Key Employment Issues When Hiring An Employee Without A Local Entity

It is theoretically possible for a foreign entity to engage an employee to perform work in Indonesia. While the employment will generally be subject to employment laws in Indonesia, the specific circumstances of the engagement will determine that. This update sets out the key employment issues to consider.

Whether Indonesian employment law applies to the employment relationship

Indonesia's primary employment legislation, Law No. 13 of 2003 on Manpower (as amended by Government Regulation In Lieu of Law No. 2 of 2022), defines an "employment relationship" as a relationship between an employer and an employee based on an employment agreement. Depending on the specific arrangements in place (including where the employing entity is registered, the nature of work the individual performs and where this work occurs), Indonesian employment law generally applies to all individuals working in Indonesia, including foreign employees.¹