Indonesia

Significant changes taking effect for companies employing foreign workers

27 Jul 15

INDONESIA

IMPACT – MEDIUM

What is the change? Several changes to the procedures for hiring foreign nationals and the types of work permits to be obtained have been implemented in Indonesia under a recent regulation.

What does the change mean? The new regulation creates stricter rules and will result in longer processing times for employing foreign workers in Indonesia.

  • Implementation time frame: Effective June 29.
  • Visas/permits affected: Work permits.
  • Who is affected: Foreign nationals who wish to work in Indonesia.
  • Business impact: The changes generally make it more difficult, time consuming and costly for companies to bring foreign talent into the country. Companies need to update their policies with the new revisions issued by the Ministry of Manpower.
  • Next steps: Clearer implementation guidelines are expected to be issued by the authorities in due course. BAL will provide further updates as soon as information has been made available.

Background: The recent changes in the regulation are as follows:

  • Additional short-term work authorization categories are now available for eligible foreign nationals. The RPTKA (expatriate placement plan) for “emergency or urgent work” has a validity of one month, while the RPTKA for “temporary work” may be granted for up to six months.
  • Certain activities previously permitted on a business visa now require work permits, including attending meetings and conducting audits or inspections in representative offices or on-site locations, performing installations and other services on products, and other listed activities.
  • Non-resident directors and commissioners are now required to obtain a work permit.
  • Foreign workers in Indonesia are now subject to a new requirement to have insurance coverage and to both hold a tax card (personal NPWP) and join the National Security Program (“BPJS Ketenagakerjaa/JAMSOSTEK” and BPJS Kesehatan/Health Insurance”) after six months of working in the country.
  • Companies need to make sure that they have at least 10 local workers for every foreign worker hired in non-director or non-commissary roles.
  • Progress reports submitted by employers of foreign workers will face greater scrutiny and enforcement.

BAL Analysis: The new regulations will have a major impact on businesses, who should anticipate additional inconvenience and costs. This is particularly true given the new requirements to obtain work permits instead of business visas for simple business meetings held in offices and the additional requirements for foreign workers on long-term assignments in the country.

This alert had been provided by the BAL Global Practice group and our network provider located in Indonesia. For additional information, please contact your BAL attorney.

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