Indonesia’s Omnibus Law: New Regulation to Ease the Hiring of Foreign Workers
In our second article of the Indonesia Omnibus Law series, we review the new implementing Government Regulation No. 34 of 2021 (GR 34/2021), which aims to ease the process of hiring foreign workers in Indonesia. GR 34/2021 repeals Presidential Regulation No. 20 of 2018.
GR 34/2021 introduces different categories for the Foreign Worker Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing or RPTKA) and stipulates that applicants will now be required to submit specific documents to the Ministry of Manpower (MoM).
In addition, the government has eased the employment licensing process for tech-based startups seeking to hire foreign workers by waiving the RPTKA requirement, for no more than three months. There are also RPTKA exceptions for diplomatic and consular officers as well as directors or commissioners who are shareholders.
Indonesia’s government has lauded the Omnibus Law as the country’s most comprehensive economic reform, with more than 90 percent of the law aimed at stimulating domestic and foreign investments through the removal of bureaucratic inefficiencies. To read our first article in the series — the positive investment list — please click here.
GR 34/2021 has introduced new categories of RPTKA authorizations. Obtaining an RPTKA is the first step towards accessing a work permit in Indonesia.
An RPTKA refers to the detailed employment plan of the foreign expatriate, such as their position and length of employment. This is submitted to the MoM for approval by the employer, after which the company can apply for the work permit.
The exceptions for RPTKA application apply to the following:
- Directors or commissioners who are shareholders;
- Diplomatic or consular officers; or
- Foreign workers in Indonesia tech-based startups. This exemption lasts no more than three months after which the company must apply for an RPTKA.
RPTKA Application Procedure
The employer will submit an application to the MoM stating their intention to hire a foreign employee (s) upon which the MoM will conduct a feasibility study.
The employer must provide the following documents and information to the foreign worker online application platform:
- Identity of employer;
- Reasons for utilizing a foreign worker;
- The position of the foreign worker within the company’s organization structure;
- Number of foreign workers being employed;
- Contract length of the foreign employee;
- Working location of the foreign employee;
- Identities of Indonesia co-laborer for the transfer of knowledge from the foreign employee; and
- Future plans to absorb Indonesian workers.
- Company business identification number;
- Company deed of establishment;
- Draft employment agreement;
- Company organization structure;
- Proof of mandatory employment reporting by the employer; and
Statement letter affirming the following:
- The designation of the Indonesian employee(s) assigned as a co-worker to the foreign employee;
- The Indonesian employee(s) will receive training or education from the foreign employee in accordance to the position and qualifications of the foreign employee; and
- Ensure the foreign worker returns to their home country once their work contract expires.
Prior to the issuance of the RPTKA, employers will need to make a payment to the Foreign Worker Utilization Compensation Fund (Dana Kompensasi Penggunaan Tenaga Kerja Asing or DKP-TKA), which amounts to US$100. This amount is to be paid monthly to the MoM.
Employers that do not secure RPTKA approval or hire foreign workers in tech startups for more than three months can expect a fine, imposed per person, and on a monthly basis.
- One month: 6 million rupiah (US$416);
- Two months: 12 million rupiah (US$833);
- Three months: 18 million rupiah (US$1,250);
- Four months: 24 million rupiah (US$1,666):
- Five months: 30 million rupiah (US$2,082); and
- Six months: 36 million rupiah (US$2,500).
The temporary suspension of RPTKA authorization for employers can be imposed for those that fail to facilitate technology transfer or educational activities to Indonesian co-workers or those that fail to register and pay social security premiums.
GR 34/2021 also clearly states that employers must not hire foreign workers to occupy two different positions in a single company.
Annual Reporting Obligations
Employers must submit an annual report to the MoM that covers the scope of the foreign worker’s employment, the education or training facilitated to Indonesian co-workers, and the types of technology transfer implemented.