Indonesia: Labour and Employment Comparative Guide

1 Legal framework

1.1 Are there statutory sources of labour and employment law?

Indonesian labour and employment law is generally governed by the Manpower Law (13/2003), as amended by the Job Creation Law (11/2020) ('Labour Law'). The government has also issued regulations to implement the labour laws, including:

• Government Regulation 35/2021 on fixed-term employment agreement, outsourcing, working hours and rest hours, and termination of employment; and
• Government Regulation 36/2021 on wages.

The other main statutes are:

• the Law on Industrial Relations Dispute Settlement (2/2004); and
• the Labour Union Law (21/2000).

1.2 Is there a contractual system that operates in parallel, or in addition to, the statutory sources?

In addition to the laws and regulations discussed in question 1.1, employers and employees are subject to the relevant company regulations (or work rules) and/or any applicable collective labour agreement, as well as the provisions of the employment agreement between the employer and employee.

1.3 Are employment contracts commonly used at all levels? If so, what types of contracts are used and how are they created? Must they be in writing must they include specific information? Are implied clauses allowed?

Employment contracts are commonly used at all levels of employment. However, directors and commissioners are not employees of a company, unless stated otherwise contractually.

Generally, an employment contract in Indonesia can be either a fixed-term (definite) or an indefinite-term (permanent) contract. Fixed-term employment agreements are subject to stricter requirements compared to indefinite-term employment agreements. A fixed-term employment agreement must be in writing in the Indonesian language or a bilingual format. Additionally, a fixed-term employment agreement cannot include a probationary period. Indefinite-term employees are employees who do not fall into the category of fixed-term employees. These types of workers are also known as permanent workers.

2 Employment rights and representations

2.1 What, if any, are the rights to parental leave, at either a national or local level?

Female employees are entitled to three months' maternity leave with full pay. The leave period consists of:

• 1.5 months prior to the delivery; and
• 1.5 months following the delivery, unless the employee's doctor certifies otherwise.

The above leave periods can be extended with a doctor's certificate confirming that this is medically necessary. Female employees are also entitled to 1.5 months' leave in the event of a miscarriage.

Male employees are entitled to two days' paid paternity leave pursuant to the Labour Law. National Civil Service Agency Regulation 24/2017 on Procedures for Granting Leave to Civil Servants allows men in the civil service to extend their paid paternity leave to up to one month with a doctor's certificate stating that the extended leave is medically necessary.

2.2 How long does it last and what benefits are given during this time?

Please see question 2.1. In addition to paid leave, employers must provide mothers with reasonable time and special facilities to breastfeed once they return to work.

2.3 Are trade unions recognised and what rights do they have?

Indonesia recognises labour unions, as regulated under the Labour Union Law. In general, labour unions must first be registered with the local office of the Ministry of Manpower (MOM). A labour union must then submit written notification to the company in question after its registration is approved by the MOM. Prior to the enactment of the Labour Union Law, Indonesia ratified International Labour Organization (ILO) Convention 87 concerning Freedom of Association and Protection of the Right to Organize, pursuant to Presidential Decree 83/1998 on the Ratification of ILO Convention 87 concerning Freedom of Association and Protection of the Right to Organise. Under the presidential decree, employers in Indonesia may not postpone the establishment of or dissolve labour unions.

Pursuant to the presidential decree, the government guarantees employers and employees the right to establish organisations or labour unions without government and/or employer intervention. In addition, the Labour Law stipulates that employees have the right to take industrial action (ie, strike – a collective action by employees and/or the labour union to stop or delay work) in the event of unsuccessful negotiations to settle an industrial relations dispute.

2.4 How are data protection rules applied in the workforce and how does this affect employees' privacy rights?

Indonesia's new Personal Data Protection Law requires personal data controllers to have a legal basis for processing personal data, such as the explicit valid consent of the data subject. For an employer to lawfully store and process the personal data of employees, it must obtain the consent of the employees, confirming their awareness that their personal data will be stored and processed by the employer. Such consent must be written or recorded and must be:

• clearly distinguished from other purposes;
• given in an understandable and accessible format; and
• conveyed in simple and clear language.

2.5 Are contingent worker arrangements specifically regulated?

The Labour Law and other applicable labour regulations do not recognise the concept of a part-time worker. Therefore, a part-time worker is entitled to the same rights as a regular worker depending on the relevant employment arrangement (either a permanent or fixed-term worker).

3 Employment benefits

3.1 Is there a national minimum wage that must be adhered to?

The minimum wage applies to probationary, regular and contract employees, regardless of whether they are paid on a daily or monthly basis. The applicable minimum wage varies depending on the location of the business. There are different minimum wages for each province and, if applicable, each district/city. Minimum wages are reviewed and determined annually.

3.2 Is there an entitlement to payment for overtime?

In accordance with Government Regulation 35/2021, overtime is payable at a rate of 1.5 times the hourly wage for the first hour and twice the hourly wage thereafter. Overtime pay is calculated based on an employee's monthly wage, with the hourly wage being equal to 1/173 of the monthly wage. Government Regulation 35/2021 also specifies overtime pay for work done during rest days (eg, Saturday and Sunday), depending on whether the employee is on a six-day or five-day working week.

A company must pay overtime to all employees, with the exception of certain categories of employees who are not entitled to receive overtime payment. These employees are, literally translated, employees with responsibilities as thinkers, planners, executors and controllers of the company's operations whose working hours cannot be limited and who receive higher salaries. It is widely thought that employees with these responsibilities are those at or above management level or professional employees. These special categories of employees should be specified in the employment contract, company regulations (work rules) or collective labour agreement. Otherwise, all employees will be entitled to overtime pay.

3.3 Is there an entitlement to annual leave? If so, what is the minimum that employees are entitled to receive?

Employees are entitled to minimum annual leave of 12 days per year insofar as the employee has worked for 12 months consecutively. The employer can decide a suitable time for the employee to take his or her leave. These provisions also apply to fixed-term employees.

The implementation of annual leave should be specified in the employment contract, company regulation or collective labour agreement.

3.4 Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?

The Labour Law stipulates that an employer is prohibited from terminating an employee who is absent because he or she is sick, provided that the employee provides a doctor's note. If the employee suffers from prolonged sickness, the employer must pay:

• full wages for the first four months of sick leave;
• 75% of full wages for the second four months;
• 50% for the third four months; and
• 25% thereafter until the employer terminates the employee.

Further, female employees are not obliged to work on the first and second days of menstruation if they feel sick and notify the employer. However, this provision should be further regulated in the employment agreement, company regulations (work rules) or collective labour agreement.

3.5 Is there a statutory retirement age? If so, what is it?

The labour laws do not specifically regulate the retirement age. Provisions relating to retirement age can be found in several regulations. The retirement age must be stipulated in the employment contract, company regulations (work rules) or collective labour agreement. In practice, employers commonly follow the provisions of Government Regulation 45/2015 on the Organisation of Retirement Security Programme. This regulation stipulates that as from 1 January 2019, the retirement age is 57 years old and will rise by an additional year every three years until it reaches the age of 65 in 2043.

4 Discrimination and harassment

4.1 What actions are classified as unlawfully discriminatory?

Several actions are classified as unlawfully discriminatory, as follows:

• Article 5 of the Labour Law provides that all people must have the same rights and opportunities in relation to applying for jobs and securing a viable standard of living, regardless of gender, ethnicity, race, religion or political orientation, including equal treatment for disabled people.
• The Labour Union Law stipulates that discrimination relating to job training and skills development based on ethnicity, race, religion, political orientation, nationality or origin will be deemed employment and occupation discrimination.
• Government Regulation 36/2021 provides that:
• • all employees have the right to equal treatment in the implementation of a wage system without discrimination; and
  • every employee is entitled to the same wage for work that has equal value.
• The right to equal treatment means that the employer must implement its wage system fairly, regardless of gender, ethnicity, race, religion, skin colour or political orientation. In determining employees' wages, employers may not discriminate between male and female workers who perform work of equal value; and employees are entitled to the same wage for work of the same value. Work with equal value is regarded as work with equal weight and is measured by, among other things, competence, work risk and responsibilities in the workplace.
• Ministry of Manpower Decree Kep.68/MEN/IV/2004 on HIV/AIDS Prevention and Control in the Workplace prohibits employers from discriminating against employees based on their HIV/AIDS status, whether they are positively infected or are believed to be infected.
• Sexual harassment in connection with the employer-employee relationship is deemed a crime under the Sexual Violence Law. Article 86(1) of the Labour Law also provides that employees are entitled to protection against immoral and indecent behaviour and actions. It is common for company regulations and collective labour agreements to treat sexual harassment as a serious violation.

4.2 Are there specified groups or classifications entitled to protection?

The Labour Law, in conjunction with Article 27(2) of the 1945 Constitution, provides that each employee shall be entitled to equal treatment from the employer without discrimination. Each employee has the same rights and opportunities to obtain a decent job and livelihood without discrimination by gender, ethnic group, race, religion, or political orientation, in accordance with the interests and abilities of the employee, including equal treatment for the disabled.

As a result of Indonesia's ratification of International Labour Organization Convention 138 on Minimum Age for Admission to Employment, the minimum age for employment is 15 years. Employers are basically prohibited from employing children. However, this provision may be waived to allow a child aged between 13 and 15 years to perform light work, provided that this does not interfere with the child's physical, mental or social welfare and development.

The Labour Law also provides as follows:

• Female employees under the age of 18 are prohibited from working between the hours of 11:00 pm and 7:00 am;
• It is prohibited to employ pregnant employees between the hours of 11:00 pm and 7:00 am if a doctor's assessment shows that this would endanger the health and safety of the employee or her unborn child;
• Employers employing women between the hours of 11:00 pm and 7:00 am are obliged to provide them with nutritious food and beverages, and to protect their morals and security in the workplace;
• Employers must provide transportation to and from home for female employees departing for and returning from work between the hours of 11:00 pm and 5:00 am; and
• Female employees have the right to breastfeed or to extract and store breast milk during working hours.

Also under the Labour Law, employers that employ disabled workers must ensure proper access and provide specific work tools to protect the workers according to the degree of disability. This provision is reinforced by the Law on Disabled People (8/2016), which stipulates that disabled people have an equal right and opportunity to work.

4.3 What protections are employed against discrimination in the workforce?

Please see question 4.2.

4.4 How is a discrimination claim processed?

In practice, an employee who has experienced discrimination in the workplace can ask the company to arrange bipartite negotiations between the employee, the employer and the labour union (if applicable). If the negotiations are unsuccessful, the employee can file a claim to the district court where the employer is legally domiciled pursuant to civil tort law.

4.5 What remedies are available?

As at the time of writing, there are no specific remedies for discrimination under Indonesian labour laws and regulations.

4.6 What protections and remedies are available against harassment, bullying and retaliation/victimisation?

Please see questions 4.3 and 4.5.

5 Dismissals and terminations

5.1 Must a valid reason be given to lawfully terminate an employment contract?

The basic policy of Indonesian labour law is that the dismissal of an employee should be prevented or even, in some cases, prohibited. The general principle is that the Labour Court must approve every termination of employment unless the termination is agreed or otherwise not disputed by the employee.

The Labour Law, as amended, and Government Regulation 35/2021 can be construed as permitting the employer to effectively terminate the employment relationship by written notice of termination with reasons, while ensuring that the employee has the right to object, negotiate and commence legal proceedings for wrongful dismissal in the Labour Court.

In instances where, following written notice, the employee agrees to a voluntary mutual termination agreement (MTA), the question of the employee's acceptance or rejection of the termination will not be relevant. The execution of the MTA will be the employee's response and settlement.

5.2 Is a minimum notice period required?

Subject to any specific warning requirements that must be complied with as regulated in the employment agreement, company regulations (work rules) or collective labour agreement, Government Regulation 35/2021 specifies that written notice must be given in the form of a notification letter duly served on the employee at the latest 14 working days before the effective date of termination. If the employee does not object, the termination need only be reported to the local manpower service office. Otherwise, the objection from the employee must be delivered to the employer within seven working days of receipt of the notification letter.

5.3 What rights do employees have when arguing unfair dismissal?

Government Regulation 35/2021 stipulates that the employee can reject the termination notice by delivering an objection to the employer within seven working days of receipt of such notification letter. In such cases, the termination process will then involve:

• bipartite negotiations;
• non-binding mediation; and
• Labour Court approval.

5.4 What rights, if any, are there to statutory severance pay?

Article 40 of Government Regulation 35/2021 provides the following calculations for the minimum statutory severance and long-service pay.

Other compensation payable to the employee includes:

• compensation for annual leave to which the employee is entitled but has not taken or forfeited;
• any costs or expenses incurred in returning the employee and his or her family to the place where he or she was recruited (if applicable); and
• any other matters agreed to in the employment agreement, company regulations (work rules) or collective labour agreement.

Further, employees may be entitled to separation pay, in an amount which is contractually agreed with the employer.

The total benefits that will be received by the employee will be calculated based on the formula depending on the grounds for termination as prescribed by Government Regulation 35/2021.

6 Employment tribunals

6.1 How are employment-related complaints dealt with?

Under the Industrial Dispute Law, private arbitration is an alternative method of dispute settlement for disputes between unions and employers over work conditions, or between labour unions in the same company.

An employee who is involved in a voluntary resignation or termination due to a criminal proceeding can file a claim with the Labour Court within one year of the date of termination. Article 96 of the Labour Law originally stipulated a two-year statute of limitations to bring a claim for payment arising from the employment relationship; but the Constitutional Court nullified this two-year limit in 2012 through its Decision 100/PUU-X/2012 and the Job Creation Law formally deleted Article 96. In practice, the limitation period for bringing employment claims is similar to that for civil claims; Article 1967 of the Civil Code stipulates that a potential claim expires after 30 years.

Employers can either:

• suspend employees on full salary and go through the mandatory non-binding mediation process with the Ministry of Manpower, followed by a Labour Court trial to obtain approval of the termination; or
• successfully negotiate and settle a separation benefits package with the employee and execute a mutual termination agreement – the only cost-effective alternative.

There is no restriction under the law on an employee waiving his or her contractual right to potential employment claims. Any written agreement that includes such a waiver will not form a basis for cancellation of the agreement or for the agreement to be considered null and void. Although this type of waiver should be enforceable, in practice, the Labour Court will most likely still hear the employee's claim, even though he or she has contractually waived the right to make such an employment claim.

Employment-related complaints are heard by a panel of three judges at the Labour Court, with one of the judges acting as the head of the panel.

6.2 What are the procedures and timeframes for employment-related tribunals actions?

Please see question 6.1.

7 Trends and predictions

7.1 How would you describe the current employment landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The enactment of the Job Creation Law in November 2020 – which amended the Labour Law and its subsequent implementing regulations, among others – has reshaped Indonesia's employment law regime. The changes it introduced relate to issues such as:

• expatriate employment;
• employee entitlements; and
• the termination process.

However, in late 2021, the Constitutional Court declared that the Job Creation Law is conditionally unconstitutional and must be amended within two years of the court's decision. This decision has raised legal concerns and left employers wondering what to expect next and how they should proceed. The Constitutional Court also prohibited the issuance of any new implementing regulations for the Job Creation Law pending its amendment.

The amendments made by the Job Creation Law to various laws, including the Labour Law, and the already enacted implementing regulations for the Job Creation Law remain valid and in effect during the two-year time frame. However, if the government fails to implement the amendment as ordered by the Constitutional Court, the Job Creation Law (including the Labour Law, as amended by the Job Creation Law) will become permanently unconstitutional and all previous laws and regulations amended or replaced by or due to the Job Creation Law will become valid again.

Given that the Job Creation Law has introduced significant changes to the employment law regime, its being scrapped would have a significant impact on the employment sector. We will have to wait and see whether the court's rectification order is enforced, and if the legislature does amend the Job Creation Law, what provisions they might revise, remove or add during the amendment process.

8 Tips and traps

8.1 What are your top tips for navigating the employment regime and what potential sticking points would you highlight?

With the changes to the employment law regime in Indonesia introduced by the enactment of the Job Creation Law and its implementing regulations, companies must anticipate making changes to their company regulations, collective labour agreements or employment contracts to ensure they are in line with the Labour Law as amended by the Job Creation Law, as well as its implementing regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.