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 these employees, it is important to understand the employment laws.
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 legislations which cover 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:
What are the 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 labour law, applies equally to all employees and makes no discrimination between different sorts of workers. The most important Indonesian employment laws state the following:
Here are some of the types of leave applicable in the eyes of Indonesia employment laws:
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 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 labour 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:
Common issues in employment and labour laws and regulations are covered by employment laws in Indonesia. Employment terms and conditions, employee representation, labour relations, discrimination, maternity and family leave entitlements, and business sales are all common topics.
Violation of Employment Laws in Indonesia
Employers and employees that break employment laws in Indonesia 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 labour 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.
Indonesia’s yearly minimum wage is $1,027.00 in International Currency.
Employees are paid a mandatory 13th-month salary payment in Indonesia, often referred to as THR.
Under the Indonesian labour law, termination of employment in Indonesia can be initiated by the employer through dismissal or by the employee through resignation.
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.