Foreign Worker Employment Policy Falls to Criticisms

After many complaints from foreign investors due to its overly stringent rules, Minister of Manpower Regulation No. 16 of 2015 regarding Procedures for Employing Foreign Workers (“Regulation”) was recently revised through the recent issuance of Minister of Manpower Regulation No. 35 of 2015 (“Amendment”) on 23 October 2015.

The new provisions under the Amendment include in relation to:

  1. Ratio of foreign workers to local workers;
  2. New commissioner prohibition for domestic direct investment companies;
  3. Foreign Worker Employment Permit (Izin Mempekerjakan Tenaga Kerja Asing – “IMTA”);
  4. Government Compensation for Employing Foreign Workers (Dana Kompensasi Penggunaan Tenaga Kerja Asing – “DKP-TKA”); and
  5. Temporary IMTA.

Ratio of Foreign to Local Workers Revoked

To the pleasure of many corporations both foreign and domestic, the Amendment revokes the foreign workers to local workers ratio of 1 to 10 (meaning that 10 local workers must be hired for every foreign worker employed).[1]

This requirement is no longer applicable, and officials from the Ministry of Manpower have confirmed that the current foreign workers to local workers ratio is 1 to 1.[2] Other than this confirmation from the official from the Ministry of Manpower, currently there is no statutory legal requirement in place in regard to foreign workers to local workers ratio.

Commissioner Prohibition

The Amendment stipulates a new provision that prohibits domestic direct investment companies to employ foreign workers as commissioners. This was not previously provided under the Regulation.[3]

Foreign Worker Employment Permit

An IMTA is no longer required for directors, commissioners, advisors, administrators and supervisors who are not domiciled in Indonesia. Previously, an IMTA was compulsory for all foreign workers holding any position in Indonesia, regardless of their domicile.[4]

Government Compensation for Employing Foreign Workers

DKP-TKA is a non-tax state revenue payment[5] that must be paid by employers to hire foreign workers.[6] The amount is currently set at USD$ 100, which must be paid prior to the hiring of any foreign workers.[7]

The Amendment erases the provision under the Regulation that requires the payment of the DKP-TKA to first be converted into IDR prior to payment. As such, employers wishing to hire foreign workers are no longer required to convert the DKP-TKA into IDR, as the fees can be paid in USD directly.[8] In addition, any DKP-TKA payments made prior to the Amendment coming into force are not refundable.[9]

Temporary IMTA

Under the Amendment, only the following works must be secured with a temporary IMTA:[10]

  1. Production of commercial films;
  2. Inspecting a branch office in Indonesia, including conducting audits, quality control, and the like; and
  3. Installation of machinery and electrical installations, as well as work related to providing after-sales service, and product feasibility assessment.

Previously, a temporary IMTA was also required for:[11]

  1. Providing training in implementing or innovating industrial technology to improve industrial product design and quality, and cooperation to market Indonesian products overseas;
  2. Lecturing activities;
  3. Attending meetings in Indonesia;
  4. Foreign workers undergoing competency assessment; and
  5. One-off jobs.

Temporary IMTA are now valid for 6 months for all types of work, but still without any possible extensions as previously stipulated under the Regulation. Previously under the Regulation, a temporary IMTA are granted for 1 month, except for the following which were granted for 6 months:[12]

  1. Production of commercial films;
  2. One-off jobs; and
  3. Installation of machinery and electrical installations, as well as work related to providing after-sales service, and product feasibility assessment.

 


FOOTNOTES

[1] Amendment, Art. 3

[2] Indonesia Investments, “Amendment Foreign Worker Regulation 16 of 2015 – Legal Update Indonesia,” 31 October 2015

[3] Amendment, Art. 4A

[4] Compare: Regulation, Art. 37 (2), and Amendment, Art. 37 (2)

[5] Non-Tax State Revenue (Penerimaan Negara Bukan Pajak – “PNBP”) is governed under Law No. 20 of 1997 regarding Non-Tax State Revenue. There is currently in circulation the Draft Bill regarding Non-Tax State Revenue currently being deliberated by the House of Representatives

[6] Regulation, Art. 1 (7)

[7] Regulation, Art. 40 (1)

[8] Amendment, Art. 40 (2)

[9] Amendment, Art. 66B

[10] Amendment, Art. 46 (1)

[11] Compare: Regulation, Art. 46 (1), and Amendment, Art. 46 (1)

[12] Compare: Regulation, Art. 46 (2), and Amendment, Art. 46 (2)


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