The Legal 500

Foreign Employees

Minister of Labor and Transmigration Decree No. 40 of 2012 on Restricted Positions for Foreign Employees ("Decree") has been issued, with immediate effect, on 29 February 2012. Article 46 (1) of Law No. 13 of 2003 on Labor ("Labor Law") forbids foreign employees from holding positions of authority in a human resources capacity and certain other positions, while Article 46 (2) calls for Article 46 (1) to be further implemented by means of a ministerial decree.        

In Indonesia, despite it being generally accepted that a foreign employee is by nature a fixed term employee, recent rulings of the Industrial Relations Court or the Supreme Court have given rise to some arguments among scholars, legal practitioners and jurists since the rulings have recognized foreign employees as ‘permanent’ employees and therefore entitled to severance pay upon termination of their employment in Indonesia.

In recent years, Indonesia's labour environment has become exceptionally complicated, with labour laws and regulations changing frequently. The creation of a relatively new labour court has resulted in better reporting of important decisions but also some inconsistent decisions. Restrictions on the use of fixed term employment contracts, the need to obtain judicial approval of employment terminations and the rather generous separation pay entitlements of employees, taken together create an employee-friendly labour law regime.

The following paper is intended to provide a basic overview of Indonesian labour and employment law.

The Minister of Labor and Transmigration has issued the Regulation of Minister of Labor and Transmigration No. Per.17/MEN/VIII/2009 concerning the Enactment of Pre-departed Briefing of Indonesian Migrant Worker Overseas.It shall be effective as of 6 August 2009.

I. Introduction: It has been over 4 years since the Constitutional Court’s ruling on 26 October 2004 which declared that Article 158 and other relevant articles of the Manpower Law in relation to serious misconduct were against the Indonesia Constitution and therefore were not legally binding. The legal effect of the ruling was that an employer cannot immediately terminate an employee for serious misconduct. Instead an employer must report the act to the police and then follow the criminal proceedings under the Indonesian Criminal Procedure Law. Only upon receiving a criminal judgment of the district court that the employee is guilty (and if the decision is not appealed by the employee) can the employer terminate the employee.