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Labor Rights in Indonesia

7 min read|Last Updated: August 29, 2022|
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Labor 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. Labor rights are outlined in a country’s labour 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 labor 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:

  • Employers’ Obligations

    Many business owners who have registered a company would be unaware of their responsibilities as employers if labour and employment laws did not specify labour rights.

    Fair employment practices in the recruiting, employment, training, and retention of employees are often mandated by labor laws around the world. Equal employment opportunities for all, regardless of color, national origin, disability status, gender, are examples of fair employment policies.

  • Workplace Structure

    Labor and employment rights offer organisations a structure and keep business owners aware about how to preserve a company’s structure in good shape. All workers’ labour rights are linked to minimum wage and overtime rules.

    According to labor regulations, workers have several rights. Employers will be guided by the requirement that firms keep track of their employees’ pay records for compliance and other purposes.

  • Labor Rights and Unions

    Employees who are members of labour unions have the right to speak out about issues such as salaries, benefits, and working conditions. Most countries’ labour laws also require employers to collaborate with labour unions to improve a company’s terms and conditions of employment. As a result, the total amount of transparency in a company’s employment process grows.

  • Organisational Integrity

    The protection of labor rights ensures that a company’s organisational integrity is preserved. As a result, labor rights are beneficial in protecting sound corporate practices and ethical workplace behavior. Employers who respect their workers’ labuor rights are thus regarded good corporate citizens.

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:

  • Marriage leave, which lasts three days for employees’ weddings and two days for their children’s weddings.

  • Menstrual leave, which is for female employees and lasts for the first one to two days of their menstruation cycle.

  • Hajj leave, which is for Muslim employees, can only be used once, and lasts for up to three months so that they can perform the Hajj pilgrimage.

  • Maternity leave, which is three months of paid leave for female employees.

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:

  • Sick leave, menstrual leave, marriage leave, childbirth leave, or compassionate leave

  • If they must perform government-related duties

  • If they must fulfill religious obligations

  • If they are using one or more days of the leave to which they are entitled;

  • If they are performing labor union duties

  • If they are performing company-assigned tasks

How does Indonesia’s Labor Laws Apply to Foreign Workers

Every Indonesian employer who hires a foreign worker 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. 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, and the duration of the foreign workers’ expected employment in the position to be taken are some of the points that an employer should address when bringing foreign workers into the country. Employers must also show that each foreign worker has been paired with an Indonesian citizen as an assistance partner.

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 labor 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.

Setting up an Indonesia company and complying with the laws can be difficult. Reach out to us for a free consultation for your incorporation and other corporate needs from corporate secretarial to visa application!

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Why do Indonesian companies start with PT?2021-11-15T15:03:24+08:00

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. 

Is my LLC an S or C Corp?2021-11-15T15:05:29+08:00

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. 

Can I set up a foreign local company?2021-11-15T15:05:45+08:00

Yes, you can. You will need a local nominee director for your foreign local company incorporation. 

What is the Positive and Negative Investment List?2021-11-15T15:06:09+08:00

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. 

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