It’s theoretically attainable for a overseas entity to have interaction an worker to carry out work in Indonesia. Whereas the employment will typically be topic to employment legal guidelines in Indonesia, the precise circumstances of the engagement will decide that. This replace units out the important thing employment points to contemplate.

Whether or not Indonesian employment legislation applies to the employment relationship

Indonesia’s main employment laws, Regulation No. 13 of 2003 on Manpower (as amended by Authorities Regulation In Lieu of Regulation No. 2 of 2022), defines an “employment relationship” as a relationship between an employer and an worker based mostly on an employment settlement. Relying on the precise preparations in place (together with the place the using entity is registered, the character of labor the person performs and the place this work happens), Indonesian employment legislation typically applies to all people working in Indonesia, together with overseas workers.^[1]

If Indonesian employment legislation applies, the employer should be certain that it complies with the minimal statutory necessities. These embody minimal wage, non secular vacation allowances, social safety (Badan Penyelenggara Jaminan Sosial or BPJS), working hours, additional time, annual depart, sick depart, maternity depart and all different varieties of statutory depart, public holidays, and termination funds.

As regards BPJS, it’s unclear whether or not BPJS contributions from an abroad entity with no presence in Indonesia will be accommodated. In observe, an area payroll supplier might have to be engaged to take care of payroll and BPJS issues.

Nevertheless, because the using entity relies abroad, there’s a threat that the employment legal guidelines within the jurisdiction the place the using entity operates will apply along with the Indonesian employment legal guidelines. This may imply that the worker might declare advantages and entitlements beneath Indonesian legislation and beneath the overseas legislation. Dangers could also be minimised by clearly stating within the employment contract that (i) Indonesian legislation governs the employment relationship, (ii) the worker’s place of business is in Indonesia, and (iii) the worker is simply required to carry out Indonesia-related work.

Concerns for overseas workers

Staff will need to have the precise to stay and work in Indonesia in accordance with the employment and immigration legal guidelines. If they’re Indonesian residents and/or have already got the precise to work in Indonesia, this concern falls away. Overseas nationals might want to get hold of the precise to stay and work in Indonesia earlier than the employment might begin. This can be tough when the employer doesn’t have an area entity because the work allow utility requires an area sponsor.

Key Takeaways

When contemplating hiring an worker in Indonesia with no native entity, employers ought to think about these key points:

• whether or not Indonesian employment legislation applies;
• whether or not the employment association complies with statutory necessities beneath Indonesian legislation; and
• immigration issues for overseas nationals.

Enterprise registration, tax and different company and regulatory points might come up, relying on the precise preparations in place. That each one falls exterior the scope of this text.

If compliance with Indonesian employment legislation poses a problem, another association could also be to have interaction the people in an impartial contracting association, however this will solely be appropriate for people who have already got the precise to work and stay in Indonesia.

^[1] There could also be exceptions. For example, the Indonesia’s Supreme Courtroom in Case No. 214K/Pdt.Sus-PHI/2020 discovered that, on the precise details of that case, the secondees (who have been Australian) have been correctly employed (and paid a wage) by the Australian dwelling entity based mostly on a global employment contract, and have been assigned to offer companies by means of a secondment association to the Indonesian entity. The courtroom discovered that the employment relationship was ruled by Australian legislation, and that the Indonesian Industrial Relations Courtroom subsequently had no jurisdiction over a declare introduced by the secondees over their entitlements to termination pay upon termination of the secondment.