Indonesia - India Labour and Employment Comparative Guide
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Indonesia
A. General Legal Framework of Labour and Employment Law
1. What are the main statutory sources of labour and employment law in your jurisdiction?
In Indonesia, labour and employment or manpower is governed under Law No. 13 of 2003 on Manpower, as lastly partially amended by Law No. 11 of 2020 on Job Creation (collectively, the "Manpower Law"), which works as the main “umbrella law” for manpower related regulations. In addition to the above, there are other implementing regulations issued by the government and Ministry of Manpower ("MoM”), which essentially act as the implementing regulations to Manpower Law. They include Government Regulation No. 35 of 2021 on Fixed-Term Contract, Outsourcing, Work and Resting Hours, and Termination of Employment (“GR 35/2021”), Government Regulation No. 36 of 2021 on Wages (“GR 36/2021”), and Government Regulation No. 37 of 2021 on Implementation of the Job Loss Security Program (GR 37/2021).
2. Is there a contractual system that operates in parallel, or in addition to, the statutory sources?
In addition to Manpower Law and its implementing regulations, employers and employees need to comply with the prevailing provisions under the employment agreement, company regulations, or collective labour agreements.
B. Employment Contracts
3. Are employment contracts commonly used at all levels? If “yes”, what types of contracts are used and how are they created?
Yes. Employment contracts are commonly used at all levels of employment. However, directors and commissioners are not generally considered as employees of a company, but rather, as a part of the "management" of the company, unless otherwise stated or governed in the employment agreement.
As a reference, there are two types of employment contracts in Indonesia, based on the period of the employment relations. They are as follows:
(a) Fixed-term (definite) Employment Contract (Perjanjian Kerja Waktu Tertentu or "PKWT") is an employment agreement between a worker and his/her employer, valid for a definite period of time or for certain jobs. A PKWT is made in writing.
A PKWT must, at least, contain the following information:
- name, address, and type of business of the company;
- name, gender, age, and address of the worker/labour;
- position or type of work;
- place of work;
- amount and method of payment of wages;
- rights and obligations of the employers and workers/labours following the provisions of the legislation and/or working conditions stipulated in the company regulations or collective labour agreements;
- start and period of validity of PKWT;
- place and date of PKWT; and
- signatures of the parties in PKWT.
(Article 13 of GR 35/2021)
(b) Indefinite-term (permanent) employment (Perjanjian Kerja Waktu Tidak Tertentu or "PKWTT") is an agreement between an employee and an employer in a permanent employment relationship. Article 63 of Manpower Law allows the employer to hire employees verbally or in writing. However, the employer is obliged to make a letter of appointment for the relevant employee.
The letter of appointment shall, at least, contain the following information:
- name and address of the employee;
- employment start date;
- type of work; and
- amount of wage/salary.
4. Are there any requirements for a written employment contract? must they include specific information?
Please refer to our response to question 3 above.
5. Does a verbal employment relations recognized under your jurisdiction? If "yes", what are the requirements and restrictions of such verbal employment relations?
Yes. Manpower Law allows verbal employment relations. However, this is only applicable to PKWTT arrangements. On the other hand, a PKWT should be made in writing because the employer has an obligation to register PKWT to MoM through the local Manpower Office (Dinas Ketenagakerjaan)
C. Employment Rights and Representations
6. Are there any applicable mandatory parental leave (i.e., maternity leave and paternity leave), under the labour and employment laws in your jurisdiction?
Yes. Manpower Law allows an employee to take a maternity or paternity leave.
Based on Article 82 of Manpower Law, a female employee has the right for 1.5 month of pre-natal maternity leave and 1.5 month of post-natal maternity leave or, a total 3-month leave. A female employee who just had a miscarriage is granted with a 1.5 month of miscarriage leave or another period of time as determined/recommended by the gynecologist or midwife.
Pursuant to Article 93 (4) of the law, a male employee whose wife gives birth or just had a miscarriage shall have the right to two days of paid leave.
7. How long does the parental leave last and what benefits are given during such period?
Please see our responses to question 6 above.
An employee under a paternal leave shall be entitled to full salary (i.e., or, at least, their basic wages).
8. Are trade unions recognized and what rights do they have?
Yes. Indonesia recognizes the existence of trade unions. For Indonesian Law purposes, these unions are called "labour unions" as regulated under Law No. 21 of 2000 on Labour Union ("Labour Union Law") and Manpower Law. A labour union can be established by employees and registered at the local Manpower Office. Generally, employees have the right to establish a labour union without any intervention from their employers.
A labour union has the right to participate in negotiation processes in the drafting of a collective labour agreement (Perjanjian Kerja Bersama). Based on Article 119 of Manpower Law, workers of a company that has a labour union have the right to be represented in negotiations with the employer or business owner in drafting the collective labour agreement, provided that the union has members consisting of more than 50% of the total number of employees in the relevant company. If such labour union has less members than the threshold, its participation in the negotiations can be based on votes by more than 50% of the employees.
Furthermore, Articles 137 and 138 of Manpower Law allows a strike to be held as a basic right of the workers and trade/labour unions as long as it is legally, orderly, and peacefully performed as a result of failed negotiations with the employers.
9. How are data protection rules applied in the workforce and how does this affect employees' privacy rights?
Indonesia Manpower Law respects privacy rights of the employees as stated in Article 1 paragraph (1) of Minister of Communication and Information Technology Regulation Number 20 of 2016 on Protection of Personal Data in Electronic Systems ("MoCI 20/2016").
Article 30 paragraphs (1) and (2) of MoCI 20/2016 prohibits every person from knowingly and unlawfully accessing computers and/or electronic systems belonging to other persons in any way with or without any purpose of obtaining electronic information and/or documents. Therefore, before a company accesses the personal data of its employees, the employees must state their explicit consent before the company can process, disclose, or retain their personal data.
10. Does the labour and employment laws in your jurisdiction provides any framework or requirements for health and social benefits?
Yes. In Indonesia, an employer is required to provide health insurance for the workers as stipulated under Article 100 of Manpower Law to improve the welfare of workers/labours and their families.
Furthermore, Article 15 paragraph (1) of Law 24/2011 jo. Constitutional Court Decision No. 82/PUU-X/2012 requires employers to register themselves and their workers as participants in the health and manpower programs of the government's social security program (Badan Program Jaminan Sosial or "BPJS").
11. What are the general rights for employees during their employment period? Are there any other entitlements and/or benefits that are statutorily required?
In general, employees' rights and obligations shall be determined and agreed between the parties in their employment agreement. As an individual, an employee's basic human rights, such as the right to own private property, the right to life, the right not to be tortured, the right to freedom of thought and conscience, the right to religion, and the right not to be enslaved shall be protected by law.
In specifics, Manpower Law requires employers to fulfill the rights of their employees:
- Article 76: Employers are obliged to provide shuttle transportation for female employees who leave and return to work between 23.00 and 05.00;
- Article 79: Employers are obliged to provide rest and leave times;
- Article 80: Employers are obliged to provide adequate opportunities for employees to perform the worship required by their religions;
- Article 88A: Employers are obliged to pay wages to employees under the agreement;
- Article 148: Employers are obliged to provide a written notification to their employees and/or labour unions, and the agencies responsible for local manpower affairs, at least, seven working days before the date of the company closing (lockout);
- Article 156: In the event of termination of employment, an employer is obliged to pay severance and/or service payments, and compensation to the employees for the entitlements they should receive; and
- Article 61A: Employers are obliged to provide compensation money to the employees.
D. Employment Benefits
12. Is there a national minimum wage that must be adhered to?
Yes, employers in Indonesia must adhere to the regulatory requirements on the applicable minimum wage for both their permanent and non-permanent employees. Minimum wage is determined regionally, based on various factors related to the regional economic growth and prevailing inflation rates. GR 36/2021 outlines the formula to determine a minimum wage that should be increased by 1.09% for 2022 stipulation. In this regard, each provincial government should issue a minimum wage decree establishing the minimum wage in the relevant district and regency/city.
13. Is there an entitlement to payment for overtime?
Yes. According to Article 78 of Manpower Law, an employer of workers/labours who work beyond working hours is required to pay the overtime.
14. Is there an entitlement to annual leave? If “yes”, what is the minimum that employees are entitled to receive?
Yes. An employee is entitled to, at least, 12 working days of annual leave, after he/she has continuously worked for 12 months (Article 79 of Manpower Law).
15. Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?
Article 93 (2) (a) of Manpower Law requires the employer to pay wages if an employee becomes ill that he/she is unable to work, and if a female employee is sick on the first and second days of her menstrual period that she is unable to work.
16. Is there a statutory retirement age? If so, what is it?
The statutory retirement age is 56 years old, based on Government Regulation No. 45 of 2015 on Implementation of the Pension Security Program. Retirement age can be increased for 1 year every next 3 years until it reaches 65 years. This means that the maximum working age limit for the elderly in Indonesia is generally 65 years.
You can read the full comparative guide here.
The article above was prepared by Marshall S. Situmorang (Partner) and Audria Putri (Senior Associate).
