(availability, ability, working relationship system, wages, and working time)
Regarding labor issues in Indonesia (for foreign investment), minimum there are 5 things that are important to know by investor, ie.: availability, ability, employment relationship system, wages, and working time.
This section is actually more of a demographic analysis, and there are no specific rules about how to provide labor, both in terms of numbers, qualifications, skills or education.
However, in Indonesian labor law, the provision of manpower by “Manpower Service Providers” which in Indonesia is generally known as “outsourcing”, is possible and commonly used for several types of work, such as security, cleaning, and piecework.
So, if foreign investors not have issues with the labor supply system through a third party, then this scheme can be used to reduce labor issue.
For jobs that require certain skills, such as work related to security, machine operators, experts, etc., the Indonesian law requires the worker to have a certification or the like, issued by the Indonesian government or a professional organization officially recognized by the government of Indonesia.
The certification is intended to provide more confidence for labor users that these workers have expertise in their fields, even though there is no guarantee that these workers will do their work 100% in accordance with the wishes of the Investor, but at least, if there is an ethical or professional violation, then it can be complained to be given sanctions in accordance with the code of ethics and profession.
Working Relationship System
In recruiting employees in Indonesia, in general there are three forms of working relationships that can be chosen and carried out (of course with their respective conditions):
- The employment relationship is permanent (permanent employees of the company. In Indonesian labor law it is known as PKWTT which stands for ” Perjanjian Kerja Waktu Tidak Tertentu “);
- The employment relationship is temporary (employees are contracted by the company to work for a certain period of time. A maximum of 5 years. In Indonesian labor law, it is known as PKWT which stands for “Perjanjian Kerja Waktu Tertentu”); and
- Part Time (for certain jobs and companies).
For the scale of foreign investment, generally what is allowed is a working relationship with the PKWTT and PKWT schemes. It’s just that for PKWT (or contract employees), it cannot be done for all types of work, only certain jobs such as temporary work. However, especially for Foreign Workers in Indonesia, regardless of the type of work, they can only be employed in Indonesia in the status of a Contract or PKWT employment relationship. And for the part time working relationship, foreign investors can take advantage if investor build “start-up” companies.
The main difference and effect for investors in determining whether to use contract employees (PKWT) or permanent employees (PKWTT) is the severance pay in the event of termination of employment, whereas for permanent employees, they generally receive “severance pay” in the event of layoffs, while for contract employees (PKWT) only get “compensation money” whose value is relatively lower than the value of severance pay.
The regulation of wages in Indonesia is very strict. However, if it is described in a simple way, it can be conveyed with several points as follows:
- The Indonesian government sets minimum standards for wages;
- Minimum wages, different for each province in Indonesia;
- Minimum wages can change every year, generally increase about 1-5% / year;
- The company must not pay wages below the minimum wage (if violated, there will be criminal sanctions);
- For wages above the minimum wage, the company is free to agree with the employees;
- For employees with a certain level (such as managers and above), they have their own minimum standard for their salary which is generally higher than the minimum wage standard.
Based on Indonesian regulations, the working hours in one week are divided into two schemes, ie.:
- For employees who work 5 days a week, the working hours are 8 hours / day;
- For employees who work 6 days a week, the working hours are 7 hours / day;
And any excess working hours from the above provisions will be counted as working overtime and the company is obliged to pay overtime wages. Some important points for overtime provisions in Indonesia are:
- Overtime a maximum of 4 hours a day;
- For certain level employees (such as managers and above), not get overtime pay even though they work more than the working time.
The Indonesian government provides consulting services for potential investors in Indonesia through the BKPM, so that foreign investors can take advantage of these services by contacting the BKPM directly or find out local consultant for your business interest.