Indonesia Labor Management QA

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LRC – Indonesia Labor Regulations

LRC-ID-20.10
What must be included in the contents of a labor contract in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, arts. 22, 54, 56-58, 60, 63-66, 108-115.
A work agreement must state the terms and conditions of employment, including:

•  employer’s name, address, and type of business
•  worker’s name, sex, age, and home address
•  occupation and type of work
•  duty stations or workplace
•  amount of wages and method of payment
•  rights and obligations of the worker and the employer
•  starting date and duration of the contract
•  place and date of the work agreement
•  signatures of both parties

LRC-ID-20.11
Does Indonesia arrange labor contract in a fixed term?
What should be the length of the labor contract in Indonesia?

Evershine RD:
Indonesian workers can enter either fixed-term or open-ended labor contracts.
The maximum validity of the initial definite-period employment agreement is two years, extendable one time for up to one year.
Subsequently, it is possible to renew a definite period employment agreement once for up to two years, but only after a break of at least 30 calendar days after the original employment agreement has expired.

LRC-ID-20.20
What is the minimum age for hiring a new employee in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, arts. 1, 68 and Regulation No 37/POJK.03, 2017.
The legal minimum age for employment in Indonesia is 15.

LRC-ID-20.40
Is it a requirement for employer in Indonesia to conduct a pre-employment background check?

Evershine RD:
The labor code does not address background checks.

LRC-ID-20.50
Is the Non-Competition indemnity clause in labor contract in Indonesia has legal effect?

Evershine RD:
The labor law does not restrict an employer’s ability to impose noncompetition agreements on an employee provided the employer and the employee have entered into a formal agreement.

LRC-ID-40.05
What are the regulations on Gender Discrimination in employment specifically for female workers in Indonesia?

Evershine RD:
Under Guidelines on Sexual Harassment Prevention at the Workplace (2011) and Indonesian Constitution, 1945, arts. 28-29.
Women:

• cannot be discriminated against because of their gender in recruitment or in working conditions
• cannot be terminated because of marriage, pregnancy, or childbirth; and
• must be paid equal wages for equivalent work.

Employers must not require women to undergo pregnancy tests as part of the hiring process or at any time during employment unless the work presents a recognized significant risk to the health of the woman or child.

LRC-ID-50.10
Can the employer in Indonesia collect, or process data transmitted by employees over the internet?

Evershine RD:
According to Law on Electronic Information and Transaction, 2008.
This is the main regulation addressing the use of an employee’s private or personal information and requires the consent of the worker concerned to such use.

LRC-ID-60.10
What are the regulations on working hours in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, arts. 77, 79.
Regular weekly working hours are limited to 40.
Regular daily working hours are limited to 7 hours a day, 6 days a week or 8 hours a day, 5 days a week.

LRC-ID-60.30
What are the regulations on overtime hours in Indonesia?
What is the overtime premium rate in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, arts. 78, 85 and Ministry of Manpower Decree on Overtime Hours and Wages, No. Kep.102/Men/VI/2004, art.11.
Employers must pay employees overtime if they work:

•  More than 40 hours a week or more than 8 hours per day in a 5-day workweek or
•  More than 7 hours in a day in a 6-day workweek.

Employers must abide by the following rules regarding overtime:

•  the worker must consent to the requirement to work overtime,
• the worker can only work overtime up to 3 hours per day or 14 hours per week and
• the employer must provide the employee with food and drink of at least 1,400 calories if the overtime work is carried out for 3 hours or more.
  This cannot be replaced with money.

Overtime must be paid at 1.5 times the normal hourly rate for the first hour and 2 times the normal rate for the subsequent 2 hours.

Categories	Overtime premium
6-days workweeks Normal day
First hour	1.5 times
Subsequent 2 hours	2 times
Weekly rest days
First 7 hours	2 times
Subsequent 8 hours	3 times
Subsequent 9 to 10 hours	4 times
Statutory holidays
First 5 hours	2 times
Subsequent 6 hours	3 times
Subsequent 7 to 8 hours	4 times
5-days workweeks Normal, Weekly rest days, Statutory holidays
First 8 hours	3 times
Subsequent 9 hours	3 times
Subsequent 10 to 11 hours	4 times

LRC-ID-60.50
Is it common to pay 13^th month’s salary in Indonesia?

Evershine RD:
According to Ministry of Manpower Regulation No. Per-04/Men/1994.
Workers with 12 months’ service are entitled to a religious bonus of at least 1 month’s salary to be paid at least 1 week before their religious holiday.
Workers with 3 to 12 months of continuous service are entitled to a prorated amount of the religious allowance.

LRC-ID-70.10
What are the regulations on general leave policy for employee in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, arts. 79, 84.
Workers are entitled to 12 days of paid annual leave after they have worked for 12 consecutive months.
At least 6 days of this leave must be taken consecutively.
In some companies, employees who have been with the employer for 6 consecutive years get 1 month of paid leave in each of the next 2 years.
This long break is available after every six years the worker has been with the company.
Annual leave must be taken within 6 months of its accrual.

LRC-ID-70.20
What are the public holidays in Indonesia?
What is the overtime premium rate during public holiday in Indonesia?

Evershine RD:
According to Ministry of Human Development and Culture, National Holidays 2017 and Ministry of Manpower Decree on Overtime Hours and Wages, No. Kep.102/Men/VI/2004, art. 11.
Public holidays in Indonesia are as follows:

•  Jan. 1: New Year’s Day
•  Chinese New Year
•  Prophet Muhammad’s Birthday
•  Hindu New Year
•  Ascension of the Prophet Muhammad
•  Good Friday
•  Vesak Day
•  Ascension
•  International Labor Day
•  Pancasila Day
•  Aug. 17: Independence Day
•  Idul Fitri (five days)
•  Idul Adha
•  Islamic New Year
•  Dec. 25: Christmas Day

Workers cannot be required to work on holidays unless the nature of the job is such that work must be performed on these days, as determined by the minister of manpower.
Employees who are required to work on a holiday must be paid twice their normal wage. Holidays that occur on a weekend are not moved to another date.

LRC-ID-70.30
What is the maternity leave policy for female employee in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, arts. 76, 82, 153.
Female workers have the right to employer-paid maternity leave 1 ½ months before and 1 ½ months after giving birth.
A worker who suffers a miscarriage may also take 1 ½ months of paid leave.
These periods of leave can be extended if the need is attested by an obstetrician or midwife.

LRC-ID-70.40
What is the paternity leave policy for male employee in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, arts. 93(4)(e).
A male employee is entitled to two days’ employer-paid leave following the birth of a child or his wife’s miscarriage.

LRC-ID-70.50
What are the provisions on sick leave, bereavement leave and personal leave for employees in Indonesia?

Evershine RD:

Sick leave

According to Manpower Act No. 13 of 2003, arts. 81, 93(3).
For the first 4 months, compensation must be at 100% of wages; for the second four, 75%; the third four, 50%; and subsequent months, 25%.
After 12 months’ absence due to illness, the employer can fire the employee.
Female employees are entitled to 2 days’ menstruation leave if they are unable to work.

Bereavement leave

Death of a spouse, child, child-in-law, parent, or parent-in-law (2 days)
Death of another member of a worker’s household (1 day)

Personal leave

Workers are entitled to paid leave in the following circumstances:

•  wedding (three days)
•  children’s wedding (two days)
•  son’s circumcision (two days)
•  child’s baptism (two days)
•  state obligations
•  religious obligations; and
•  trade union activities with the permission of the employer.

LRC-ID-70.60
What are the regulations on pension benefits and social security insurance benefits for employee in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, art. 99.
All employees, including foreign workers, who have been employed for at least 6 months in Indonesia are obliged to become a member of the social security program.
Social security for workers covers the following benefits:

•  workers’ compensation
•  old age
•  death
•  pension

The legal retirement age is 57 and will gradually increase by 1 year every 3 years until it reaches 65.
Retirement benefits can be obtained by employees only after they have been enrolled in the program for at least 15 years or 180 months and reached retirement age.

Participants may also claim the benefits before they satisfy any of the above requirements to prepare themselves for retirement before they reach retirement age, although they must have participated in the program for at least 10 years and the benefits can only be claimed up to either 10% of total benefits for preparing for retirement or 30% to buy a house.

Medical insurance

Employers must provide medical coverage for workers, their spouses and up to 5 children.
The policy premium is 5% of workers’ pay, borne by employer at 4% and employee 1%.

LRC-ID-70.70
What are the regulations on Workers’ Compensation for employee in Indonesia?

Evershine RD:

Presidential Regulation No. 7 of 2019 clarified the definition of occupational disease, the scope of coverage, and the types of diseases that are covered under work accident social security.
A work accident is one that occurs in connection with employment and includes diseases arising from the workplace as well as accidents that occur during travel to and from work.
Workers who suffer an occupational accident are entitled to compensation for transportation costs and costs of treatment and rehabilitation, as well as payments to cover temporary incapacity to work, partial or total disability (mental or physical), and death benefits.

LRC-ID-80.05
Can the employee in Indonesia join labor union?

Evershine RD:
According to Trade Union Act, No. 21 of 2000, arts. 3-5, 9, 11-12, 14, 18, 28.
Indonesian law allows workers to form and join unions of their choice without previous government authorization or excessive requirements.

LRC-ID-80.06
How to handle labor dispute in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, arts. 136-149 and Industrial Relations Dispute Act, 2004, art. 40.
Under the Industrial Relations Disputes Settlement Act, the parties to a dispute must first try to resolve it through negotiations.
If a consensus is not reached within 30 days, the dispute moves to the local government labor office, which offers the parties a choice of conciliation or arbitration.

If the parties fail to make a choice within 7 days, the dispute is handed over to a mediator.
If a labor dispute cannot be resolved through negotiation, conciliation or arbitration, workers have the right to strike and employers to impose a lockout, either with 7 days’ notice.
If no agreement is reached through any of these avenues, either party may file a legal petition in Industrial Relations Court, which will render a binding decision.
The law requires that regional and national labor dispute resolution committees adjudicate charges of anti-union activities.
The committees’ decisions can be appealed to the state administrative court.
The law also requires that employers obtain the approval of the labor dispute resolution committee before firing workers.

LRC-ID-90.10
What are the regulations on workplace safety and health for employee in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, arts. 86-87 and Work Safety Act of 1970, art. 10.
The Work Safety Act of 1970 outlines basic workplace protections to:

• reduce the risks of accidents involving (for example) fire, explosion, or electrical shock
•  control the sources of exposures that can pollute the workplace environment’s air and cause work-related diseases
•  create a safe and comfortable workplace through such factors as temperature, lighting

ventilation, cleanliness, and proper storage of materials

•  create harmony between worker, environment, working method and process
•  provide personal protective equipment to workers

Employers are required to establish an occupational health and safety management system if they:

•  employ 100 or more workers or
•  require workers to engage in high-risk work.

LRC-ID-100.10
What are the circumstances that an employer can terminate an employee in Indonesia?

Evershine RD:
It is quite difficult to terminate employees in Indonesia.
Employers have the right to terminate the employment of a worker for the following conduct:

•  theft of company goods or money
•  fraud that harms the company
•  alcoholic intoxication or consumption of other addictive substances at work
•  indecency at work
•  gambling at work
•  attacks, threats or intimidation of co-workers or supervisors
•  abuse of the employer or his or her family
•  persuasion of others at work to break laws or regulations
•  reckless or deliberate damage to life or company property
•  divulging trade secrets
•  missing work for five consecutive days without submitting a written explanation or
•  committing crimes that warrant a five-year or longer prison sentence

LRC-ID-100.11
What is the notification period for terminating an employee in Indonesia?
How much is the severance pay?

Evershine RD:
According to Manpower Act No. 13 of 2003, art. 153, 161-172 and 156.
In principle, a 30-day notice period must be given to terminate an employment contract.
Workers who are fired for cause do not receive severance or reward pay but are entitled to payments for benefits.

Years of service	Severance payment
Less than 1 year	1 month salary
1 year but less than 2 years	2 months’ salary
2 years but less than 3 years	3 months’ salary
3 years but less than 4 years	4 months’ salary
4 years but less than 5 years	5 months’ salary
5 years but less than 6 years	6 months’ salary
6 years but less than 7 years	7 months’ salary
7 years but less than 8 years	8 months’ salary
8 years or more	9 months’ salary

 

Years of service	Reward payment
3 years but less than 6 years	2 months’ salary
6 years but less than 9 years	3 months’ salary
9 years but less than 12 years	4 months’ salary
12 years but less than 15 years	5 months’ salary
15 years but less than 18 years	6 months’ salary
18 years but less than 21 years	7 months’ salary
21 years but less than 24 years	8 months’ salary
24 years or more	10 months’ salary

LRC-ID-100.12
What is the reporting requirement for employer in Indonesia to notify the termination of employees to the competent authority?

Evershine RD:
Employment-at-will and termination upon simple notice are not recognized in Indonesia.
Employment terminations must follow the procedures under the Labor Law regarding Industrial Relations Dispute Settlement.
Employee, employer, or labor union are required to meet to reach termination settlement.
This should be completed within 30 days, and minutes of each negotiation must be drafted and signed by all parties.
If a settlement is reached, a Mutual Termination Agreement should be executed and then registered at the relevant labor court.
If the negotiations fail, the employer or employee may file the dispute with the relevant office of the Ministry of Manpower (MOM).

LRC-ID-100.20
What are the regulations on mass layoffs in Indonesia?

Evershine RD:
According to Manpower Act No. 13 of 2003, art. 164.
Should the nature of the employer change, through either a merger or a change in ownership, the employer is given considerable leeway to terminate its workers.
Under such circumstances, the employer may terminate employees if:

•  the workers are not willing to continue their employment
•  the employer does not want to employ the workers in the new enterprise
•  the enterprise closes down because of losses for two consecutive years or because of force majeure (” act of God”)
•  the enterprise closes for other reasons or
•  the enterprise goes bankrupt

In these cases, the terminated workers are entitled to severance and reward pay and payment for benefits, but if the terminations are because the employer does not want to employ the workers in the new enterprise or the company closes for reasons other than losses or force majeure, severance pay is doubled.

LRC-ID-100.30
What is the time limit for employer in Indonesia to pay employees upon termination?

Evershine RD:
Employers must pay wages on an agreed-upon date.

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(version: 2024/07)
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