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Indonesia Employment Laws

6 min read|Last Updated: August 29, 2022|
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Whether you incorporated a company in Indonesia, or anywhere else in the world, you are more likely than not to hire employees to run your business. Before hiring the employees, it is important to understand the employment laws in the country.

When it comes to the employment laws in Indonesia, the basic terms of employment and laws still stand universally. However, there are certain differences that you should take note of if you are a foreigner who has an Indonesian company. This is crucial as if you violate the Indonesian employment laws, there are severe penalties that you will incur.

What are Employment Laws?

Employment laws are a set of rules that govern employees’ rights and employers’ duties. They cover a wide range of topics, including pension plans and retirement, job safety, and workplace discrimination. They control the employer-employee relationship as well as the rights and responsibilities of employees.

It is made up of a variety of different legislation which covers everything that has to do with the workplace. In the relationship between a company and their employees, employment lawyers play a critical role. This relationship begins with the hiring of an employee and continues through a full cycle that can conclude in the voluntary or forced termination of employment.

Beyond that, employment laws include a wide range of matters, which are, among other things:

  • Recruiting

  • Advertising job openings

  • Recruitment process

  • New formalities

  • Remuneration

  • Promotion & immigration of employees

  • Benefits &bonuses

  • Organisational restructuring

  • Voluntary exits

  • Litigation

  • Discrimination

  • Wrongful termination

  • Minimum wage

Employment Laws in Indonesia 

There are several major regulations that govern employment in Indonesia, according to the country’s existing employment laws. Law 13/2003, Indonesia’s basic labor law, applies equally to all employees and makes no discrimination between different sorts of workers. The most important Indonesian employment laws state the following:

  • National improvement to improve the lives of all Indonesians and encourage all Indonesian citizens to become citizens who are beneficial to the country, fair, prosperous, just, and knowledgeable in both material and spiritual matters, based on the Five Principles (Pancasila) and the Republic of Indonesia’s constitution (UU Dasar Negara Republik Indonesia Tahun 1945).

  • Manpower development is carried out in accordance with the role and position of employees to increase the quality of labor and its role in development. This strengthens labor protection in line with humanity’s dignity and prestige. Manpower development is carried out in accordance with the role and position of employees to increase the quality of labor and its role in development. This strengthens labor protection in line with humanity’s dignity and prestige.

  • Employee protection is intended to secure workers’ or laborers’ basic rights, as well as equal chance to work without discrimination based on any reason, in order to improve the welfare of workers and their families while also advancing the business world.

Here are some of the types of leave applicable in the eyes of Indonesia employment laws:

  • Maternity & paternity leave
    Pregnant employees are entitled to take 3 months paid maternity leave while male employees are given 2 days paternity leave if their wife gives birth or miscarries

  • Paid family leave
    For the purposes of marriage, circumcision, baptism, or death of an employee’s child

  • Sick leave
    For instances where the employee is ill or injured that is evidenced by a medical certificate or statement

  • Long-term paid medical leave
    Only applicable if it is recommended in writing by a doctor and lasts for a period greater than 1 year

  • Annual leave
    Entitled to employees after working for 12 consecutive months

When it comes to working hours, an employee is limited to 40 hours a week with at least one 30-minute break after 4 hours of continuous work. Employers must pay overtime to employees who are required to work outside the usual working hours.

The employment laws in Indonesia do does not establish notice periods for ordinary dismissals or unfair dismissals when an employee’s contract is terminated. However, in most cases, a 30-day notice is required to cancel an employment contract. Individual employment termination is regulated by Law No. 13 of 2003 on Manpower, which provides for dismissal without cause and dismissal with cause.

The Indonesia labor law specifies the conditions for dismissal and severance pay. Depending on the reason for the dismissal, the amount and type of severance to be paid to an employee may differ. If the dismissal is due to the employee’s fault, the typical severance pay is one month’s salary for every year of service, with a maximum of nine months’ income.

Minimum Terms of Contract Employment in Indonesia 

There are minimum terms of an employment contract regulated under the Indonesia employment law which include:

  • Name, address, line of business

  • Name, gender, age, address od employee

  • Occupation / type of job

  • Place where the job is located

  • Wages and how it is paid

  • Rights and obligations of both the employer and employee

  • Work agreement including date of work period

  • Place of work agreement establishment

  • Signatures of parties involved

Common issues in employment and labor laws and regulations are covered by employment laws in Indonesia. Employment terms and conditions, employee representation, labor relations, discrimination, maternity and family leave entitlements, and business sales are all common topics.

Violation of Employment Laws

Employers and employees that break employment laws will face penalties such as fines and jail terms. In addition to legal and financial penalties, the Indonesian government makes repeat offenders’ names public and instructs other government institutions and commercial banks to refuse them services and loans.

Despite this, firms in Indonesia continue to break labor laws and regulations that protect workers’ rights. When an employee breaks the law, the penalty can only be applied if it is spelled out in a written contract or working agreement.

If an employer violates employment regulations, such as by failing to pay wages on time, the employer will be required to pay a penalty equal to a percentage of the worker’s wages.

Need a compliance partner in Indonesia? Reach out to us for corporate secretarial services, and other corporate services like incorporation today.

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FAQs

What is the minimum wage in Indonesia?2021-11-15T11:15:42+08:00

Indonesia’s yearly minimum wage is $1,027.00 in International Currency. 

Is 13th month pay mandatory in Indonesia?2021-11-15T11:14:53+08:00

Employees are paid a mandatory 13th-month salary payment in Indonesia, often referred to as THR. 

How do I terminate an employee in Indonesia2021-11-15T11:14:35+08:00

Under the Indonesian labour law, termination of employment in Indonesia can be initiated by the employer through dismissal or by the employee through resignation. 

What are the Labour laws in Indonesia?2021-11-15T11:13:08+08:00

A basic principle of Indonesian labour law is that the dismissal of an employee should be prevented and, in some cases, prohibited. Fundamentally, the relevant authorities must initially approve every termination of employment. 

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