1 Legal framework

1.1 Are there statutory sources of labour and employment law?

In general, Indonesian employment law is governed by the Labour Law (13/2003), dated 25 March 2003. The two other main statutes are the Law on Industrial Relations Dispute Settlement (2/2004), dated 14 January 2004, and the Law on Labour Unions (21/2009), dated 4 August 2000.

1.2 Is there a contractual system that operates in parallel, or in addition to, the statutory sources?

In addition to the laws referred to in question 1.1, employers and employees are subject to company regulations (or work rules) or a collective labour agreement, if applicable, as well as to the express provisions of the employment agreement between the employer and the employee.

1.3 Are employment contracts commonly used at all levels? If so, what types of contracts are used and how are they created? Must they be in writing must they include specific information? Are implied clauses allowed?

Employment contracts are commonly used at all levels of employment. However, directors and commissioners are not generally employees of a company, unless stated otherwise contractually.

The employment relationship between employee and employer must be documented in a contract; no implied clauses are allowed. Generally, an employment contract in Indonesia can be either a fixed-term (definite) or indefinite-term (permanent) contract. Fixed-term employment agreements are subject to stricter requirements than indefinite-term employment agreements. A fixed-term employment agreement must be in writing, in the Indonesian language and using the Roman alphabet, as subject to Minister of Manpower and Transmigration (MOMT) Decree KEP.100/MEN/VI/2004 on Technical Provisions on Employment Agreements for a Specified Period, dated 21 June 2004. If it is not made in writing, a fixed-term employment agreement is deemed an indefinite-term employment agreement. Additionally, a fixed-term employment agreement cannot include a probationary period. Indefinite-term employees are employees who do not fall into the category of fixed-term employees. Indefinite-term employees are also known as permanent workers.

As an implementing regulation of the Labour Law (Articles 65(2) and 66(2)), Constitutional Court Decision 27/PUU-IX/2011 emphasises that outsourcing is possible under a fixed-term contract if the contract contains a clause that guarantees the employment relationship will continue with the successor outsourcing company or the company that uses the labour of the outsourced workers (the ‘successors'). The successors must continue to employ the workers from the original company if the outsourced work persists. The successors cannot amend the previous employment agreement except by mutual consensus for the benefit of the outsourced workers. If the outsourced work persists but there is no guarantee of the employees' rights in the fixed-term contract, the employment relationship will be deemed an indefinite-term contract.

2 Employment rights and representations

2.1 What, if any, are the rights to parental leave, at either a national or local level?

Women are entitled to three months' maternity leave with full pay. The leave period consists of:

  • 1.5 months prior to the delivery, which can be extended to up to three months with a doctor's certificate confirming that this is medically necessary; and
  • 1.5 months following the delivery, unless the employee's doctor certifies otherwise.

Women are also entitled to 1.5 months' leave in the event of a miscarriage.

Men are entitled to two days' paid paternity leave pursuant to the Labour Law. National Civil Service Agency Regulation 24/2017 on Procedures for Granting Leave to Civil Servants, dated 22 December 2017, allows men in the civil service to extend their paid paternity leave to up to one month with a doctor's certificate stating that the extended leave is medically necessary.

2.2 How long does it last and what benefits are given during this time?

In addition to paid leave, employers are required by the government to register all employees with the national health insurance system, BPJS Kesehatan. Employers must also provide mothers with reasonable time and special facilities to breastfeed once they return to work.

2.3 Are trade unions recognised and what rights do they have?

Indonesia recognises labour unions, as regulated under the Labour Unions Law. In general, labour unions must first be registered with the local office of the MOMT. A labour union must then submit written notification to the company in question after its registration is approved by the MOMT. Prior to the enactment of the Labour Unions Law, Indonesia ratified International Labour Organization (ILO) Convention 87 concerning Freedom of Association and Protection of the Right to Organize, pursuant to Presidential Decree 83/1998 on the Ratification of ILO Convention 87 concerning Freedom of Association and Protection of the Right to Organize. Under the presidential decree, employers in Indonesia may not postpone the establishment of or dissolve labour unions.

Pursuant to the presidential decree, the government guarantees employers and employees the right to establish organisations or labour unions without government and/or employer intervention. In addition, the Labour Law stipulates that employees have the right to take industrial action (ie, strike – a collective action by employees and/or the labour union to stop or delay work) in the event of unsuccessful negotiations to settle an industrial relations dispute.

2.4 How are data protection rules applied in the workforce and how does this affect employees' privacy rights?

There are no specific labour regulations governing the privacy of an employee's particulars. This refers to information that is generally relevant to the employee's employment, such as name, address, remuneration and rights and obligations. Therefore, there is no prohibition that prevents an employer from disclosing an employee's particulars, as long as the information relates to the employee's employment and his or her employment agreement.

However, the Law on Electronic Information and Transactions (11/2008), as amended by Law 19/2016, and its implementing regulations regulate the use of a person's private or personal information through electronic media. Fundamentally, the law strictly requires the consent of a person for the use of his or her private or personal information through electronic media. Therefore, if an employer intends to divulge any personal information, it would be prudent to obtain the employee's prior consent.

An employer's monitoring of employees' emails, telephone calls, use of the employer's computer system and social media activity, inside and outside the workplace, is commonly regulated in the employer's company regulation or collective labour agreement.

2.5 Are contingent worker arrangements specifically regulated?

The Labour Law and other applicable labour regulations do not recognise the concept of a part-time worker. Therefore, a part-time worker is entitled to the same rights as a regular worker (either a permanent or fixed-term worker).

3 Employment benefits

3.1 Is there a national minimum wage that must be adhered to?

Minimum wages apply to probationary, regular and contract employees, regardless of whether the employee is paid on a daily or monthly basis. The applicable minimum wage varies, depending on the nature and location of the business. In 2019, based on Jakarta Governor Regulation 114/2018 on the Provincial Minimum Wage for 2019, dated 26 October 2018, the monthly minimum wage for Jakarta is IDR 3,940,973.

The monthly minimum wage is determined annually by the governor of the particular province based on a recommendation from the Provincial Council on Wages. Minister of Manpower and Transmigration (MOMT) Regulation 15/2018 on the Minimum Wage, dated 23 November 2018, stipulates that the new minimum wage formula is based on the sum of Indonesia's inflation and GDP growth over the past 12 months. The minimum wage is now calculated using the following formula:

New minimum wage = current minimum wage + [current minimum wage x (inflation + % GDP annual increase)].

3.2 Is there an entitlement to payment for overtime?

Overtime is regulated under MOMT Decree KEP.102/MEN/VII/2004 on Overtime Work and Overtime Pay, and is payable from either the seventh hour or the eighth hour, depending on the length of a company's normal working day. Overtime is payable at the rate of 1.5 times the hourly wage for the first hour and double the hourly wage thereafter. Overtime pay is calculated as 1/173 of the monthly wage.

Certain employees who may be regarded as thinkers, planners, implementers and controllers of the company's operations, and whose working hours cannot be limited, are not entitled to overtime pay, provided that they receive higher salaries than employees who do not fall within this category. Generally, those employees with responsibilities at or above management level are considered to fall within this category.

3.3 Is there an entitlement to annual leave? If so, what is the minimum that employees are entitled to receive?

Each employee is entitled to one day of paid leave for every 23 working days, up to a maximum of 12 days per year. Leave may be taken in parts, but one part must be a period of at least six uninterrupted working days. Leave must also be taken within six months after accrual or it is forfeited. These provisions also apply to contract employees.

3.4 Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?

Employees on sick leave are entitled to:

  • 100% pay for the first four months of sick leave;
  • 75% for the next four months;
  • 50% for the following four months; and
  • 25% until the employer terminates employment.

Social security contributions are deducted from pay. Only employees who suffer prolonged illness or permanent injury as a result of a work accident, and who cannot work for a period exceeding 12 months, can apply for termination of the employment relationship. Such employees shall be eligible for a payment including double severance pay, double service pay and single compensation pay.

Female employees are not obliged to work on the first and second days of menstruation if they feel unwell and inform their employer. However, this provision should be further regulated in the employment agreement, company regulation or collective labour agreement.

3.5 Is there a statutory retirement age? If so, what is it?

There is no explicit regulation that prescribes a retirement age in Indonesia. Employers are free to specify a retirement age in the company regulation or collective labour agreement, the latter of which must be agreed to by the labour union. In practice, it is common to set the retirement age by referring to the applicable retirement age stipulated in Government Regulation 45/2015 on the Management of the Pension Security Programme and Government Regulation 46/2015, as amended by Government Regulation 60/2015 on the Management of the Old-Age Security Programme, which regulate the pension security and old-age security programmes in Indonesia. The MOMT issued MOMT Regulation 19/2015 on the Procedures and Requirements of Old-Age Benefit Payments as an implementing regulation for Government Regulation 46/2015 (the ‘Social Security Law'). As of 1 January 2019, the retirement age under the Social Security Law is 57 and is expected to rise by an additional year every three years until it reaches 65 in 2043.

4 Discrimination and harassment

4.1 What actions are classified as unlawfully discriminatory?

Several actions are classified as unlawfully discriminatory as follows:

  • Article 5 of the Labour Law provides that all people have the same rights and opportunities in relation to applying for jobs and securing a viable standard of living, regardless of gender, ethnicity, race, religion or political orientation, including equal treatment for disabled people.
  • The Labour Unions Law stipulates that discrimination relating to job training and skills development based on ethnicity, race, religion, political orientation, nationality or origin will be deemed as employment and occupation discrimination.
  • Government Regulation 8/1981, in conjunction with Government Regulation 78/2015 on Wages, states that:
    • in determining an employee's wage, employers may not discriminate between male and female workers who perform work of equal value; and
    • employees are entitled to the same wage for work of the same value.
  • MOMT Decree Kep.68/MEN/IV/2004 on HIV/AIDS Prevention and Control in the Workplace prohibits employers from discriminating against employees based on their HIV/AIDS status, whether they are positively infected or are believed to be infected.

Sexual harassment in connection with the employer-employee relationship will be deemed a crime under Article 294(2) of the Penal Code. Article 86(1) of the Labour Law also provides that employees deserve the right to receive protection against immoral and indecent behaviour and actions. It is common for company regulations and collective labour agreements to treat sexual harassment as a serious violation.

4.2 Are there specified groups or classifications entitled to protection?

The Labour Law, in conjunction with Article 27(2) of the 1945 Constitution, provides that each employee shall be entitled to equal treatment from the employer without discrimination. Each employee has the same rights and opportunities to obtain a decent job and livelihood without discrimination by gender, ethnic group, race, religion or political orientation, in accordance with the interests and abilities of the employee, including equal treatment for the disabled.

Specific protections are given in Indonesia by law, as stipulated in the following regulations:

  • As a result of ratification of International Labour Organization Convention 138 on Minimum Age for Admission to Employment, the minimum age for employment is 15 years. Employers are basically prohibited from employing children. However, this provision may be waived to allow a child aged between 13 and 15 years to perform light work, provided that this does not interfere with the child's physical, mental or social welfare and development.
  • Under the Labour Law:
    • female employees under the age of 18 are prohibited from working between the hours of 11:00pm and 7:00am;
    • it is prohibited to employ pregnant employees between the hours of 11:00pm and 7:00am if a doctor's assessment shows that this would endanger the health and safety of the employee or her unborn child;
    • employers employing women between the hours of 11:00pm and 7:00am are obliged to provide them with nutritious food and beverages, and to protect their morals and security in the workplace;
    • employers must provide transportation to and from home for female employees departing for and returning from work between the hours of 11:00pm and 5:00am; and
    • female employees have the right to breastfeed or to extract and store breast milk during working hours.
  • Also under the Labour Law, employers that employ disabled workers must ensure proper access and provide specific work tools to protect them according to the degree of disability. This provision is reinforced by the Law on Disabled People (8/2016), which stipulates that disabled people have an equal right and opportunity to work.

4.3 What protections are employed against discrimination in the workforce?

Please see question 4.2.

4.4 How is a discrimination claim processed?

In practice, an employee who has experienced harassment in the workplace can ask the company to arrange bipartite negotiations between the employee, the employer and the labour union (if applicable). If the negotiations are unsuccessful, the employee can file a claim to the district court where the employer is legally domiciled pursuant to civil tort law.

4.5 What remedies are available?

As at the time of writing, there are no specific remedies in Indonesian labour laws and regulations.

4.6 What protections and remedies are available against harassment, bullying and retaliation/victimisation?

Please see questions 4.3 and 4.5.

5 Dismissals and terminations

5.1 Must a valid reason be given to lawfully terminate an employment contract?

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. Exceptions to this rule include termination during the probationary period and the voluntary resignation of the employee.

Employers do not have the power to unilaterally terminate any employee in any circumstance. Employers can either:

  • suspend employees on full salary and go through the mandatory non-binding mediation process with the Ministry of Manpower and Transmigration, followed by a labour court trial to obtain approval for the proposed terminations; or
  • successfully negotiate and settle a separation benefits package with employees and execute a mutual termination agreement – the only cost-effective alternative.

5.2 Is a minimum notice period required?

In order to terminate any employment relationship, a company must follow a stringent set of requirements. These requirements mandate that before terminating the relationship, the company must provide guidance to an employee who is performing unsatisfactorily and give him or her various warnings. As part of this guidance, the company may issue an oral or written warning giving the employee a period of six months to improve, unless the employment agreement, company regulation or collective labour agreement provides for a different timeframe. If the employee's performance does not improve, the company must issue at least two additional warnings before proceeding to terminate the employment relationship. If the employee still fails to perform satisfactorily after the third warning letter, the company may apply for permission to terminate the employment relationship.

5.3 What rights do employees have when arguing unfair dismissal?

Article 153 of the Labour Law provides that an employer is prohibited from terminating an employment relationship because:

  • the employee is unable to work due to illness for a period not exceeding 12 consecutive months, based on a doctor's statement;
  • the employee is prevented from working because he or she is fulfilling state duties in accordance with the prevailing laws and regulations;
  • the employee is performing religious rites prescribed by his or her religion;
  • the employee marries;
  • a female employee is pregnant, is on maternity leave, miscarries or is nursing her baby;
  • the employee has a blood and/or marital relationship with another employee in the same company, except where this is regulated in the employment agreement, company regulation or collective labour agreement;
  • the employee establishes or becomes a member or executive of a labour union or conducts labour union activities outside of working hours or during working hours, subject to agreement with the employer or pursuant to the provisions in the employment agreement, company regulation or collective labour agreement;
  • the employee reports the employer to the authorities for a criminal act committed by the employer;
  • the employee has a certain ideology, religion, political leaning, ethnic group, skin colour, gender, physical condition or marital status; or
  • the employee is permanently disabled or injured in a work accident or is injured due to the employment relationship where, based on a doctor's statement, the recovery period required cannot be predicted.

5.4 What rights, if any, are there to statutory severance pay?

Article 156 of the Labour Law provides the following calculation of the minimum statutory termination benefits:

Severance pay:

Completed years of service Benefit
Less than 1 year 1 month's wages
1 year or more, but fewer than 2 years 2 months' wages
2 years or more, but fewer than 3 years 3 months' wages
3 years or more, but fewer than 4 years 4 months' wages
4 years or more, but fewer than 5 years 5 months' wages
5 years or more, but fewer than 6 years 6 months' wages
6 years or more, but fewer than 7 years 7 months' wages
7 years or more, but fewer than 8 years 8 months' wages
8 years or more 9 months' wages

Service pay:

Completed years of service Benefit
3 years or more, but fewer than 6 years 2 months' wages
6 years or more, but fewer than 9 years 3 months' wages
9 years or more, but fewer than 12 years 4 months' wages
12 years or more, but fewer than 15 years 5 months' wages
15 years or more, but fewer than 18 years 6 months' wages
18 years or more, but fewer than 21 years 7 months' wages
21 years or more, but fewer than 24 years 8 months' wages
24 years or more 10 months' wages

Other compensation payable to the employee:

  • Compensation for annual leave to which the employee is entitled, but which has not been taken and which has not been forfeited;
  • Compensation for housing, medical and hospitalisation fees (which is deemed to be 15% of the severance pay and/or service pay to which the employee is entitled);
  • Any costs or expenses incurred in returning the employee and his or her family to the place where he or she was recruited, as applicable; and
  • Any other compensation agreed to in the employment agreement, company regulation or collective labour agreement.

6 Employment tribunals

6.1 How are employment-related complaints dealt with?

Under the Industrial Dispute Law, private arbitration is an alternative method of dispute settlement for disputes between unions and employers over work conditions, or between labour unions in the same company.

An employee involved in a voluntary resignation or termination due to a criminal proceeding can file a claim with the labour court within one year of the date of termination. Article 96 of the Labour Law originally stipulated a two-year statute of limitations to bring a claim for payment arising from the employment relationship, but the Constitutional Court nullified this two-year limit in 2012, pursuant to its Decision 100/PUU-X/2012. In practice, the timeframe for bringing an employment claim is similar to that for civil claims, whereby Article 1967 of the Indonesian Civil Code stipulates that a potential claim expires after 30 years.

Employers can either:

  • suspend employees on full salary and go through the mandatory non-binding mediation process with the Ministry of Manpower and Transmigration, followed by a labour court trial to obtain approval of the termination; or
  • successfully negotiate and settle a separation benefits package with employees and execute a mutual termination agreement – the only cost-effective alternative.

There is no restriction under the law on an employee waiving his or her contractual right to potential employment claims. Any written agreement that includes such a waiver will not form a basis for the cancellation of the agreement or for the agreement to be considered null and void. Although this type of waiver should be enforceable, in practice, the labour court will most likely still hear the employee's claim, even though he or she has contractually waived the right to make such an employment claim.

Employment-related complaints are heard by a panel of three judges at the Industrial Relations Court, with one of the judges acting as the head of the panel.

6.2 What are the procedures and timeframes for employment-related tribunals actions?

Please see question 6.1.

7 Trends and predictions

7.1 How would you describe the current employment landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

A recent development is the issuance of Ministry of Manpower and Transmigration (MOMT) Decree 228/2019 on Positions Open for Expatriates. The decree expressly provides that director and commissioner positions may be held by expatriates in all sectors, to the extent permitted by the prevailing laws and regulations, and insofar as such positions do not include human resources and administrative matters.

Attached to the decree is a list of positions that can be filled by expatriates. The positions in the list are classified under 18 business sectors. In earlier drafts of the decree the positions open to expatriates were delineated under 17 business sectors, as construction and real estate were combined.

While the list specifies the positions that may be filled by expatriates, the MOMT has the authority to approve the employment of an expatriate whose position is not included on the list. Further, the decree provides that all positions and related requirements shall be evaluated at least every two years or at any time as necessary.

The decree is part of a trend in the Indonesian employment law landscape of easing the process for expatriates to work in Indonesia.

8 Tips and traps

8.1 What are your top tips for navigating the employment regime and what potential sticking points would you highlight?

An employment agreement is useful to describe the details of the employee-employer relationship and prevent any possible ‘implied' clauses from arising. It is advisable to have a written employment agreement that at least contains and clarifies the following:

  • the name, address and business of the company;
  • the name, sex, age and address of the employee;
  • details of the position or type of work;
  • the location of the work;
  • remuneration and payment procedures;
  • the rights and obligations of the employer and the employee (including, but not limited to, the employee's right to terminate the agreement);
  • the duration of the employment and start date;
  • the location and date on which the employment agreement is concluded; and
  • the signatures of the parties to the employment agreement.

The agreement should be in writing, in the Indonesian language and using the Roman alphabet. In the event of a dispute over an employment contract in two or more languages, the Indonesian- language text shall prevail.

As a further tip, there are hundreds of linguistic groups in the Indonesian archipelago. The essential motto of the country promotes "unity in diversity" and above all, it is important to show that you understand and respect the generally accepted norms in Indonesia, no matter what management methods you use towards employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.