Indonesia strengthens localization program

IMPACT – MEDIUM

What is the change? Under a new labor regulation, companies must have at least 10 Indonesian workers for every foreign worker employed.

What does the change mean? The previously unwritten policy is now subject to official regulation and enforcement.

• Implementation time frame:  The regulation was issued June 29.
• Visas/permits affected: Work permits.
• Who is affected: Companies employing foreign nationals, although there are several exceptions for foreign employees in certain roles.
• Business impact: Enforcement of the 10:1 ratio may influence the ability of companies to bring in foreign workers.

Background: The regulation, issued by the Ministry of Employment, reinforces efforts to localize employment. However, companies do not have to observe the 10:1 ratio for expatriate employees who are working in temporary jobs, “emergency and urgent” jobs, or temporary positions in the fields of arts or sports. In addition, the rule does not apply to expatriate employees who are members of the board of directors or board of commissioners of an Indonesian company or who are members of the patrons, management or supervisors of a foundation (yayasan).

BAL Analysis: Indonesian companies should be prepared for possible increased scrutiny of their foreign work permits and labor force composition. BAL will closely monitor this new regulation and will provide updates to clients with any additional information or guidelines from authorities.

This alert has 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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