Foreigners in Indonesia’s Workforce
As a country which has been influenced by colonization for many centuries, foreigners have left an impact on Indonesia for many years. Therefore, many Indonesian citizens today have mixed feelings with regard to foreigners who have made plans to live and work in the country. While some locals are open to the addition of foreigners to Indonesia’s workforce, several others fear that these immigrants are ‘stealing their jobs.’
The number of foreign workers who are currently working in Indonesia has gradually been increasing. The Investment Coordinating Board (BKPM) reported that there are 95,335 foreign workers currently in Indonesia. However, although this number has been increasing, it is much less than what one might assume. When this figure is compared to that of the country’s total workforce of over 127 million individuals, the proportion of foreign workers in Indonesia can be seen to be one of the world’s lowest at just 0.075% of the workforce.
This fact was supported by BKPM chairman Thomas Lembong. In a recent interview, Lembong stated that the foreign workforce in Singapore makes up 36% of its total workforce, while Malaysia’s and Thailand’s respective foreign workforces accounts for 15.3% and 4.5% of those countries’ total workforces. One of the countries with the highest proportion of foreign workers in the world is Qatar. In Qatar, foreign workers comprise 96% of the nation’s entire workforce. Thus, when the figures related to foreign workers in Indonesia are compared to those of other countries, it can clearly be seen that Indonesia’s foreign workers have not left as much of an impact on the country’s labor force as some might think.
However, certain foreigners may have some advantages in Indonesian industries. This is especially true of skilled foreign workers. Foreigners who are highly skilled and knowledgeable will be able to teach their skills to and share their knowledge with Indonesian workers.
Process of hiring Foreigners in Indonesia
Indonesia has strict regulations that which are to be followed by any company which intends to hire any foreigners. A foreign company based in Indonesia, also known as a PT PMA, is not allowed to hire foreigners without obtaining a special permission letter from the Ministry of Labor and Immigration as well as other important documents signed by several government authorities under the Ministry.
Any hired foreigners in Indonesia must have a valid work permit. Work permits in Indonesia are commonly referred to as KITAS; however, this is not entirely accurate because KITAS is merely the card that proves that one has a non-permanent residence in Indonesia.
Work Permits for Shareholders, Commissioners, and Directors
The rules pertaining to work permits meant for shareholders, commissioners, and directors differ from the standard ones. This is because shareholders, commissioners, and directors are considered to be people serving in senior positions. Therefore, such people are able to receive a work permit as soon as the company in question has been officially registered. This is especially important for companies that do not have any immediate plans to hire any local directors. Furthermore, although at least one of the directors needs to have an Indonesian tax card (NPWP), foreigners who have a valid work permit are eligible for one.
In Indonesia, commissioners and directors do not need to be shareholders of the company. Therefore, company owners who need to hire foreign experts for the company as soon as possible should make them directors or commissioners of the company as soon as possible.
Work Permits for Foreign Experts
According to the laws of Indonesia, a foreign expert can be hired if there is no local person available to fill the position. Therefore, business owners should only plan to hire foreigners to fill roles that require forms of knowledge and expertise which are rare in Indonesia.
An important principle to be followed by anyone planning to hire one or more foreign experts is that there must be at least one local person hired for every foreign expert. Business owners are also allowed to hire as many locals as desired beyond this minimum ratio.
However, foreign experts can only be hired once a company has a permanent business license (IUT). For this reason as well as several others, it is advisable for business owners in Indonesia to begin the process of applying for an IUT as soon as possible.
It is not always easy for one to acquire a work permit in Indonesia. This is where we at Paul Hype Page & Co come in. We will handle the submission of all necessary documents so that you will receive a valid work permit without any problems. We will even make arrangements with any relevant authorities in order to expedite the process on your behalf.
A legal option which allows foreigners to visit Indonesia on a regular basis and conduct business activities there is that of the business visa. People of most nationalities will become eligible for a multiple–entry business visa and allowed to stay in Indonesia for 60 days per visit after three visits to the country. The same business visa can be used for up to one year. However, only foreigners who receive a salary from an overseas entity are allowed to claim this business visa.
Local Companies Which Hire Foreign Experts
It is possible for local companies without foreign shareholders to hire foreign experts. There are, however, restrictions placed on certain local companies, especially those which do not have much company capital. Microcompanies and small companies are defined as those which have company capital of less than 500 million rupiah. Such companies are barred from hiring any foreign experts. Medium-sized companies are those which have company capital of between 500 million and 10 billion rupiah. These companies are allowed to hire foreign experts. However, medium-sized companies may also have to abide by additional limitations depending on the industry of which they are a part. Large companies have more than 10 billion rupiah’s worth of company capital. The rules that apply to large companies which pertain to the hiring of foreign experts are the same as those related to foreign–owned companies.
Should you be interested in starting a company of your own to be based in Indonesia, do not hesitate to contact us at Paul Hype Page & Co. We have a dedicated and competent team of incorporation specialists. They will provide you with the services and information you might need in your attempt to start a company in Indonesia. With their assistance, it should not be a problem for you to have your own company in Indonesia.
Differences Between Hiring Locals and Foreigners in Indonesia
During the hiring process, the eligibility criteria for foreigners and locals are different. Similarly, there are also specific criteria which apply to the hiring of foreigners. Only certain recognized companies are allowed to hire foreigners; conversely locals can be recruited by any company in Indonesia. The regulations from the Ministry of Manpower in Indonesia states that only the following organizations and institutions are allowed to employ foreign workers:
- Foreign legal entities registered in Indonesia
- Foreign countries’ representatives, international organizations, international agencies, or government agencies
- Foreign company representative offices, foreign trade representative offices, and foreign news agencies incorporated in Indonesia
- Limited liability companies (PT – Perseroan Terbatas) and foundations
- Educational, social, cultural, and religious institutions
- Sports, entertainment, and arts event organizers
Laws that Govern the Hiring of Foreigners in Indonesia
The main source of Employment Law in Indonesia is Law No. 13 of 2003 on Manpower. This law is divided into many articles, and one of the most important of these articles is Article 42. Article 42 of this law states that expatriates are only permitted to work in Indonesia on a temporary basis. Foreigners are only to be employed under a fixed-term employment agreement. This means that foreigners cannot be permanent employees.
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Step 5- Assist as your company to hire staffs and handle all HR matters
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