use foreign employees’ services (Rencana penggunaan Tenaga Kerja Asing – “RPTKA”). The employer is also obliged to pay compensation in using the foreign employees. After the required documents have been submitted for obtainment of RPTKA, and the compensation in using the foreign employees services has been paid by the employer, the authorized minister or other appointed officials shall issue the ratification of RPTKA. The ratification of RPTKA is used to obtain working visa and temporary stay permit. The working visa will be issued through Indonesian government representative in the origin country of the foreign employee, while the temporary stay permit will be provided to the foreign employees on the counter in specific international port or airport when the foreign employees enter the territory of Republic of Indonesia. The obligation to obtain the RPTKA as above will not apply for the foreign employees who work: (i) as a director or commissioner with certain shareholding in an Indonesian company as the employer; (ii) as diplomatic officials or counsellors at the embassy; and (iii) required by the employer due to emergency, vocation, in the technology-based start-up company, business travel, and research for a specific period.
Furthermore, the employer shall appoint a national employee as an accompanying working partner for the foreign employees. The purpose is for transferring of technologies and expertise, however, such regulations will not be applied for foreign employees in specific positions such as director of the company, or other positions, or specific work pursuant to the laws and regulations.
Violation upon the said provisions above would be subjected to a fine in accordance with the laws and regulations which shall be paid by the employer.
The foreign employee is prohibited to be placed in a position that deals with personnel and/or occupy certain positions. An individual employer is prohibited to employ foreign employees.
Hiring Specified Categories Of Individuals
In specific industries such as insurance, construction and other industries which are specifically regulated under various laws and regulations, certain positions shall be equipped with specific certification in accordance with the laws. This also applies to foreign employees, in which documents related to the specific competency of the employee shall be submitted in the obtaining of RPTKA’s ratification.
In addition, as elaborated above in “Hiring Non-Nationals”, foreign employees in the technology-based start-up company is exempted in the obtaining of RPTKA requirement.
Furthermore, there are restrictions on the type of work that could be undertaken by certain employees, specifically for children employees (please refer to our elaboration in “Minimum/Maximum Age”, that children can be employed with specific conditions and requirements), such as: i) Jobs relating to machinery, aeroplanes, installation, and other equipment; ii) harmful working environments (physically, biological, and chemical harm); iii) buildings, roads, bridge construction; iv) traditional loading with loads over 12 kg for boys, and over 10 kg for girls; and iv) with working hours between 18.00 P.M to 6 A.M; etc, (whilst, for female employees please see “Hours of Work”).
Outsourcing And/Or Sub-Contracting/Temporary Agency Work
Outsourcing can only be conducted by the outsourcing company with a specific license issued by the government. The outsourcing employees shall be hired whether by indefinite period working agreement or definite period working agreement. If the employee is hired by the definite period working agreement, the working agreement shall include the protection clause in the changes of the outsourcing company while the job in the user company remains available. If the protection clause is not provided, the outsourcing company shall be liable for the fulfilment of any employee’s rights.