Indonesian employment law

Indonesian Employment Law

The Indonesian employment law is governed by various laws and regulations, particularly Law No. 13 of 2003 on Manpower (as amended), together with implementing regulations. Supervision is carried out by the Ministry of Manpower (“MoM”), which has regional manpower offices across Indonesia.

Employment-related disputes are subject to a tiered resolution process: parties must first attempt bipartite negotiation. If unresolved, the dispute proceeds to tripartite mediation or conciliation at the local manpower office. Only after these steps can a case be brought before the Industrial Relations Court (“IRC”), a specialized court for employment disputes.

Key Points

• Termination of employment is not at-will and must be based on legally recognized grounds.
• Both local and foreign employees are covered under the Manpower Law, but expatriates must obtain work permits and be employed under approved manpower plans (RPTKA).
• Employers must register employees in mandatory social security programs (BPJS Ketenagakerjaan and BPJS Kesehatan).
• In terms of employment disputes, the local manpower offices have an active supervisory and mediation role, which distinguishes Indonesia’s system from many other jurisdictions.
• On top of severance pay, Indonesian manpower regulations recognize compensation benefits, long service pay, and separation pay as rights that an employee may be entitled to upon termination. Specifically, compensation benefits involve any untaken benefits (including untaken leave, travel allowances, or any rights listed in the employment documents), while separation pay terms involve any rights upon separation that an employee may receive as written in the employment documents.
• Indonesia implements region-based minimum wage, which means different cities or provinces will have different minimum wage requirements that employers must abide to.