Frequently Asked Questions: #laborlawcompliance

Foreign companies operating in Indonesia must adhere to specific regulations when hiring foreign workers. Here are the key points regarding employment regulations for foreign workers:

Work Permit Requirements

• Foreign workers must obtain a work permit (IMTA - Izin Mempekerjakan Tenaga Kerja Asing) before starting employment.
• The company must first obtain approval for its Foreign Manpower Utilization Plan (RPTKA) from the Ministry of Manpower.
• After RPTKA approval, the company can apply for individual work permits for each foreign employee.

Position Restrictions

• Foreign workers can only be employed in positions that cannot be filled by Indonesian nationals.
• Certain positions, particularly in Human Resources, are restricted and cannot be held by foreigners.
• The company must demonstrate efforts to transfer knowledge and skills to Indonesian staff.

Ratio Requirements

• For every foreign worker employed, the company must employ at least 10 Indonesian workers.
• This ratio may vary depending on the specific industry and position.

Time Limitations

• Work permits are typically issued for a maximum of 12 months and can be extended.
• Some positions may have restrictions on the total duration a foreign worker can hold them.

Compensation and Benefits

• Foreign workers must be paid in Indonesian Rupiah (IDR).
• Salaries must meet or exceed the minimum wage requirements for the region.
• Companies must enroll foreign workers in the national social security program (BPJS).

Language Requirements

• Foreign workers are expected to have a basic understanding of Bahasa Indonesia.
• Companies may be required to provide language training for foreign employees.

Reporting Obligations

• Companies must submit regular reports on their foreign workers to the Ministry of Manpower.
• Any changes in employment status must be reported promptly.

Penalties for Non-Compliance

• Failure to comply with foreign worker regulations can result in fines, business license revocation, or legal action against the company and the foreign worker.

It’s important to note that regulations can change, and specific requirements may vary based on the industry and location. Companies should consult with legal experts or professional services firms like Okusi Associates to ensure full compliance with current Indonesian employment laws for foreign workers.

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The Skills & Development Fund (SDF) levy is a mandatory contribution required for companies employing foreign workers in Indonesia. Key points about the SDF levy include:

• Purpose: It is designed to support the development of local workforce skills and competencies.

• Applicability: The levy applies to companies employing foreign workers on KITAS (temporary stay permit) visas.

• Payment frequency: The SDF levy is paid monthly for each foreign worker employed.

• Cost: The current rate is USD 100 per month per foreign worker.

• Payment method: The levy is typically paid through the company’s BPJS Ketenagakerjaan (workers’ social security) account.

• Legal basis: The SDF levy is mandated by Indonesian government regulations as part of the country’s efforts to promote skills transfer and local workforce development.

• Non-compliance consequences: Failure to pay the SDF levy can result in difficulties renewing work permits and potential fines or sanctions.

• Exemptions: Some categories of foreign workers may be exempt from the SDF levy, such as diplomatic personnel or those working on specific government-to-government projects.

Companies employing foreign workers should factor this ongoing cost into their budgeting and ensure timely payments to maintain compliance with Indonesian labor regulations.

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