Indonesian entities must comply with certain legal requirements and follow a specific procedure when hiring foreign employees. The requirements and procedure used to be provided for in Minister of Manpower (MOM) Regulation 16/2015, as amended by MOM Regulation 35/2015. However, in 2018 the MOM issued the MOM Regulation on the Utilisation of Manpower (10/2018), which implemented the Presidential Regulation on the Utilisation of Manpower (20/2018). Although some of the requirements remain the same under MOM Regulation 10/2018, others have changed. One notable addition is the requirement to obtain a notification from the MOM when hiring foreign employees.
Documents required to hire foreign employees
Under MOM Regulation 10/2018, a different set of documents is now required to hire foreign employees.
Foreign manpower utilisation plan As was the case under the previous regulations, Indonesian employers must still obtain the MOM's approval of their foreign manpower utilisation plan (RPTKA) before they can employ a foreign employee. This plan must include certain information, including the number of foreign employees who will work for the company in Indonesia. Under the new regime, a RPTKA should remain valid for the foreign employee's term of employment, as set out in their employment agreement. However, as this is a new provision, the authorities' practice has been inconsistent. It appears that the MOM will decide the term of a RPTKA at its discretion, regardless of the applicable employment agreement or a request by the employer.
Notification Under the previous regulations, the next step in the procedure was to obtain a work permit for each foreign employee. However, Regulation 10/2018 has removed this requirement. Now, after a RPTKA has been approved, Indonesian employers must be authorised to hire a foreign employee by the director general of development, the placement of manpower and the expansion of job opportunities. Under MOM Regulation 10/2018, this procedure is referred to as a 'request for a notification'.
A notification must include:
- the foreign employee's name;
- the Indonesian employer's name;
- details of the contribution to the compensation fund for employing foreign employees; and
- the notification's validity period.
A notification is required for the issuance of a limited stay visa (VITAS).
A notification will remain valid for the foreign employee's term of employment, as set out in their employment agreement. However, similar to the RPTKA approval procedure discussed above, the authorities' practice in this regard remains inconsistent.
VITAS After a notification has been issued and the foreign manpower utilisation compensation fund levy (DKP-TKA) has been paid, the employer must submit an application for a VITAS with the Directorate General of Immigration.
Limited stay permit A limited stay permit (ITAS) can be applied for:
- together with the VITAS, which must be obtained from the Indonesian Embassy in the country in which the foreign employee is making the application; or
- at the local immigration office on the foreign employee's arrival in Indonesia.
Although MOM Regulation 10/2018 does not require foreign employees to have an IMTA, all other required documents are the same as those under the previous regulations. As such, the notification is arguably equivalent to an IMTA, as the immigration authority requires one in order to issue a stay permit (ie, a VITAS under MOM Regulation 10/2018). According to MOM Regulation 10/2018, a foreign employee can work in Indonesia once they have obtained a notification and an ITAS.
Key provisions of MOM Regulation 10/2018
In addition to the above, MOM Regulation 10/2018 includes several new provisions which Indonesian employers must consider when hiring foreign employees, one of which concerns double employment.
Under MOM Regulation 10/2018, Indonesian employers may now hire foreign employees who are simultaneously employed by another employer (double employment):
- as a member of the board of directors or commissioners who is not a shareholder;
- in the educational and vocational training or digital economy sectors; or
- as a contractor under a production sharing contract in the oil and gas sector.
However, dual positions are possible only if the current employer approves the double employment. Both the current and the new employer must obtain approval for their RPTKA and pay the monthly DKP-TKA of $100.
Another important issue concerns the exemption to the requirements to obtain a notification and pay the DKP-TKA. Under the new regime, foreign citizens who hold the position of director or commissioner and own shares in the company are exempt from the requirement to obtain a notification and pay the DKP-TKA.
Despite the additional provisions, MOM Regulation 10/2018 is silent on a number of issues. For example, under the previous regulations, foreign directors and commissioners who did not reside in Indonesia did not require a work permit. MOM Regulation 10/2018 does not include this clause and is silent on this matter. However, it does state that foreign directors and commissioners who also own shares in an Indonesian company are not required to be included in the company's approved RPTKA.
The new regulation therefore leaves some questions unanswered – namely, whether foreign directors and commissioners who:
- do not own shares in an Indonesian company must be included in the RPTKA and obtain a notification; and
- reside abroad must be included in the RPTKA and obtain a notification.
According to one MOM official, foreign directors and commissioners who do not own shares in an Indonesian company need not be included in the company's approved RPTKA (which states the number of foreign employees working in the company) or obtain a notification. The MOM official also stated that foreign directors and commissioners who reside abroad need not be included in the company's approved RPTKA or obtain a notification as long as they do not frequently visit Indonesia. If such directors and commissioners visit Indonesia only seldomly (for business purposes), a business visa should suffice. However, if they frequently visit Indonesia, the MOM official has strongly advised that they be included in the company's RPTKA and obtain a notification.
However, since MOM Regulation 10/2018 is still relatively new, it largely depends on the unwritten policy of the manpower authorities, which can change from time to time, particularly when new regulations are introduced.
Penalties under MOM Regulation 10/2018
MOM Regulation 10/2018 gives the MOM the authority to impose various administrative penalties, depending on the violation, such as:
- a delay in the provision of services;
- a temporary suspension of foreign manpower work permits; or
- the revocation of foreign employees' notifications.
For example, a delay in the provision of services can be imposed on employers that fail to:
- enrol foreign employees who have worked for less than six months in an insurance programme;
- enrol foreign employees who have worked for at least six months in the National Social Security programme;
- submit the required annual foreign manpower report; or
- report the termination of a foreign employee.
The MOM can temporarily suspend foreign manpower approvals and permits if an employer fails to:
- obtain MOM approval for its RPTKA;
- appoint foreign manpower understudies for the transfer of knowledge and technology (the exception to this requirement applies only to foreign directors and commissioners);
- educate and train understudies; or
- teach its foreign employees Indonesian.
Meanwhile, a notification is likely to be revoked only if the employer hires a foreign employee in a position closed to foreigners or does not pay the applicable DKP-TKA. Under the previous regulation, an IMTA would generally not be issued if the employer applied for one for a position closed to foreign employees.
MOM Regulation 10/2018 appears to have made no significant changes to the procedure for hiring foreign employees. However, it does contain new provisions which employers should take note of, including with regard to the exemption from paying the DKP-TKA, dual positions and the approval term of RPTKAs. As this regulation was issued only recently, it remains to be seen how the new provisions will be applied through implementing regulations and the relevant officials.
For further information on this topic please contact Lia Alizia, Made Susanti or Rizanesia Citrasari at Makarim & Taira S by telephone (+62 21 252 1272) or email ([email protected], [email protected] or [email protected]). The Makarim & Taira S website can be accessed at www.makarim.com.
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