20 March 2024

Company Regulations, Why Does An Indonesian Company Need It?

In the business world, especially in Indonesia, the term company regulations (or peraturan perusahaan) is commonly known as regulations that regulate the conduct of the business for the employees who work in it.
Indonesia Corporate/Commercial Law
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In the business world, especially in Indonesia, the term company regulations (or peraturan perusahaan) is commonly known as regulations that regulate the conduct of the business for the employees who work in it.

These company regulations also hold many business interests ranging from work culture to the rights and obligations of employees, to create a sense of security and fairness between the company and its workers.

What is company regulation (or peraturan perusahaan) in Indonesia?

Company regulations are a set of regulations made by the company to regulate employee behavior and build discipline in carrying out their duties and responsibilities in the company. This includes rules regarding working hours, attendance, leave, use of company facilities, work ethics, communication and coordination flows, work culture, and so on.

According to Article 1 number 20 of Law No. 13 of 2003 on Employment ("Employment Law"), company regulations are regulations written by employers that include work conditions and the company's code of conduct.

These company regulations are mandatory for Indonesian companies once they have more than 10 workers, and are only legally binding subject to the ratification by the Minister of Manpower or an appointed official.

Please note that under Article 188 (1) of the Employment law, failure to establish company regulations is considered as a criminal violation and the company could be imposed with a fine amounting to IDR 50,000,000 (fifty million Rupiah).

Why company regulations are important?

Regardless of the jurisdiction, company regulations are important and are an essential business practice. Other than enforcing discipline, company regulations also help to ensure the employees are aware of their basic rights and also to maintain company sustainability.

It also provides clarity and certainty in processes and procedures for workers in carrying out their duties and responsibilities. This is important for many reasons;

  1. Enforcing discipline among the employees: Company regulations establish and uphold employee discipline and foster a positive work environment. Employees are better informed about what is expected of them and the repercussions if they violate the company's code of conduct. This can lessen work-related mismatches inside the organization and boost workplace productivity.
  2. Creating awareness among the employees of their basic employment rights: Employee rights, such as those concerning sexual harassment mitigation, health insurance, and leave entitlements, are one of the main subjects covered by company regulations. Providing employees with a sense of safety and fair treatment at work is the goal of this statute.
  3. Establishing a good image for the company: For the organization to keep running efficiently and sustainably, company regulations are vital. With the company regulations, the company might be allowed to enhance its public image while minimizing the possibility of legal problems or conflicts. Companies can prevent violating the law and gain the appreciation of their staff, customers, and business partners by establishing well-organized company regulations.

What to include in company regulations?

Apart from these company regulations being mandatory in Indonesia, the making of company regulations also aims to serve as work guidelines for every party involved in the company and to create a harmonious and sustainable work environment. Requirements for making company regulations must contain important matters such as the rights and obligations of employers, the rights and obligations of employees, work conditions, company regulations, and the period for which the company regulations are valid.

To be able to understand the important points in the company regulations, further in-depth studies need to be carried out so that the company regulations can be approved by various parties such as workers, employers, labor unions, and regional officials. The following are important contents that need to be considered when making company regulations in Indonesia;

  1. Rights and obligations for employers and employees
    Company regulations need to regulate the rights and obligations of entrepreneurs. Employers have the right to obtain the results of their employees' work according to the agreement. Employers also have an obligation to pay wages and provide other facilities for employees who have worked for them. Detailed company regulations are made to avoid conflicts in the future, including regarding the amount of wages, working hours, and payment dates. Meanwhile, employee rights and obligations are the right to receive wages according to the agreement and other things such as social security or health, especially for permanent employees. This is given to employees after completing their obligations in the form of completing work within the time specified by the company.
  2. Working conditions
    Company regulations impose certain conditions for them to work in their place. For example, if the company operates in the legal sector, then graduating from law school is a major prerequisite. Apart from skills, companies can also determine requirements based on experience. Other conditions can also be applied, depending on the needs of each company
  3. Company's code of conduct
    The company's code of conduct is mandatory among others to maintain equality and avoid discrimination in the work environment. For example, company regulations require employees to come in at 8 a.m. and whoever is late will receive punishment ranging from reprimands to salary cuts. Other regulations can also be implemented for consumer convenience. For example, employees who work in the customer service department, are obliged to be friendly and spread a smile.
  4. Validity period
    Company regulations must include a period of validity. This time period also shows the status of the employee, whether per contract or permanent. If the employee's status is contract, then the company can consider whether or not to extend it when the contract has expired. Each company must have company regulations, but must also pay attention to applicable legal provisions. For example, each company that has a subsidiary is only allowed to make one company regulation and this is regulated in Minister of Manpower Regulation No. 28 of 2014.

After all the stages above have been passed, the company must first request approval from the Minister of Manpower before the regulation can be implemented. This process usually takes around 30 days from when the complete documents required for making company regulations are received. These files include among other things, written requests, company profiles, texts of company regulations, and letters of request for advice and opinions from worker representatives or labor unions.


At Tampubolon Legal Solutions, our experienced employment lawyers are accustomed to advise our clients to draft their company regulations according to their business activities, needs, culture, and practice, while observing the applicable employment regulations. We understand that company regulations are unique to each company and carefully drafting it can lead to a long-term benefit for the company, not only for the business but also to improve the working relationship between the employer and employee.

Originally published Sep 28, 2023. Updated Mar 2, 2024

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.

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