Employment Laws in Indonesia
According to Indonesia’s existing employment laws, there are various important laws that govern employment. Indonesia’s primary employment law is Law 13/2003, which applies equally to all employees and does not draw distinctions between different types of worker. The most important Indonesian employment laws state the following:
Firstly, national improvement is done to improve the lives of all who live in Indonesia and encourage all Indonesian citizens to become citizens who are beneficial to the country, fair, prosperous, just, and well-versed in material as well as spiritual matters based on the Five Principles (Pancasila) and the constitution of the Republic of Indonesia (UU Dasar Negara Republik Indonesia Tahun 1945).
Second, in accordance with the role and position of employees, the development of manpower is conducted to improve the quality of labor and its role in development along with the improvement of the protection of labor in accordance with the dignity and prestige of humanity.
Thirdly, protection of employees is meant to ensure the basic rights of workers or laborers and ensure the equal opportunity to work without discrimination based on any reasons in order to increase the welfare of workers and their families while still paying attention to the advancement of the business world.
These laws are some of the numerous laws that govern employment in Indonesia. Another of the primary legislation for governing employment relationships in Indonesia is Law No. 13 of 2003 on manpower. This law stipulates the primary rules for establishing an employment relationship, employment terms and conditions, and employment termination. However, it was only after its enactment that some of its provisions were declared unconstitutional by Indonesia’s Constitutional Court. Among the other laws that govern employment-related matters is Law No. 2 of 2004 on industrial relations dispute settlements which settles disputes of rights, disputes of interest, disputes on employment termination, and disputes between labor unions.
Many people from all over the world would like to work in Indonesia. Perhaps you are one of them. If you are, we at Paul Hype Page will do all we can to help you obtain a work visa which is valid in Indonesia. Once this is completed, you may begin searching for a job there.
The laws mentioned are accompanied by government regulations as well as regulations made by the Minister of Manpower. To supervise the implementation of the employment laws, the regional offices of the Ministry of Manpower inform supervisors of matters related to manpower. Their main job is to ensure compliance with the provisions.
These employment laws defend employees’ rights, and Indonesians benefit from the employment laws. The labor law protects maternity rights in which pregnant employees are entitled to take three months’ paid maternity leave. This also applies to male workers by protecting their paternity rights. Male workers are given two days’ paternity leave if their wife gives birth or miscarries. An employee is entitled to paid family leave in cases of marriage, circumcision, baptism, or death of an employee’s child. Employees are also entitled to sick leave in cases of illness or injury that is evidenced by a medical certificate or statement. Employees are also entitled to long-term paid medical leave provided that such leave is recommended in writing by a doctor and lasts for a period greater than one year. A worker becomes entitled to annual leave after working for 12 consecutive months.
All the rights mentioned earlier are paid leave which means that the employee is paid the full salary for the period of leave. However, the employer is not obliged to pay the allowances that are conditional on the attendance of the employee. Indonesia’s employment laws are silent on surrogacy rights and carers’ rights. In practice, leave can be granted by an employer as unpaid leave. Likewise, employees may be given leave for emergency care for themselves and their immediate family members.
It should be noted that there is no national minimum wage. Instead, all 33 provinces of Indonesia set their own minimal wage which varies every year depending on industry. The minimum wage is generally set based on the estimated amount required to cover all basic needs. The minimum wage covers employees whose working hours are 40 hours a week and the minimum wage requirement only applies to employees whose length of service is less than one year. For employees whose length of services is more than one year, the amount paid to them will be negotiated by the employer and the employee.
An employee can work a maximum of 40 hours per week. Employers who require an employee to work outside the normal working hours must pay overtime wages to such an employee. Overtime can only be performed for a maximum period of three hours per day and 14 hours per week. Employees are also entitled to at least one 30-minute break after four continuous hours of work.
According to Article 5, Law No. 13 on manpower, all persons that are qualified to perform a job have the same opportunity to obtain the job without discrimination. The interpretation of Article 5 provides, among other things, that all persons who are qualified to perform a job cannot be discriminated against on the grounds of sex, ethnicity, race, religion, or political stance. Employers must provide workers with equal rights and responsibilities.
Upon termination of an employees’ contract, the law does not specify notice periods for ordinary dismissals and unfair dismissals. However, in practice a 30-day notice must be given to terminate an employment contract. Law No. 13 of 2003 on Manpower regulates individual employment termination and provides for dismissal without cause and dismissal with cause. The labor law sets out the dismissal and severance payment requirements. The amount and type of severance to be paid to an employee can vary depending on the basis of the dismissal. The standard severance pay is one month’s salary for every year of service, or up to nine months’ salary if the dismissal is the employee’s fault.
The main purpose behind these employment laws is to facilitate good employer-employee relationships and protect employees’ rights. These laws subsequently facilitate a good working atmosphere in the place of business.
Violation of Employment Laws
There are diverse punishments for employers and employees who violate the employment laws. Penalties ranges from fines to imprisonment. Besides legal and financial sanctions, the Indonesian government also publicizes the names of repeat offenders and advises other government agencies and commercial banks to deny them services and loans. Despite all this, businesses in Indonesia continue to violate labor laws and official regulations protecting workers’ rights. When an employee violates the law, the penalty of violation can only be imposed if it is regulated in a written agreement or working agreement. If violation of employment laws is on the employers’ part in cases such as delayed payment of salaries, the employer shall be ordered to pay a penalty whose amount shall correspond to a certain percentage from the worker’s wages. Employers must not go against company regulations which contain the rights and obligations of both the employer and employee, working conditions, rules of conduct, and period of validity of the company regulations. Legalization of company regulations must take place within a period of no longer than 30 working days after the draft of the company regulation is received.
Employers may face one or more the following sanctions if they do not obey the employment laws either by failing to prepare a wage structure and wage scale or failing to inform employees about the wage structure and scale: written warning letters, restrictions on business activities, temporary suspension of business activities, and revocation of business license.
We at Paul Hype Page & Co do not want any of these punishments to befall you. Thus, we will work with you to ensure that your company operates in a completely legal manner. Our specialists will give you much help in this regard.
The labor laws of many developing countries in comparison with those of developed countries are of much less relevance to how the labor markets are actually organized and operate in practice. Labor laws in Indonesia are actually similar to those of its neighboring countries as they share a lot of things in common including their systems of government and ways of life.
However, it should be noted that some changes have been made to the employment laws of Indonesia. Previously, the ratio of Indonesian to foreign employees was not clearly regulated except in the cases of representative offices. In practice, an unwritten policy of at least 3 to 1 had been used by most. Under the new regulations, an employer of expatriates must now have at least 10 Indonesian employees for each expatriate hired. The new regulation was later sanctioned by government to be non-mandatory. Other changes made include the removal of the Indonesian language requirement for foreigners and the removal of tertiary degree requirements. One will now only be required to have the educational qualifications which fit the specific job.
On March 29, 2018, the Presidential Regulation on Utilization of Foreign Expatriates was issued as an effort to support the national economy by expanding work opportunities through an increase in investment in Indonesia. One significant change is that the government removed the requirement for an employer to have a Foreign Manpower Utilization Permit in order to employ a foreign worker.
With the frequent changes being made to the employment laws, it is to be expected that any of the employment laws could be changed at any time.