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

• The company must obtain approval for its Foreign Manpower Utilization Plan (RPTKA) from the Ministry of Manpower before a foreign worker starts employment.
• The RPTKA ratification (Pengesahan RPTKA) is issued for each foreign worker and itself functions as the work permit — it replaced the former IMTA in 2018.
• The company must pay the foreign worker utilization compensation fund (DKPTKA) of USD 100 per month for each foreign worker.

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 levy — officially the DKPTKA (Dana Kompensasi Penggunaan Tenaga Kerja Asing, or Foreign Worker Compensation Fund, formerly known as the DPKK) — is a mandatory contribution required for companies employing foreign workers in Indonesia. Key points about the DKPTKA 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 DKPTKA levy is calculated monthly for each foreign worker employed, and is normally paid in advance for the period of the RPTKA ratification.

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

• Payment method: The levy is paid as non-tax state revenue (PNBP) to the state treasury, via a billing code generated in the Ministry of Manpower’s TKA Online system.

• Legal basis: The DKPTKA levy is mandated by Government Regulation No. 34 of 2021 on the Use of Foreign Workers, as part of the country’s efforts to promote skills transfer and local workforce development.

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

• Exemptions: Some categories of foreign workers may be exempt from the DKPTKA 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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The BPJS obligations — BPJS Kesehatan (health) and BPJS Ketenagakerjaan (employment) — attach to the employment of people, and contributions are calculated on wages. A company with no employees has no wages to contribute on.

In practice the question usually arises for newly-established or holding-structure PMAs whose directors live abroad, hold no KITAS and draw no Indonesian salary. For such a company:

• There are no contributions to pay — there is no payroll
• Registration expectations, however, are not uniform: some processes (certain licensing interactions, tenders, bank onboarding) ask for evidence of BPJS registration as a matter of checklist, and practice varies by region and institution
• The moment the company hires its first Indonesian employee — or a foreign employee starts drawing an Indonesian salary — registration and monthly contributions become mandatory, on deadlines measured in days, not months

Directors resident in Indonesia are their own case: a director who lives here and receives remuneration from the company is generally expected to be enrolled, and BPJS Kesehatan operates on the principle that residents are covered by someone.

Our advice to dormant and pre-operational companies: do not pre-register a payroll that does not exist, but revisit the question at the first hire, the first Indonesian salary, or the first licence application that asks for proof. Okusi’s payroll administration handles BPJS registration and monthly filings when the time comes.

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