Employment and employee benefits in Indonesia: overview | Practical Law

Employment and employee benefits in Indonesia: overview | Practical Law

A Q&A guide to employment and employee benefits law in Indonesia.

Employment and employee benefits in Indonesia: overview

Practical Law Country Q&A 0-508-0242 (Approx. 23 pages)

Employment and employee benefits in Indonesia: overview

Law stated as at 01 Nov 2015Indonesia
A Q&A guide to employment and employee benefits law in Indonesia.
The Q&A gives a high level overview of the key practical issues including: employment status; background checks; permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; data protection; discrimination and harassment; dismissals; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; intellectual property; restraint of trade agreements and proposals for reform.
To compare answers across multiple jurisdictions, visit the Employment and Employee Benefits Country Q&A tool.
This Q&A is part of the global guide to employment and employee benefits law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employment-guide.

Scope of employment regulation

1. Do the main laws that regulate the employment relationship apply to:
  • Foreign nationals working in your jurisdiction?
  • Nationals of your jurisdiction working abroad?

Laws applicable to foreign nationals

The following laws and regulations apply to foreign nationals who work in Indonesia:
  • Law No. 13 of 2003 on Manpower (Labour Law).
  • Ministry of Manpower and Transmigration Regulation No. 16 of 2015 as amended by Ministry of Manpower and Transmigration Regulation No. 35 of 2015, which provides guidance on using foreign workers.
  • Ministry of Manpower and Transmigration Decision No. 40 of 2012 which states that certain positions cannot be held by foreign workers.
  • Presidential Regulation No. 72 of 2014 on the Recruitment of Foreign Workers and the Implementation of Education and Training for Accompanying Workers.
Indonesian labour laws and regulations do not expressly differentiate between regulations imposed on foreign nationals and regulations imposed on Indonesian nationals. The principal legislation governing employment relations in Indonesia is the Labour Law. This law outlines the principal rules for:
  • Establishing an employment relationship.
  • Employment terms and conditions.
  • Employment termination.
Generally, foreign nationals can work in Indonesia, provided that the work to be performed cannot be performed by Indonesian nationals, and the work is not of the type that foreign nationals are prohibited from performing under the prevailing laws and regulations. Normally, this requirement is applied leniently and is further subject to additional regulations in a number of industries. Where a company cannot hire an Indonesian national with the appropriate skills, the company is allowed to employ foreign employees provided that at least one Indonesian national is simultaneously employed and trained by the company.
The Ministry of Manpower and Transmigration of the Republic of Indonesia has determined, as set out in the Labour Law, that the employment of foreign nationals falls under the category of employment for a definite period (Perjanjian Kerja Waktu Tertentu) (PKWT) because of the following:
  • Not all positions in Indonesia can be held by foreign nationals.
  • Foreign nationals are required to obtain a work permit and other related permits and these permits are only valid for a one-year period (even though an extension can be applied for at its expiration).
Therefore, not all the provisions of the PKWT apply to foreign employees. For example, the provision of the Labour Law which stipulates that the period of PKWT can be extended or renewed does not apply to foreign national employees because these employees can only hold certain positions for a specific period of time.

Laws applicable to nationals working abroad

The following laws and regulations apply to Indonesian nationals working abroad:
  • Law No. 39 of 2004 on the Placement and Protection of Labour Workers.
  • Government Regulation No. 3 of 2013 on the Protection of Overseas Indonesian Workers.
  • Presidential Regulation No. 81 of 2006 on National Board on the Placement and Protection of Indonesian Manpower.
  • Minister of Manpower and Transmigration Regulation No. PER.14/MEN/X/2010 on the Implementation of the Placement and Protection of Indonesian Manpower Overseas.
Law No. 39 of 2004 and its implementing regulations cover nationals working abroad through a government-appointed agent. The agent can be a government institution or a private entity. Private entity agents for Indonesian nationals working abroad must have a licence from the Ministry of Manpower and Transmigration.

Employment status

2. Does the law distinguish between different categories of worker? If so, what are the requirements to fall into each category, the material differences in entitlement to statutory employment rights and are there any maximum time periods for which each category of worker can be engaged?

Categories of worker

The Law No. 13 of 2003 on Manpower (Labour Law) divides employees into the following two categories:
  • Definite term employees (Pekerja Waktu Tertentu). A definite term employee is employed under a definite term employment agreement. This type of worker is also known as a "contract worker". Based on the Labour Law, the types of work that can be performed by a definite term employee under a definite term employment agreement are as follows:
    • work to be performed and completed at once, or temporary work;
    • work that is estimated to be accomplished within three years;
    • seasonal work;
    • work that is related to a new product, new activity or additional product which is still in the experimental stage.
  • Indefinite term employee (Pekerja Waktu Tidak Tertentu). These are employees who do not fall into the category of definite term employees. This type of worker is also known as a permanent worker.

Entitlement to statutory employment rights

The Labour Law does not make a distinction between the statutory employment rights of a definite term employee and those of an indefinite term employee. Both employees have the same statutory employment rights (that is, the right to obtain a salary, to receive holiday allowances, and any other rights provided under the prevailing laws and regulations).

Time periods

The Labour Law only stipulates the legal duration for a definite term employment agreement. A definite term employment agreement can only be performed for a maximum period of two years (with a further possible extension up to a maximum of one year, or a one-time-only possible renewal for a maximum period of two years).


3. Are any grants or incentives available for employing people? Does any information/ paperwork need to be filed with the authorities when employing people?

Grants or incentives

There are no monetary grants or incentives for employing people.


In general, there is no official information or paperwork that needs to be filed when employing people. However, an employer must register the employment contract for employees who work for a definite period with the relevant Ministry of Manpower.

Background checks

4. Are there any restrictions or prohibitions on carrying out background checks in relation to applicants?
The Indonesian legislation, including the Law No. 13 of 2003 on Manpower (Labour Law), is silent on this matter. Based on the latest information from the official at the Ministry of Manpower, there are no prohibitions under the Labour Law on background checks on applicants.

Permission to work

5. What prior approvals do foreign nationals require to work in your country? What information/paperwork needs to be kept or filed with the authorities when they start work?


Limited stay visas. A foreign national must obtain a limited stay visa (Visa Tinggal Terbatas) (VITAS) to be able to work in Indonesia. This visa has a minimum validity period of six months and a maximum validity period of two years.
The procedure for obtaining approval is the same as for obtaining approval of permits (see below, Permits: Procedure for obtaining approval).
The cost for obtaining a VITAS is about US$150.
Obtaining a VITAS takes about one month.
The following is a brief guide concerning the visas required for entry into Indonesia. The visas are classified on the basis of the purpose of the entry.
Visas for non-business visitors (tourists). A foreign national who wishes to enter into Indonesia for a purpose other than business can apply for either a tourist visit visa or a social and cultural visit visa. For citizens of certain countries, the tourist visit visa can be obtained at the immigration desk at the point of entry on arrival. The social and cultural visit visa can be applied for from the home country at the Indonesian Consulate. Under the terms of the tourist visit visa (which is valid for two months and is non-extendable), the holder is not allowed to perform any form of official business activities. The social and cultural visit visa is valid for one month and is extendable four times.
Visas for business visitors. A foreign national who wishes to come to Indonesia for business purposes can apply to the Indonesian Embassy in the country of his residence for a business visit visa with no permit to work. This business visit visa is valid for a maximum period of two months and expires as soon as the holder leaves the country. As long as the holder is still in the country, the business visit visa can be extended in Jakarta up to four times, each time with a maximum validity of one month.
The holder of this visa can visit offices and attend business meetings, but is not allowed to perform actual work. If, during the initial two-month period, the holder wishes to interrupt his stay in Indonesia, it is more efficient for him to apply for a multiple visit visa. The multiple visit visa is valid for 12 months, with a maximum duration of two months for the initial visit and a maximum duration of one month for subsequent visits. With this multiple visit visa, a foreign national can travel in and out of Indonesia as many times as he or she wishes or needs to in any 12-month period, and can undertake all activities that a holder of a business visit visa with no permit to work would be entitled to.
This type of visa is not renewable on its expiry or on the exit of the holder from Indonesia. If the VITAS is expired, the employee must physically leave Indonesia and will need to apply for a new visa.
Sanctions. Under Article 121 of Law No. 6 of 2011 concerning immigration (Immigration Law), a foreign national can be subject to imprisonment for a maximum period of five years and a maximum fine of IDR500 million if they:
  • Knowingly make a fake or falsified visa, entry permit or stay permit for their own or another person's use to enter or leave or stay in the Indonesian territory.
  • Knowingly use a fake or falsified visa, entry permit or stay permit to enter or leave or stay in the Indonesian territory.
The following individuals may be subject to imprisonment for a maximum period of five years and a maximum fine of IDR500 million (Article 122, Immigration Law):
  • A foreign national who knowingly abuses or carries out an activity that is against the purpose and aim of their stay permit.
  • Any person who orders or allows a foreign national to abuse their stay permit or carry out an activity that is against the aim and purpose of their stay permit.
The following individuals can also be subject to imprisonment for a maximum period of five years and a maximum fine of IDR500 million (Article 123, Immigration Law):
  • Any person who knowingly gives a fake or falsified letter, data or wrong information when applying for a visa or stay permit for themselves or another person.
  • Any foreign national who knowingly uses that visa or stay permit to enter and/or stay in the Indonesian territory.


Procedure for obtaining approval. The employer must first apply to the Ministry of Manpower and Transmigration through its online system (www.tka-online.depnakertrans.go.id) for the Ministry's approval of its Expatriate Manpower Utilisation Plan (RPTKA), which is the master document for processing individual work permits for foreign employees. The RPTKA contains information on the number, functions and employment periods of the foreign employees.
Processing an RPTKA approval takes about ten to 15 working days.
After obtaining the RPTKA, an employer must further obtain a permit to employ expatriate (IMTA) from the Minister of Manpower and Transmigration for its foreign employees. The application for IMTA must also be submitted through the Ministry of Manpower and Transmigration online system (www.tka-online.depnakertrans.go.id). The IMTA is valid for one year.
In certain regions, foreign nationals who work in Indonesia must also obtain a number of other permits.
The employer must also pay an annual contribution of US$1,200 to the Compensation Fund for the Utilization of Expatriate (Dana Kompensasi Penggunaan Tenaga Kerja Asing) (DKP-TKA).
After the issuance of both the RPTKA and IMTA, the employer can submit a VITAS application to the Immigration Office. If the VITAS application is accepted, the Immigration Office will send a telex confirming the approval to the Indonesian embassy in the foreign national's country of domicile. The foreign national must then collect the approval at the Indonesian embassy and get the VITAS stamp on their passport.
The time frame for processing the required permits is about two to three months.
Sanctions. The sanctions for failing to comply with the obligation to obtain the written permit to employ foreign nationals from the Ministry of Manpower and Transmigration are:
  • Imprisonment for a minimum period of one year up to a maximum period of four years.
  • A minimum fine of IDR100 million and a maximum fine of IDR400 million.


Procedure for obtaining approval. The foreign worker must submit the application for the limited stay permit to the Immigration Office no later than seven days after their arrival in Indonesia (verified by the entry permit). If the application is approved, the Immigration Office issues a Limited Stay Permit Card (KITAS), following which the employee receives a "control blue book" to record changes, if any, to his immigration status. The KITAS is valid for one year.
For sanctions see above, Visas: Sanctions.
Filings when foreign nationals start work. There are no official filings that need to be made when the foreign nationals start working in Indonesia, except for an extension of the work permit and stay permit and other related documents, as they are valid for 12 months.

Restrictions on managers and directors

6. Are there any restrictions on who can be a manager or company director?

Age restrictions

Indonesian Company Law No. 40 of 2007 (Company Law) outlines the requirements, constraints and conditions in relation to company directors. The law is silent on any age restrictions imposed on company directors. Article 93 provides that the director must simply be "capable of performing legal actions". Therefore, the individual must have mental capacity to perform legal decision-making actions and have reached the age of majority. Under the Indonesian Civil Code, only persons who have reached the age of 21 can be considered as capable of performing legal actions.

Nationality restrictions

The Company Law is silent on any nationality restrictions imposed on company directors.


The only explicit restrictions imposed on company directors are that they cannot, in the five years preceding their appointment, have been (Article 93(1), Company Law):
  • Declared bankrupt.
  • Members of a board of directors or a board of commissioners declared to be at fault in causing a company to be declared bankrupt.
  • Sentenced for crimes that caused losses to the state and/or were related to the finance sector.
In addition, the authorised technical agencies are entitled to determine additional requirements under the applicable legislative regulations (Article 93(2), Company Law).
Members of a board of directors must be appointed by the general meeting of shareholders. A company's articles of association can also provide certain additional requirements and procedures for the election of company directors.

Regulation of the employment relationship

7. How is the employment relationship governed and regulated?

Written employment contract

Employment agreements can be made for a definite or indefinite period of time (Law No. 13 of 2003 on Manpower (Labour Law)). Specifically, a fixed-term employment agreement must be made in writing, in the Indonesian language using the Latin alphabet (some Indonesian dialects do not use the Latin alphabet) (Article 57, Labour Law). If an employment agreement is in both Indonesian and a foreign language, the Indonesian version prevails in the event that there are differences in interpretation.
Employment agreements of an indefinite term can be made either orally or in writing (Article 51, Labour Law).
Any written employment agreement (fixed-term or indefinite) must state the following as a minimum:
  • Name, address and line of business of the employer.
  • Name, sex, age and address of the employee.
  • Position of the employee or type of work.
  • Place where the work is to be carried out.
  • Amount of wages and how they will be paid.
  • Terms and conditions of employment stating the rights and obligations of both the employer and the employee.
  • The effective date of the employment agreement and the period of the employment agreement.
  • Place and date of the execution of the employment agreement.
In addition, it must be signed by the parties to the agreement.
Employment agreements of an indefinite term can be made orally or in writing (Article 51(1), Labour Law). However, in practice, employment agreements should be made in writing. An employment agreement can be made orally only if circumstances do not permit it to be made in writing.

Implied terms

There are no implied terms in employment agreements under the Labour Law or other applicable laws and regulations.

Collective agreements

If a company has a registered labour union, the labour union can enter into a collective labour agreement (CLA) with the management of the company. A labour union can be established by at least ten employees in any business industry. The CLA is valid for two years but can be extended. Only a duly registered trade union with a registration number has the right to negotiate a collective labour agreement with the employer's management.
8. What are the main points to consider if an employer wants to unilaterally change the terms and conditions of employment?
An employment agreement is a contract. Under the Indonesian Civil Code, a contract cannot unilaterally be changed and, therefore, an employment agreement cannot be unilaterally changed or revoked.

Minimum wage

9. Is there a national (or regional) minimum wage?
There is no national minimum wage. Instead, all 33 provinces settle their own minimal wage every year, which can also vary depending on industry. The minimum wage is generally set based on the estimated amount required to cover all basic needs.
For example, the minimum wage in Jakarta, in 2015, was set at just over IDR274 million per month.
The minimum wage is intended to cover employees working a 40-hour week in the formal sector (that is, any job sector or industry that is recognised, monitored and regulated by the government). The minimum wage requirement only applies to employees (whether working under a definite or indefinite employment contract) whose length of service is less than one year. For employees whose length of services is more than one year, the amount of wage will be negotiated by the employee and the employer.
There are two types of minimum wage:
  • Provincial or regency (an area within a province (kabupaten)) based minimum wage.
  • Sectoral-based minimum wage, which is determined by a sector in a province or in a regency. Sectoral-based minimum wages are established by business groups in a district, province or regent throughout Indonesia. A sectoral-based minimum wage cannot, in any case, be lower than the minimum wage of the respective province or regency.
The minimum wage of a regency cannot be higher than the minimum wage of the province.
There is some evidence of the increasing role of trade unions in wage bargaining. If the salary is composed of basic wage and fixed allowances, the amount of the basic wage must not be less than 75% of the total remuneration.

Restrictions on working time

10. Are there restrictions on working hours? Can an employee opt out on either an individual or collective basis?

Working hours

An employee can work a maximum of 40 hours per week, allocated in one of the following ways:
  • Seven hours per day, six days per week.
  • Eight hours per day, five days per week.
It is prohibited to employ the following employees between 11pm and 7am:
  • Female employees aged less than 18 years.
  • Pregnant employees who, under a doctor's statement, are at risk of damaging their health or harming their own safety or the safety of their unborn child if they work.
In general, employers who require an employee to work outside the normal working hours must pay overtime wages to the employee, unless the employee's position, function or job is that of a "thinker, planner, implementer or controller" whose working hours cannot be limited to normal working hours. These categories of employees are not entitled to overtime wages, but are entitled to a higher salary than that of ordinary employees. Overtime can only be performed for a maximum period of three hours per day and 14 hours per week. The overtime pay rate for one hour is 1/173 of the monthly wage plus fixed allowances, if any.

Rest breaks

Employees are entitled to at least an half an hour break after four continuous hours of work (Law No. 13 of 2003 on Manpower (Labour Law)).

Shift workers

Under Indonesian labour laws and regulations, shift workers are those normally employed as blue-collar workers and security guards. For shift workers, the total working hours per day is eight hours and no more than 40 hours per week .

Holiday entitlement

11. Is there a minimum paid holiday entitlement?

Minimum holiday entitlement

Workers who work a five-day week have Saturday and Sunday off. Workers who work six days a week are entitled to Sunday off. All employees are entitled to 12 working days of paid vacation per year after one year's uninterrupted service.

Public holidays

Workers are not obliged to work on formal public holidays (Law No. 13 of 2003 on Manpower (Labour Law)). Employers who require their employees to work on formal public holidays must pay the concerned employees for overtime work (see Question 10, Working hours). The Minister of Manpower together with the Minister for Religious Affairs and the Minister for the Utilisation of State's Apparatus issue a Joint Ministerial Decree every year, stipulating the specific date for each public/national holiday. Most public holidays are religious dates and, as most religions function under a different calendar (for example, the lunar cycle), the exact dates vary from year to year. Public holidays are included in the minimum holiday entitlement.

Illness and injury of employees

12. What rights do employees have to time off in the case of illness or injury? Are they entitled to sick pay during this time off? Who pays the sick pay and, if the employer, can it recover any of the cost from the government?

Entitlement to time off

Employees are entitled to paid sick leave in the case of illness or injury that is evidenced by a medical certificate or statement.
Employees are also entitled to long-term paid medical leave provided that such leave is recommended in writing by a doctor and lasts for a period greater than one year.
Female employees are also entitled to two days of menstrual leave (the first and second day of menstruation).

Entitlement to paid time off

An employee who is experiencing a prolonged sickness continues to be entitled to the payment of wages, as follows (Law No. 13 of 2003 on Manpower (Labour Law)):
  • First four months: 100% of the wages.
  • Second four months: 75% of the wages.
  • Third four months: 50% of the wages.
  • Subsequent months: 25% of the wages until the employment is terminated.
The employer pays these wages.

Recovery of sick pay from the state

The employer cannot recover any of the costs from the government.

Statutory rights of parents and carers

13. What are the statutory rights of employees who are:
  • Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?
  • Carers (including those of disabled children and adult dependants)?

Maternity rights

Pregnant employees are entitled to take three months' paid maternity leave, of which 1.5 months are taken in the pre-natal period and 1.5 months are taken in the post-natal period (Law No. 13 of 2003 on Manpower (Labour Law)). In this period, employees receive their full salary. A pregnant employee is entitled to receive her full salary during her pregnancy.
An employee who has had a miscarriage is entitled to a 1.5-month rest period, provided this is recommended in a medical statement issued by an obstetrician or midwife.
Employers must provide proper opportunities to female employees, whose babies still need breastfeeding, to breastfeed their babies if this must be performed during working hours (Labour Law).

Paternity rights

Male workers are entitled to two days' paid paternity leave if their wife gives birth or miscarries.

Surrogacy rights

The labour laws are silent on the rights of a surrogate mother or parents under a surrogacy arrangement to leave, pay and other benefits. Provided all legal documents are given to the employer, parents under a surrogacy agreement will have the same maternal and paternal rights as parents of a naturally born child.

Adoption rights

Labour Law does not recognise this type of leave. As long as all legal documents are given to the employer, parents of an adopted child will have the same maternal and paternal rights as parents of a naturally born child.

Parental rights

An employee is entitled to paid family leave in the following circumstances:
  • Marriage of the employee's child: two days' paid leave.
  • Circumcision of the employee's child: two days' paid leave.
  • Baptism of the employee's child: two days' paid leave.
  • Death of the employee's child: two days' paid leave.
All the above mentioned leaves are paid leave, which means that the employee is paid his full salary for the period of his leave. However, the employer is not obliged to pay the allowances that are conditional on the attendance of the employee.

Carers' rights

Indonesian labour laws are silent on carers' rights. In practice, leave can be granted by an employer as unpaid leave. This also applies for emergency care for dependants, a spouse or a close family member. An employee may be given permission for unpaid leave. Likewise, an employee may be given leave for emergency care for himself and his immediate family members.

Continuous periods of employment

14. Does a period of continuous employment create any statutory rights for employees? If an employee is transferred to a new entity, does that employee retain their period of continuous employment? If so, on what type of transfer?

Statutory rights created

A worker becomes entitled to annual leave after working for 12 consecutive months (see Question 11, Minimum holiday entitlement). An employee who has been working for the same employer for six consecutive years may also be entitled to a leave of at least two months in the seventh and eighth year of work.

Consequences of a transfer of employee

If employees are transferred from one company to another without dismissal, the new company must provide at least the same remuneration as the previous company. The new company must also recognise the length of service of the employees. This applies to all types of employee transfer.

Fixed term, part-time and agency workers

15. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees? To what extent are part-time workers entitled to the same rights and benefits as full-time workers?

Temporary workers

The Law No. 13 of 2003 on Manpower (Labour Law) and other applicable regulations do not differentiate between the rights of temporary and agency workers and the rights of permanent employees. Temporary workers' terms and conditions, including salary, cannot be lower than what is provided for under the existing laws in relation to permanent employees.
An agreement for a definite or specified period can be an agreement for a specified period of time or an agreement for a specified job.
Under Indonesian labour laws, an agreement for a definite or specified period can only be extended once. Generally, it can only be made for a maximum period of two years (with the possibility of a one-time extension for a maximum period of one year, or a one-time renewal for a maximum period of two years). Employees who are hired for a definite period, or temporarily, are entitled to the remaining amount of pay if their employment is terminated before the end of the specified period of the job.
In relation to agency workers who are seconded to another company, protection and working conditions provided to the workers at the other company must be at least the same as the protection and working conditions provided at the previous company.

Agency workers

Part-time workers

The Labour Law and other applicable labour regulations do not recognise the concept of part-time worker. Therefore, a part-time worker will be entitled to the same rights as a permanent worker.

Data protection

16. Are there any requirements protecting employee privacy or personal data? If so, what are an employer's obligations?

Employees' data protection rights

While Indonesia has enacted various laws relating to data privacy in a number of specific areas (for example, banking and tax), no laws have been enacted on the protection of an employee's privacy before, during or after employment. The only law that may be applicable in this case is the Human Rights Law No. 39/1999, which stipulates that each individual has the right to their own privacy, and cannot be subjected to an investigation without their agreement, except on the order of a court or other legitimate authority under prevailing legislation.

Employers' data protection obligations

There are currently no specific laws on data protection in Indonesia. The Law No. 13 of 2003 on Manpower (Labour Law) is also silent on the issue of data protection in relation to human resources.

Discrimination and harassment

17. What protection do employees have from discrimination or harassment, and on what grounds?

Protection from discrimination

All persons that are qualified to perform a job have the same opportunity to obtain the job without discrimination (Article 5, Law No. 13 of 2003 on Manpower (Labour Law)). The interpretation of Article 5 provides, among other things, that all persons who are qualified to perform a job cannot be discriminated against on the grounds of:
  • Sex.
  • Ethnicity.
  • Race.
  • Religion.
  • Political orientation.
In addition (Article 6, Labour Law):
  • All workers have the right to receive equal treatment without discrimination from their employer.
  • Employers must provide workers with equal rights and responsibilities with no discrimination based on:
    • sex;
    • ethnicity;
    • race;
    • religion;
    • skin colour; or
    • political orientation.
Indonesia has also ratified the following International Labour Organisation (ILO) Conventions:
  • No. 111 of 1958 on Discrimination in Employment and Occupation.
  • No. 80 of 1957 on Equal Remuneration for Male and Female Workers for Work of Equal Value.

Protection from harassment

The Labour Law does not regulate protection from harassment for employees. However, a company's manual or collective labour agreement will normally contain a provision regarding harassment and its sanction. Indonesian case law also provides protection for workers from harassment. However, the Indonesian court system is based on a civil law system and does not follow the rule of stare decisis (a legal principle under which judges must respect the precedents established by prior decisions).
Employees wishing to take action against sexual harassment they have experienced in the workplace can file a claim on the basis of civil tort law. The labour laws and regulations are silent on the claim limitation period for this matter.


18. Do whistleblowers have any protection?
Employees cannot be dismissed for reporting suspected crimes committed by their employers (Article 153(1), Law No. 13 of 2003 on Manpower (Labour Law)). This can be interpreted as a form of general protection for whistleblowers. There are no specific provisions regarding the protection of whistleblowers under the law.

Termination of employment

19. What rights do employees have when their employment contract is terminated?

Notice periods

The law does not set out notice periods for ordinary dismissals and unfair dismissals. However, in practice a 30-day notice must be given to terminate an employment contract.
The Law No. 13 of 2003 on Manpower (Labour Law) regulates individual employment termination and provides for:
  • Dismissal without cause (not due to the employee's fault). Where dismissal of employees cannot be avoided, such as in the case of a merger, a reorganisation of the company, or bankruptcy of the employer, it is prudent for the employer to explain the circumstances to the related Ministry of Manpower in advance if the employment termination is mass employment termination.
  • Dismissal with cause (due to the employee's fault). Dismissal with cause can arise in the following circumstances:
    • the employee's violation of the employment contract or company regulation;
    • the employee's gross wrongdoing or committing of a major fault. However, dismissal can only be effected if a final and binding verdict confirming the employee's wrongdoing has been obtained from a criminal court judge (Decision of the Manpower Minister No. 13 of 2005).
In addition, an employer can dismiss an employee if:
  • The employee has been unable to work for over six months due to legal proceedings brought against them (Article 160(3), Labour Law). If the court finds the employee not at fault, the employer must re-employ the employee.
  • The employee has been absent from work for five or more consecutive working days without providing reasons or evidence (Article 168, Labour Law).

Severance payments

The labour law sets out the dismissal and severance payment requirements. The amount and type of severance to be paid to an employee can vary depending on the basis of the dismissal. If the dismissal is due to the employee's fault, the employee is entitled to the following:
  • Standard severance pay. One month's salary for every year of service, up to nine months' salary.
  • Service appreciation pay. Two months' salary for the first three years of service, followed by an additional one month's salary for every three years of service thereafter, up to a maximum of ten months' salary for 24 years of service.
  • Compensation. Monetary compensation must be paid to cover the following (Labour Law):
    • annual leave that has not expired or been taken;
    • relocation expenses (that is, expenses to return the employee and their family to the place from which they were recruited);
    • medical and housing allowance: 15% of the total severance pay and service appreciation pay, if any;
    • other benefits provided under the respective employment agreement, the company regulations or the collective labour agreement (CLA); and
    • other compensation amounts as determined by the Industrial Relations Court (this can include special arrangements between the employer and employee).
If the dismissal is not due to the employee's fault (dismissal without cause), the employee is entitled to two times the severance pay amount plus the standard service appreciation pay and compensation. The Labour Law does not contain separate provisions on severance payment for ordinary dismissals and unfair dismissals. However, it provides different formula of severance pay for the different reasons of dismissal/employment termination.

Procedural requirements for dismissal

If the employee violates the provisions under the employment agreement, company regulations or CLA, then the employer can terminate the employment after it issues three consecutive disciplinary (warning) letters (Article 161, Labour Law).
In all other cases, the employer must attempt to negotiate the proposed dismissal with the employee or applicable labour union. In addition, all employment termination plans (except where dismissal is caused by the resignation of the employee) require approval, in the form of a decision of authorisation of the Industrial Relations Court. If the employee and the employer agree to the employment termination, they must enter into a mutual employment termination agreement. This must be done simultaneously with the payment of the severance package (see above, Severance payments). The entire transaction must be registered with the Industrial Relations Court, after which the court issues a deed of registration of the employment termination.
The long and expensive procedures involved with employment termination have induced employers to try and conclude an amicable settlement with employees.
If procedures are not followed or the parties do not reach a termination agreement, each party can bring the case to a mediator (officials from the Manpower Department). If the case cannot be settled through mediation, the mediator will forward the case to the Industrial Relations Court, and the losing party can appeal to the Supreme Court.
Law No. 13 of 2006 on the protection of witnesses and victims (Law No. 13/2006) provides protections for witnesses and victims at all stages of court proceedings within court jurisdiction. The protection to witnesses and victims is aimed at providing a sense of safety to witnesses and/or victims in presenting their testimony in a court proceeding. Article 10 sets out that witnesses, victims and people who report an offence should not be prosecuted under the criminal or civil code for the report or testimony which they will give, are giving or have given. These provisions are not applicable to witnesses, victims and people who provide information without a good intention.
Under Law No. 13/2006, whistleblowers cannot be discriminated against. Based on the principle of equality before the law, witnesses and victims in a court proceeding must be given a guaranteed legal protection.
20. What protection do employees have against dismissal? Are there any specific categories of protected employees?

Protection against dismissal

An employee cannot be dismissed under certain circumstances, including the following (Article 153(1), Law No. 13 of 2003 on Manpower (Labour Law)):
  • The employee is ill (the employee must have this validated in writing by a doctor), provided the employee is not absent for a period of more than 12 months.
  • The employee is fulfilling state obligations, as defined in valid legislation.
  • The employee is fulfilling religious obligations (for example, praying, taking part in a religious ceremony).
  • The employee is getting married. This means that an employee cannot be fired the day that they are getting married. In addition, an employee is entitled to three days' paid family leave when getting married (Article 93, Labour Law).
  • The employee is pregnant, breastfeeding, giving birth or has recently had a miscarriage.
  • The employee is related by blood to another worker, unless the dismissal is required by a collective bargaining agreement.
  • The employee belongs to a trade union.
  • The employee has reported a crime committed by their employer.
  • The dismissal is due to discrimination on any basis.
  • The worker is disabled or ill due to a work-related accident and the period of recovery is indeterminable.
Dismissal under one of the circumstances listed above will be declared null and void, and the employer will then be obliged to re-employ the employee concerned.

Protected employees


21. How are redundancies/layoffs defined, and what rules apply on redundancies/layoffs? Are there special rules relating to collective redundancies?

Definition of redundancy/layoff

The labour regulations do not contain provisions on redundancy notification. There is no specific definition of redundancy or layoff in Indonesian labour law. Redundancy or layoff would be treated as dismissal without cause (see Question 19). An employer should provide evidence as grounds for the redundancy. In particular, the evidence is needed if the case is brought to a government institution that handles labour cases.

Procedural requirements

Employers who wish to dismiss employees must first obtain approval from the Industrial Relations Court. Following this, consultation or discussion with the employee or labour union is required prior to mass or individual dismissal (see Question 19, Procedural requirements for dismissal).

Redundancy/layoff pay

The redundancy pay/severance package is calculated on the basis of the employee's:
  • Monthly salary.
  • Period of service.
  • Allowance and benefits such as leave, and medical and housing entitlements.
Since redundancy/layoff is treated as dismissal without cause, the employee is entitled to two times the severance pay amount plus the standard service appreciation pay and compensation.

Collective redundancies

Under the Ministry of Manpower and Transmigration's Decision No. 150/MEN/2000 (as amended by the Ministry of Manpower and Transmigration's Decision No. KEP-111/MEN/2001 regarding the settlement of termination of employment and the determination of severance pay, service appreciation pay and compensation pay), "collective redundancies" means:
  • The termination of the employment of ten or more employees in a company within one month.
  • The serial termination of the employment of employees of a company which indicates the company's intention to conduct collective redundancies.
Collective redundancies require the permission or approval of the Labour Dispute Settlement Committee.

Employee representation and consultation

22. Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them? Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)?

Management representation

There is no requirement under law that employees be represented at management level. Management representation is regulated by the Company Law No. 40 of 2007 (Company Law). A company's articles of association can provide a procedure and requirements relating to the management team's selection (Company Law).


An employer whose company is engaging in a merger or acquisition, or whose company is changing ownership, must notify its employees of the merger or acquisition, or change of ownership (Articles 127(1) and (2), Company Law). Notification must be made at least two weeks before the respective transaction, to allow employees to decide whether they want to continue their employment following the transaction. This procedure (sale of shares), including an announcement in a newspaper, only applies for a change in shares of the controlling shareholders. In relation to an asset sale, the announcement to employees is not mandatory, but is done in practice.
Employee opinion can be voiced and can have an impact on the stakeholders' decision, as the employees have the opportunity to resign if they are not satisfied with the planned action or change.

Major transactions

Employee consent is not required for major transactions (see above, Consultation).
23. What remedies are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?


An employee can voice their concerns with the Ministry of Manpower and Transmigration appointed mediator. However, there is no requirement for an employer to consult their employees on major transactions. Despite there being no consultation requirement, the employer is required to notify the employees in the event that such a transaction will result in termination of their employment.

Employee action

Employees cannot take any action other than voicing their concerns (see Question 22).

Consequences of a business transfer

24. Is there any statutory protection of employees on a business transfer?

Automatic transfer of employees

Employees are not automatically transferred on a business transfer. The following three options are possible in relation to permanent employees:
  • The employee is not willing to continue their employment with the new employer, in which case they must be paid a severance payment.
  • The new employer is not willing to accept the employee, in which case the employee concerned is entitled to two times the stipulated severance pay, plus the other standard remuneration (that is, compensation pay and service appreciation pay).
  • Both the new employer and the employee are willing to continue the employment as if no business transfer had occurred. In this case, the employment relationship continues on the basis of the same terms and conditions as before the transfer.
A non-permanent worker whose employment is not continued by the new employer is entitled to receive the wages for the remaining period of his contract.

Protection against dismissal

There is no protection against dismissal for employees on a business transfer (see above, Automatic transfer of employees). However, as with all dismissal claims, the Industrial Relations Court approval is required before an employee can be dismissed (see Question 19, Procedural requirements for dismissal).

Harmonisation of employment terms

If the employment continues following the business transfer, the terms and conditions of employment must be the same as before the transfer, unless the change is approved by the Industrial Relations Court. The new employer must also recognise the employee's continuous length of service.

Employer and parent company liability

25. Are there any circumstances in which:
  • An employer can be liable for the acts of its employees?
  • A parent company can be liable for the acts of a subsidiary company's employees?

Employer liability

The labour laws are silent on the employer's liability for the acts of its employees. However, an individual must be responsible for the damage that he has caused by his own act, as well as for that which was caused by the acts of the individuals for whom he is responsible, or caused by matters that are under his supervision (Article 1367, Civil Code). Therefore, an employer may be liable for the acts of its employees.

Parent company liability

Indonesian law does not provide for a parent company's liability for the acts of its subsidiary company's employees.

Employer insolvency

26. What rights do employees have on the insolvency of their employer? Is there a state fund which guarantees repayment of certain employment debts?

Employee rights on insolvency

In the event of the employer's insolvency, the affected employees are entitled to a one-time payment of the stipulated severance pay, service appreciation pay and compensation pay.

State guarantee fund

The Law No. 13 of 2003 on Manpower (Labour Law) does not provide for a state guarantee fund. However, it does provide that, in the event of the employer's insolvency, the employee's salary and any other outstanding rights of the employee are treated as prioritised debts of the company.

Health and safety obligations

27. What are an employer's obligations regarding the health and safety of its employees?
Law No. 1 of 1970 regarding Occupational Safety sets out the general framework for the implementation of occupational safety. An employer must establish an occupational safety and health management system that complies with the legal requirements if it both:
  • Employs 100 or more individuals.
  • Requires its employees to carry out high risk work/activities.
An employees' representative must agree to the workplace occupational safety and health management system. The system must also be explained to all the company's employees, suppliers and customers. The Ministry of Manpower and Transmigration must supervise the implementation of the system, and evaluate and assess the system on a regular basis.

Taxation of employment income

28. What is the basis of taxation of employment income for:
  • Foreign nationals working in your jurisdiction?
  • Nationals of your jurisdiction working abroad?

Foreign nationals

Resident foreign employees are taxed on the part of their salary earned in Indonesia and other remuneration earned during their stay in Indonesia (for example, bonus and religious holiday allowance). The Indonesian portion of the salary is taxed at source, and the employer must withhold the tax.
Non-resident employees (that is, an individual who does not reside in Indonesia and is present in Indonesia for less than 183 days in any 12-month period, or an entity that is not domiciled in Indonesia and is not conducting business or carrying out activities in Indonesia through a permanent establishment) are generally subject to a withholding tax of 20% of their gross income from Indonesia (Law No. 13 of 2003 on Manpower (Labour Law)).
Indonesia has concluded several tax treaties and agreements with other states. Taxation rates and deductions can be altered under these treaties. Double taxation treaties offer a lower withholding tax rate, usually 10% or 15%. In addition, most treaties provide an exemption from withholding tax where interest is paid to the government or other specified authority of the other country. The treaties also provide a "time test" for determining when a permanent establishment is deemed to exist. By the end of 2008, Indonesia had negotiated and implemented tax treaties with 57 countries.
Deductions can be made for dependant spouses and children. In addition, foreign nationals may be able to claim for some expenses that are paid for by the employer, such as accommodation or vehicles. However, this depends on how the employer has classified these payments. Items such as healthcare costs are classified as income.

Nationals working abroad

Indonesia exempts the portion of the employee's salary that is attributable to a foreign company from taxation.
29. What is the rate of taxation on employment income? Are any social security contributions or similar taxes levied on employers and/or employees?

Rate of taxation on employment income

Non-resident individuals are subject to a withholding tax of 20% on their gross income from Indonesia (Law No. 13 of 2003 on Manpower (Labour Law)), unless the provisions of a double taxation treaty provide otherwise.
Tax resident individuals are subject to the following rates of income tax:
  • Up to IDR50 million: 5%.
  • From IDR50 million up to IDR250 million: 15%.
  • From IDR250 million up to IDR500 million: 25%.
  • Over IDR500 million: 30%.

Social security contributions

On 25 November 2011, the Indonesia Government issued Law No. 24 year 2011 regarding the Social Security System (Law No. 24). This Law regulates the provision of the social security system for Indonesian workers, as well as for foreign nationals who have worked in Indonesia for at least six months. A special institution named the Social Security Management Board (known locally as Badan Penyelenggara Jaminan Sosial or BPJS) was set up to administer the social welfare system.
BPJS is a non-profit institution. Law No. 24 distinguishes between two different types of social security programmes for employees, which BPJS manages:
  • The manpower (labour) social security programme.
  • The health security programme.
Law No. 24 states that employers must register all their employees (including expatriates who work for more six months) in both these programmes.
The manpower social security programme was formerly known as the Jamsostek programme. Until the implementing regulations on the manpower social security programme are issued, certain provisions of the Jamsostek programme are still applicable. Employees who are already members of the Jamsostek programme will automatically become members of the manpower social security programme.
The following contributions must be made by both the employer and employee for both social security programmes:
  • Manpower social security programme:
    • occupational accident security contributions are between 0.24 to 1.74% of the employee's monthly pay, depending on the type of industry in which the employee works (there are five types of industry under the Government Regulation No. 44 of 2015 concerning Implementation of Occupational Accident Security and Death Security programme). Occupational accident security contributions must be fully paid by the employer;
    • death security is 0.3% of the employee's monthly pay, to be paid by the employer;
    • old age security is 5.7% of the employee's monthly pay. The employer pays 3.7% and the employee pays 2%.
    • pension security is 3% of the employee's monthly pay. The employer pays 2% and the employee pays 1%.
  • Health security programme: 5% of the employee's monthly pay. The employer will pay 4% and the employee will pay 1%.


30. Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded?
The only recognised bonus under the Law No. 13 of 2003 on Manpower (Labour Law) is the Tunjangan Hari Raya (THR) or religious allowance. The THR is paid to workers who have been working for longer than three months. Workers who have been working for a consecutive 12-month period are entitled to a minimum THR amount of one month's salary. The THR must be paid no later than seven days before the Idul-Fitr holiday. In practice, contractual or discretionary bonuses can be provided to employees.

Intellectual property (IP)

31. If employees create IP rights in the course of their employment, who owns the rights?


If a work is made in the course of an employment relationship or based on an order from the employer, the party who creates the work is deemed to be the creator and copyright holder, unless agreed otherwise by the parties (Article 8(3), Law No. 19 of 2002 concerning copyright law). In addition, the author of the work is entitled to both economic and moral rights. The moral rights in a work cannot be transferred, even if the economic rights have been transferred to another party. IP rights differ depending on the laws relating to the industry in which they are created.


The party who assigned the work is the party who is entitled to the patent for an invention produced in the course of an employment relationship, unless otherwise agreed by the parties (Article 12(1), Law No. 14 of 2001 concerning patent law). Inventors are entitled to compensation determined by the concerned parties. The law recognises inventors' moral rights, who are entitled to have their name stated on the patent certificate.

Restraint of trade

32. Is it possible to restrict an employee's activities during employment and after termination? If so, in what circumstances can this be done? Must an employer continue to pay the former employee while they are subject to post-employment restrictive covenants?

Restriction of activities

Indonesian laws do not restrict an employer's ability to impose non-competition and non-solicitation covenants on an employee, provided the employer and employee have entered into a formal agreement regarding this matter.

Post-employment restrictive covenants

The employer is not required to continue paying former employees while they are subject to post-employment restrictive covenants.

Proposals for reform

33. Are there any proposals to reform employment law in your jurisdiction?
The government is planning to reform the Law No. 13 of 2003 on Manpower (Labour Law) to address:
  • Complaints from employers regarding the formula set out to calculate severance pay.
  • Complaints from employees regarding outsourcing. Labour outsourcing has become popular with Indonesian employers, but the rights of outsourced employees are not clear.
In 2010, the government established a committee to review and redraft the Labour Law. The government hoped that the review would be completed and a new draft produced by 2013. However, so far the new Labour Law has not yet been issued.

Online resources

The Ministry of Manpower and Transmigration

Description. This is the official website of the Ministry of Manpower and Transmigration. It contains up-to-date official data and information as well as regulations on manpower and transmigration. New regulations are uploaded at random intervals, but no English translation of the provisions are provided. Occasionally, information in English will appear, but it is limited.

Contributor profile

Nafis Adwani

Ali Budiardjo, Nugroho, Reksodiputro (ABNR)

T +62 21 250 5125/5136
F +62 21 250 5001/5121/5122/5392
E [email protected]
W www.abnrlaw.com
Professional qualifications. Advocate, Indonesia
Areas of practice. Corporate; labour law; land law; capital markets.
Recent transactions
  • Assisted business corporations in major employment termination cases.
  • Involved in power and mining projects, focusing particularly on land law issues, as the leader of the ABNR team advising the investors.
  • Licensed by the Capital Market Supervisory Board to provide legal opinions to companies offering securities in the Indonesian capital market.