1. Overview of the Employment Law Framework
Indonesia's employment laws are mainly governed by the Omnibus Law on Job Creation (Law No. 11 of 2020) and Law No. 13 of 2003 (Manpower Law). These reforms aim to increase labor market flexibility while preserving worker rights. The Ministry of Manpower (Kemnaker) oversees labor compliance.
2. Primary Employment Statutes and Regulatory Bodies
Key laws and regulations include:
- Manpower Law (Law No. 13/2003)
- Omnibus Law on Job Creation (Law No. 11/2020)
- Government Regulation No. 35/2021 on employment contracts and termination
- Law No. 24/2011 on BPJS
Enforced by Kemnaker and the Industrial Relations Court.
3. Employment Contracts: Legal Requirements
Contracts must be in writing and registered with the Ministry of Manpower. Types include:
- Definite-Term (PKWT): Max 5 years (2+3)
- Indefinite-Term (PKWTT): No duration cap
Employers must include role, salary, working hours, social security, and termination clauses. Failure to register contracts can void PKWT arrangements.
4. Working Hours and Overtime: Statutory Standards
Standard work hours are 7 hours/day (6-day week) or 8 hours/day (5-day week). Overtime is capped at 4 hours/day and 18 hours/week. Overtime pay ranges from 1.5x to 4x the hourly wage. Employers must provide at least one rest day/week.
5. Wages and Payroll Compliance
Indonesia has region-specific minimum wages (UMR). Employers must:
- Pay monthly salaries by the agreed date
- Register employees with BPJS Kesehatan and BPJS Ketenagakerjaan
- Issue payslips and maintain records for 5 years
- Avoid deductions outside statutory limits
Violations can result in mediation, fines, or labor court cases.
6. Foreign Worker Regulations and Employer Duties
To employ foreign nationals, companies must:
- Obtain RPTKA (Expatriate Manpower Plan)
- Apply for IMTA (Work Permit)
- Pay the DPKK (Skill Development Fund) at USD 100/month
- Provide training to local employees
Work permits are typically valid for 12 months and renewable. Employers must also report employment activity and submit periodic compliance reports.
7. Labor Inspections and Enforcement Risks
Kemnaker and regional agencies conduct routine inspections. Offences include:
- Breach of wage law
- Unregistered PKWT contracts
- Improper termination
Penalties range from written warnings and fines to revocation of operating licenses.
8. How AYP Helps You Stay Compliant
With AYP as your Employer of Record (EOR) in Indonesia, you can:
- Ensure contract registration
- Onboard expats legally
- Manage payroll and BPJS registration
- Stay ahead of evolving labor regulations
9. Contact Us
Hiring in Indonesia? Let AYP take care of contracts, payroll, and employment law compliance.
👉 Contact us today.
