MANAGING DIFFERENT CATEGORIES OF EMPLOYMENT … · Expatriate Employment (Cont.) Work Permit...

MANAGING DIFFERENT CATEGORIES OF EMPLOYMENT

CONTRACT

SSEK Legal

Consultants

Rusmaini Lenggogeni

Syahdan Z. Aziz

September 18 , 2018

I. Laws and Regulations

II. Fixed-Term vs. Permanent Employment

III. Outsourcing Employment

IV. Expatriate Employment

V. Secondment Agreement

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Categories of Employment Contract

SSEK LEGAL CONSULTANTS


The main sources of Indonesian employment law:

▪ Law No. 21 of 2000 (August 4, 2000) on Labor Unions;

▪ Law No. 13 of 2003 (March 25, 2003) on Manpower, as

adjusted by Constitutional Court decisions (“Manpower

Law”);

▪ Law No. 2 of 2004 (January 14, 2004) on Industrial Relations

Dispute Settlement;

▪ MOMT Regulation No. 19 of 2012 (November 19, 2012) as

amended by MOMT Regulation No. 27 of 2014 (December

31, 2014) regarding the Requirements to Delegate a Portion

of Work to Other Companies (“Outsourcing Regulation”)

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I Laws and Regulations


▪ Supreme Court Circular Letter No. 1 of 2017 regarding the

Implementation of the 2017 Supreme Court Meeting as a

Guideline for the Role of Indonesian Courts (“SEMA No. 1”).

▪ Presidential Regulation No. 20 of 2018 (March 29, 2018) on

the Use of Foreign Manpower.

▪ Minister of Manpower (“MOM”) Regulation Number 10 of

2018 (July 11, 2018) on the Procedure for the Utilization of

Foreign Manpower;

▪ Minister of Law and Human Rights (“MOLHR”) Regulation

Number 16 of 2018 (July 27, 2018) on the Procedures for

the Issuance of Visa and Stay Permits for Foreign Workers

(“MOLHR 16 of 2018”).

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I Laws and Regulations


Fixed Term Employment Contract (Perjanjian Kerja Waktu

Tertentu or “PKWT”):

• Must be made in writing and in the Indonesian language

(Article 57(1) of the Manpower Law).

• A PKWT that is not made in writing is deemed to be a

permanent employment contract (Article 57(2)).

• Dual language agreements are permitted, but the governing

language must be Indonesian (Article 57(3)).

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II Fixed Term vs. Permanent Employment


Two types of PKWT:

• Time Based:

Up to two years plus a one year extension. Employers who

wishes to extend a PKWT must notify their intention in

writing to the employee at the latest 7 (seven) days prior to

the expiration of the PKWT. A PKWT can be renewed for up

to two more years after a 30-day grace period.

If these limits are exceeded, the PKWT will be deemed

permanent employment where the employee becomes

entitled to the benefits of being a permanent employee

under the Manpower Law including termination benefits.

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• Work-based:

PKWT may not be used for work of a permanent nature, but

may be used for:

(a) work which can be completed on one occasion or which

is temporary in nature,

(b) work whose completion is estimated not to exceed three

years,

(c) seasonal work, or

(d) work related to new or trial products or services.

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Indefinite-term (Permanent) Employment Contract

(Perjanjian Kerja Waktu Tidak Tertentu or “PKWTT”):

• A probationary period is only permitted for PKWTT employees. A

PKWT cannot provide for a probationary period, otherwise it will

be void by law (Article 58(1) and (2) of the Manpower Law).

• The probation period of up to 3 months only is permitted within

which either party may terminate the agreement without penalty

or sanction. The probation period cannot be extended.

• PKWTT is valid until it is terminated, the employee resigns,

passes away or reaches retirement age.

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III Outsourcing Employment

Article 64 of Manpower Law

A company may delegate a part of its work to other legal

entities by way of:

- subcontracting services (pemborongan)

carried out through an agreement on the contracting of

work that is drawn up in writing

- labor supply (penyediaan jasa pekerja)

conducted for non-core supporting services or activities

that are not directly related to the production process


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III Outsourcing Employment (Cont.)Before engaging Subcontracting Services:

• User Company arrange a “flowchart” from business

sector association

• Flowchart describes main business activities in the

industry and possible supporting activities

• User Company prepare description of specific

supporting activities required

• User Company register Description of Supporting

Activities with local MOM office


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III Outsourcing Employment (Cont.)Subcontranting Services:

• The outsourced work must be conducted separately from the

main activities, both management and work implementation

activities;

• The outsourced work is performed by direct or indirect order

from employing companies for the purpose of providing clarity

on how to perform the work so that it is consistent with the

standards of employing companies;

• The outsourced work shall completely be a company

supporting activities;

• The outsourced work does not directly hinder the production

process


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III Outsourcing Employment (Cont.)

• Following the registration of Description with MOM, the

Subcontracting Services Agreement must contain:

a) rights and obligations of each party;

b) guarantee protection of work and the fulfillment of all

work conditions for the employees according to

prevailing laws and regulations;

c) Confirmation of the availability of competent workers

in the relevant field


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Labor Supply

• May only be conducted for non-core supporting services or activities

that are not directly related to the production process.

• Must meet the following requirements:

➢ the existence of a working relationship between a worker and the

labor supplier,

➢ the employment agreement must be in the form of a written fixed

term employment agreement or a written permanent employment

agreement signed by both parties,

➢ protection of salary and welfare, terms of employment and any

dispute which arises shall be the responsibility of the labor supplier;

➢ the agreement between the User Company and the Labor Supplier

must be made in writing and shall contain the above provisions.


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The type of work that can be delegated to the Labor Supplier

must be “supporting services or activities that are not directly

related to the main production process”, which are:

• cleaning services;

• catering services for employee/labor;

• security services;

• supporting services in mining and oil industry; and

• transportation services for employee/labor”.

(Article 17 (2) of Outsourcing Regulation)


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• Under Manpower Law, outsourced employee

under a labor supply agreement will become a

permanent employee of the user company if the

labor supplier company is not a limited liability

company and/or if it does not have a labor

supplier company permit.

• The Outsourcing Regulation, in contrast, does

not contain such restrictions, but the restrictions

under the Manpower Law still apply.


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III Outsourcing Employment (Cont.)

• The MOMT will issue a formal acknowledgement

of the registration

• User Company is prohibited to engage

Subcontractor prior to registration of Description

of Supporting Activities with the local MOM.

• If all these requirements are not met, the

Subcontractor’s employees shall be converted

(by operation of law) into User Company’s

employees


Expatriate is a foreign citizen holding a visa for the purpose ofworking in Indonesia.

Expatriates may only be employed in Indonesia in anemployment relationship for a specific position and a fixedterm.

• The Indonesian Labor Court has in fact flip-flopped on theissue of foreign employees and their status. The court hasheld both that foreigners can be permanent employees andthat they can only be fixed-term employees.

• Affirmation by SEMA No. 1

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IV Expatriate Employment


Article 46(1) of the Manpower Law:

A prohibition on foreign workers holding a

position “managing personnel and/or certain

positions”.

MOMT Decree No. 40 of 2012 lists 19

positions that cannot be held by non-Indonesian

nationals, all related to the field of human

resources.

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IV Work Permit - Prohibition on Expatriates


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IV

NO.NAME OF POSITION

ENGLISH INDONESIAN

1. Personnel Director Direktur Personalia

2. Industrial Relations Manager Manajer Hubungan Industrial

3. Human Resources Manager Manajer Personalia

4. Personnel Development Supervisor Supervisor Pengembangan Personalia

5. Personnel Recruitment Supervisor Supervisor Perekrutan Personalia

6. Personnel Placement Supervisor Supervisor Penempatan Personalia

7. Employee Career Development Supervisor Supervisor Pembinaan Karir Pegawai

8. Personnel Declare Administrator Penata Usaha Personalia

9. Chief Executive Office [sic] Kepala Eksekutif Kantor

10. Personnel and Career Specialist Ahli Pengembangan Personalia dan Karir

11. Personnel Specialist Spesialis Personalia

12. Career Advisor Penasehat Karir

13. Job Advisor Penasehat Tenaga Kerja

14. Job Advisor and Counseling Pembimbing dan Konseling Jabatan

15. Employee Mediator Perantara Tenaga Kerja

16. Job Training Administrator Pengadministrasian Pelatihan Pegawai

17. Job Interviewer Pewawancara Pegawai

18. Job Analyst Analis Jabatan

19. Occupational Safety Specialist Penyelenggara Keselamatan Kerja Pegawai

Positions Closed to Expatriates


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Expatriate Employment (Cont.)

Work Permit

Presidential Regulation 20 of 2018

• No time limit for RPTKA (Expatriate Manpower Utilization

Plan):

o If a company employs a foreign employee, they can

make the time period for the RPTKA as long as they

want with the reasons stated. Further, such approved

RPTKA will be an automatic permit for the company to

employ foreign employee.

• Does not include the issuance of IMTA since the RPTKA is

the permit by itself.

• Problem: Sectoral recommendation?

IV


21

Expatriate Employment (Cont.)

RPTKA Prerequisites

IV

To be Filled in To be Uploaded

TKA Employer’s identity Draft of Employment Contract

Number of TKI being employed Organization Chart

TKI absorption plan each year Co-Worker Appointment Statement

Letter

TKA utilization plan each year Training for Co-Worker Statement

Letter

Data of Co-worker Emergency Situation Statement

Letter (conditional)

Reason in utilizing TKA


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Expatriate Work Permit – RPTKA IV

Previously (PR No.72 of 2014)

1. Given for 5 years and extendable

for the same period of time – Art.

7

2. Amendments to RPTKA that must

attain approvals:

a.Company’s Address

b.Name of the Company

c. Title/Position

d.Work Location

e.Number of Foreign workers

f. Citizenship

3. Approved RPTKA – basis to

obtain IMTA (Permit/license)

PR No.20 of 2018

1. Applicable pursuant to the time limit

submitted in the RPTKA – Art.11

2. Amendments to RPTKA that must

attain approvals:

a.Company’s Address

b.Name of the Company

c. Title/Position of foreign workers

d.Temporary need to add foreign

workers not stipulated in the initial

RPTKA

e.Time period of employment

f. Additional number of foreign

workers

g.Assigned assisting accompanying

Indonesian Workers

3. Approved RPTKA = Permit


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Expatriate Work Permit – RPTKA IV

Previously (MOM Reg. 16 and 35

of 2015)

1. Permit : RPTKA and IMTA

2. Duration: 6 Days

- 3 days : RPKTA

- 3 days : IMTA

3. Services : Semi-online / partially

integrated

4. Validity : 1 year, extendable

5. Indonesian language course:

No obligation to facilitate

Current (MOM Reg. 10 of 2018)

1. Permit : RPTKA and Notification

2. Duration: 4 Days

- 2 days : RPKTA

- 2 days : Notification

3. Services : Online / fully integrated

4. Validity : As per contract / work

agreement

5. Indonesian language course:

No obligation to facilitate


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Work Permit – IMTA IV

Previously (PR No.72 of 2014)

1. Applicable for 1 year and

extendable – Art. 9

2. For Commissioner and

Directors max. applicable for

2 years with condition not

exceeding the RPTKA

PR No.20 of 2018

1. No IMTA

2. RPTKA approved = Permit

Art.9


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Work Permit – Exceptions IV

Previously (PR 72 of 2014)

1. Directors and Commissioner –

2 year applicability of IMTA

2. RPTKA is not necessitated for

Governmental Institution,

Representatives/ Embassy of

Foreign Countries, and

International Bodies

3. IMTA is not required for

Representatives/Embassy of

Foreign Countries

PR 20/2018

RPTKA is not required for

Shareholders holding title as

Director/Commissioner, Diplomatic

and Consular employee of Foreign

Representative Offices and Foreign

workers needed by the Government


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Work Permit

• Employers may employ foreign employees employed by another

company as long as the term of the employment does not

exceed the approved term in the RPTKA.

• Emergency and Urgent situation: Employers are allowed to

immediately employ foreign workers with the condition that a

request of approval for RPTKA shall be submitted to the Minister

or appointed officials a maximum 2 (two) days after the

employment. The RPTKA will be approved for a maximum of

one month (non extendable). However, the standard of

emergency and urgent situation is not provided in the regulation.

• Duty to report to be conducted every 1 (one) year.

IV


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Work Permit – VITAS (Limited Stay Visa)

MOLHR 16 of 2018

• Foreign employees working in Indonesia are obliged to possess VITAS

for working purposes

• The length of stay under a granted VITAS will follow the time period set

mentioned on the approval notification up to a maximum period of two

years

• A Visa on Arrival can be granted to a Candidate for maximum 30 days

and functions as a prerequisite for the ITAS (Limited Stay Permit) on

arrival

IV


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Work Permit – ITAS (Limited Stay Permit)

MOLHR 16 of 2018

• ITAS are granted to Candidates who have secured Vitas at certain

Immigration Check Counters.

• ITAS, which are derived from VITAS, have an original validity period of

two years maximum.

• This period can be extended for a further four years at the maximum

• Applications for renewals must be submitted before the relevant

expiration date.

IV


Secondment agreement: There are no

laws or regulations that prohibit an

Indonesian legal entity from entering into a

secondment agreement with a foreign legal

entity.

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VI Secondment Agreement:


▪ To avoid claims by expatriates for the generous

termination benefits under Indonesian law;

▪ Expatriates should be hired on the basis of a

secondment arrangement;

▪ For this purpose, the Indonesian company will

arrange the necessary work permits for the

seconded employees, i.e., acting as the sponsor

for Indonesian work permit purposes.

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VI Secondment Agreement:

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