What Are the Key Employment Laws in Indonesia for Locals and Foreigners?
Both employers and employees—whether local or foreign nationals—must comply with Indonesia’s employment laws, which regulate working relationships, employee rights, and employer obligations. The legal framework continues to evolve, with reforms introduced to align with global standards and ensure fair labour practices.
Indonesia’s labour laws are primarily governed by the Manpower Law (Law No. 13/2003) and its subsequent amendments. These laws regulate essential aspects of employment such as working hours, wages, social security, and termination of employment, ensuring that employees receive fundamental protections and entitlements.
Key provisions include:
- Working hours: Standard 40-hour workweek.
- Wages and allowances: Mandatory minimum wage, overtime pay, and a religious holiday allowance (THR).
- Social security: Compulsory coverage for pension, health, and life insurance.
- Termination and severance: Structured compensation system for employee dismissal.
- Industrial relations: Recognition of employee unions and regulations governing dispute resolution.
No Difference Between Locals and Foreigners
Under Indonesia labour law, there is no explicit distinction between the regulations that apply to locals and foreign nationals. The Indonesian Labour Law is the primary legislation that governs all employee relations in the country. It specifically focuses on the relationship of the employment, the terms and conditions while employed, and the termination regulations.
However, there are two categories of employees available in Indonesia. The two categories are defined under Law No. 13 of 2003 on Manpower (Labour Law). The two categories are:
- Definite term employees (Pekerja Waktu Tertentu) – Contract workers employed for a fixed period or specific project.
- Indefinite term employee (Pekerja Waktu Tidak Tertentu) – Permanent employees with open-ended employment contracts.
Working Regulations for Foreign Employees
Foreign nationals may be employed in Indonesia only when the required skills are not available locally. Employers must obtain a Foreign Worker Utilisation Plan (RPTKA) approved by the Ministry of Manpower before hiring expatriates.
Additionally:
- Companies must appoint at least one Indonesian employee to work alongside and receive training from the foreign worker.
- Certain job positions remain closed to expatriates, particularly in human resources and administrative roles.
- Expatriates must hold a limited stay visa (KITAS) and a work permit.
The Laws for Nationals Working Abroad
Indonesian nationals employed overseas are protected under a robust legal framework, including:
- Law No. 18 of 2017 on the Protection of Indonesian Migrant Workers (replacing Law No. 39/2004).
- Presidential Regulation No. 90 of 2019 establishing the Indonesian Migrant Worker Protection Agency (BP2MI).
- Government Regulation No. 10 of 2020 on Procedures for the Placement of Indonesian Migrant Workers Abroad.
These regulations provide safeguards covering employment contracts, dispute resolution, and welfare protection for Indonesian migrant workers.
Fair Employment
The employment laws in Indonesia make it clear that everyone is entitled to an equal opportunity. They should be treated equally without discrimination in employment. This applies to both job applicants and current employees. Workers should not be discriminated against on any of the following:
- Race
- Ethnicity
- Sex and sexual preference
- Political preferences
- Religion
- Disability
- AIDS/HIV status
- Harassment
Minimum Employment Age
In Indonesia, the minimum age for employment is 15 years. This applies to regular jobs. Special considerations are available for those under the age of 18 years. Child labour is not permitted in the country. The local child labour laws are stipulated in the Minimum Age Convention No. 138 of 1973 (C138) and Worst Forms of Child Labour Convention No. 182 of 1999 (C182).
Working Hours and Overtime Regulations
Under current laws:
- The standard working hours are 40 hours per week (7 hours/day for 6 working days or 8 hours/day for 5 working days).
- Overtime is permitted up to 4 hours per day and 18 hours per week, with mandatory overtime pay.
- Employees are entitled to one full day of weekly rest and paid annual leave of at least 12 days after one year of service.
Wages, Social Security, and Benefits
- Employers must comply with the Provincial Minimum Wage (UMP) or District Minimum Wage (UMK) as determined annually.
- Employees are entitled to a Religious Holiday Allowance (Tunjangan Hari Raya – THR), payable once a year before major religious holidays.
- Enrollment in BPJS Ketenagakerjaan (social security for employment) and BPJS Kesehatan (national health insurance) is mandatory, covering health, pension, work accident, and life insurance.
Termination and Severance Pay
Termination of employment is strictly regulated and must be based on lawful grounds. Employers are required to provide compensation, which may include:
- Severance pay (pesangon)
- Service pay (uang penghargaan masa kerja)
- Compensation rights (uang penggantian hak)
The exact amount depends on the employee’s length of service and the grounds for termination. Disputes are resolved through the Industrial Relations Court (PHI).
Employee Unions and Industrial Relations
Employees have the right to form and join labour unions. Employers must recognise and engage in dialogue with unions regarding working conditions and collective bargaining agreements (CBAs). Industrial disputes may be resolved through bipartite negotiations, mediation, conciliation, arbitration, or litigation.
Workplace Safety and Health
Employers are legally obligated to maintain workplace safety in accordance with the Occupational Safety and Health (K3) standards. This includes:
- Providing protective equipment.
- Conducting regular health checks.
- Reporting workplace accidents to authorities.
- Implementing safety training for employees.
