ABA International Labor and Employment Law Committee Newsletter

INDONESIA - New Work Permit Procedure Expected Before the End of 2018

By: HHP Law Firm (a member firm of Baker & McKenzie International).

A new process for obtaining permits for foreigners working in Indonesia is expected to be in place when the new Online Foreign Manpower Permit Application System ("TKA Online") comes on stream on 1 November 2018. This new process is outlined in Minister of Employment Regulation No. 10 of 2018 on the Procedures on the Use of Foreign Workers ("Regulation 10") which was issued on 11 July 2018.

As with the current process, an Indonesian entity intending to employ a foreigner will still need to obtain approval of a Foreign Manpower Utilization Plan ("RPTKA") from the Ministry of Employment ("MOE"). However, once the new process is in place, the Indonesian entity will no longer have to obtain a separate work permit for each foreigner (commonly referred to as "IMTA") as the RPTKA will also serve as a "permit" for the Indonesian entity to employ the foreigner.

Although an IMTA will no longer be required once the new TKA Online is up and running, the Indonesian entity will still need to process a "Notification" to the MOE. In the application for the Notification, the Indonesian entity will need to provide the MOE with details of the foreigner who will hold the position/job set out in the approved RPTKA, e.g., name, education background, job experience, and passport number.

When the new process is implemented, it is expected that obtaining the RPTKA approval and the Notification will take around four working days (provided that all required documents and information are complete). By comparison, currently it takes around 30 working days to obtain the RPTKA approval and the IMTA.

It should be noted that the foreigner will still need to obtain:

  •  a Limited Stay Visa (commonly referred to as a "VITAS") for the purpose of working before entering Indonesia
  • a Limited Stay Permit (commonly referred to as an "ITAS") and a Re-Entry Permit upon arrival in Indonesia

However, instead of the foreigner having to go to the relevant Immigration Office in Indonesia after arrival to get the ITAS and Re-Entry Permit, the foreigner will receive the ITAS and Re-Entry Permit upon arrival in Indonesia, e.g., at the Soekarno-Hatta International Airport of Jakarta.

Issues Still Pending

While the process for obtaining the RPTKA approval, the Notification, the ITAS and the Re-Entry Permit will be much simpler than before, there are still a number of issues that remain unclear with regard to foreigners working in Indonesia. We briefly describe some of these issues below.

  • Employment Status of Foreigners Working in Indonesia

In Indonesia there has always been a question surrounding the employment status of foreigners working in Indonesia, i.e., whether they are deemed as indefinite-period or definite-period employees. In December 2017, the Supreme Court of Indonesia issued a circular letter stating that foreigners should only be employed in Indonesia for a definite period.

Regulation 10 seems to be taking a similar position that foreigners should be employed only as definite-period employees. This is because Regulation 10 includes (as one of its Attachments) a template definite-period employment agreement that the Indonesian entity employing the foreigner will need to submit to the MOE when applying for the RPTKA approval.

Definite-period employment agreements are highly regulated in Indonesia. Indonesian labor laws and regulations set out a number of strict requirements for an employer to employ an employee on a definite period basis, e.g., type of work (it must be temporary in nature), maximum contract period, extension and renewal, etc. If some of the requirements are violated, by law the employment is deemed to be permanent employment. The question is whether these strict requirements for definite-period employment will also apply to foreigners working in Indonesia, particularly where the foreigners will work in Indonesia longer than the maximum contract periods for definite-period employment and will not be filling a temporary role.  It remains to be seen how the view of the Supreme Court in the circular letter in relation to the status of the employment of foreigners, and the requirements set out in prevailing laws and regulations in relation to definite-period employment, will be applied in practice.

  • Status of Foreign Director and Foreign Commissioner

A director (i.e., a member of the board of directors ("BOD") of a company) and a commissioner (i.e., a member of the board of commissioners ("BOC") of a company) of an Indonesian company can also be an employee of the company. However, it is also possible for a director to be a director only (or a commissioner to be a commissioner only), i.e., not also an employee of the company. Where such an approach is taken, steps need to be taken (and documents entered in to) to ensure that the director or commissioner is not also regarded as an employee.

Under the current process, to apply for a work permit for a director (or commissioner) of an Indonesian company, the company needs to provide the MOE only with evidence of the appointment of the individual to the BOD or BOC (as the case may be). That is, there is no requirement to provide the MOE with an employment agreement between the director (or commissioner) and the Indonesian company.

Regulation 10 does not address the situation where a director or a commissioner of an Indonesian company is not also an employee of the company. It also does not address a situation where a director or a commissioner of an Indonesian company who is a foreigner does not work and reside in Indonesia. It seems that under Regulation 10 as long as long as a director or a commissioner is:

* a foreigner; and

* not a shareholder of the Indonesian company

the Indonesian company will still need to obtain the RPTKA approval for the director or the commissioner.

The issue with this is that there is no exception under Regulation 10 in relation to the requirement to submit a template definite-period employment agreement (when applying for the RPTKA approval) if the foreigner is a director or commissioner of the company and is not a shareholder of the company. If the intention is for the director or the commissioner to not also be an employee of the company, if a definite-period employment agreement is put in place this would create an employment relationship between the foreign director (or commissioner) and the company. Again, it remains to be seen how this requirement will be applied in practice.

  • Indonesian Language for Foreigners Working in Indonesia

Under Regulation 10, all Indonesian entities that employ foreigners must facilitate Indonesian language training for the foreigner. A 2013 regulation requires foreigners to be able to communicate in Indonesian but makes no reference to the obligation of an employer to facilitate language training.

It remains unclear how this language training requirement will be implemented and how the MOE will (in practice) check compliance with this requirement.

Practical Note

Laws and regulations in Indonesia are, in part, implemented based on unwritten policy of the relevant government department (which can change at any time and without notice). It is possible that in implementing Regulation 10 the MOE will apply some unwritten policy in relation to the process and requirements to apply for work permits for foreign workers.