Labour and employment rights are extremely important in every country and this is noted after incorporation of a company. They give every workplace structure, establish employee and employer responsibilities, and occasionally even describe government regulations for resolving workplace issues. Labour rights are outlined in a country’s employment laws.
It is critical for businesses to follow a country’s labour regulations because it allows them to focus more of their time on improving productivity and profitability rather than dealing with issues linked to labour rights and labour laws. There are also employment laws in Indonesia to protect the well-being of workers.
Why Labour Rights Are Important
There are many reasons why labour rights in Indonesia in important. These include, among others:
What are the Labour Rights in Indonesia?
Some of the labour rights in Indonesia include:
1. Labor Rights Related to Overtime Work
Employers must pay overtime fees to their employees if they are needed to work beyond the time restriction set by HR legislation. The fees that must be paid are set by law, but they can be changed by an agreement between the employer and the employee.
2. Labour Rights Related to Leave
After one year of employment, employees in Indonesia are normally given 12 working days as paid vacation days. Employees in Indonesia can take advantage of several types of leave:
3. Labour Rights Related to Salary
Employers in Indonesia must evaluate the position, length of service, educational credentials, and competency of the individual in issue when calculating the amount of wage to pay.
The amount that an employee is to be paid should also be changed to reflect the company’s financial situation as well as the employee’s performance level. In Indonesia, salaries consisting of a basic salary and a fixed allowance have a minimum basic salary equal to 75% of the sum of the basic salary and fixed allowance. Employees who are not working must be paid if they are on:
How does Indonesia’s Labor Laws Apply to Foreign Workers
Every Indonesian employer who hires a foreign worker on a work visa (KITAS) must receive written approval from the appropriate government agencies. The law does not apply to foreign governments’ representative offices in Indonesia that employ foreigners as diplomatic or consular staff.
Individual employers, on the other hand, are not permitted to hire foreign workers. Foreign employees hired in Indonesia are only allowed to work in the nation for a limited time and in particular positions. The length of time allowed and the posts available to foreign workers in Indonesia are determined by government officials.
The now-vacant position can be filled by another foreign citizen once the first working time has passed and cannot be renewed. According to the legislation enforced by government authorities, employers of foreign employees must have a strategy in place for their foreign staff. These include:
- the reasons why foreign citizens’ services are required
- why the services to be provided by foreign workers are necessary in Indonesia
- the position to be taken by the foreign worker
- the duration of the foreign workers’ expected employment in the position
Employers of foreign workers are required to follow the existing norms and regulations governing their employment. Employers who engage foreign workers in Indonesia are expected to appoint Indonesian personnel to work alongside them so that the foreign workers can pass on their newly acquired knowledge and technology abilities to their local counterparts. Employers must also demonstrate that each foreign worker is partnered with an Indonesian citizen as a helper.
Laws that Govern Labor Rights in Indonesia
Law No. 13 of 2003 on Manpower is a major piece of legislation controlling work relationships in Indonesia. The laws governing the beginning of an employment relationship, the terms and conditions of employment, and the termination of employment are all outlined in this law.
Another law affecting worker rights in Indonesia is Law No. 2 of 2004 on industrial relations dispute settlement. All labour laws are accompanied by rules produced by the Minister of Manpower or other government authorities.
It should also be noted that the provision stated in Article 158 of Law No. 13/2003 on termination was declared to be no longer in force according to a decision of the Constitutional Court of Indonesia. This is the case because this provision violates Article 27(1) of the 1945 Indonesian constitution.
Under Circular Letter of Manpower Minister No. SE.13/MEN/SJ-HK/I/2005, which is still in effect, the termination of an employment agreement on the ground of the employee’s grave wrongdoing or major fault, can be carried out if a final and binding verdict to that effect has been obtained from a criminal court judge.
PT is the abbreviation for Perseroan Terbatas, and it means Limited Liability Company. Therefore, all company names in Indonesia must be preceded by “PT” once they are approved. This official name that starts with PT will be used in all permits, licenses and transactions owned by the company.
An LLC is a legal entity only and must choose to pay tax either as an S Corp, C Corp, Partnership, or Sole Proprietorship. Therefore, for tax purposes, an LLC can be an S Corp, so there is really no difference.
Yes, you can. You will need a local nominee director for your foreign local company incorporation.
The Negative Investment List was replaced by the Positive Investment List in 2021. The list details the restricted sectors that the government prohibits investors and entrepreneurs to invest in.