Indonesia's Employment laws and regulations

The Omnibus Law, which comprises various amendments to the Manpower Law, was introduced by Indonesia in 2020.

Wage Laws and Regulations

• For The 1st year of employment, all employees are entitled to the minimum wage. Wages are determined by both the employer and the employee after the first year.
• There is no national minimum wage; instead, the applicable minimum wage is determined by the type of business and its location. Indonesia has 33 provinces, and the governor of each province sets a monthly wage rate based on recommendations from the Provincial Council on Wages. It is also possible for a regency (a region within a province) to set its own minimum wage, as long as it is not higher than the provincial minimum wage. A 2018 regulation (the Minister of Manpower and Transmigration Regulation) established an official formula for calculating this wage in Indonesia based on inflation and GDP growth (Refer Table1: Monthly Minimum Wages Across Major Regions in Indonesia 2021 in Annexure 1 for more details.)
• There are also sector-specific minimum wages. These wage rates are set by business groups within a province or regency and cannot be lower than the provincial or regional wage.
• Employers are required to make two types of social security deductions in addition to income tax deductions: they must contribute to the badan penyelenggara jaminan sosial (the health security system or BPJS) and to the employment BJPS, which covers work accidents and the old age pension.

Holidays and paid leave

Workers are entitled to all public holidays under the Manpower Law. The Joint Ministerial Decree determines public national holidays each year. Indonesia, for example, will observe 16 national holidays in 2022.

Employers who require employees to work on federal holidays must pay overtime.

Every employee is entitled to 12 days of paid annual leave, with one day accruing for every 23 days worked. Employees must use their minimum paid vacation entitlement within 6 months or risk losing it. Paid leave is taken at the discretion of the employee, with the exception of one 6-day consecutive leave per year, which is required.

Employees who have worked for the same company for 6 years would be entitled to at least 2 months of paid leave in their seventh or either year of employment.

Companies, on the other hand, have the right to postpone employees' annual leave, but the reason must be obvious (for example peak season, or mandatory attendance days). These requirements are detailed in the PP/Company Regulations.

Sick Leave

Workers are entitled to sick leave with medical documentation at the following pay rates:

• Full pay for the first 4 months of sick leave;
• 3-quarters pay for the next four months;
• Half pay for the next 4 months; and
• 1-quarter pay until the employer terminates employment.

Women are also entitled to 2 days of paid leave during menstruation.

Contractual Employment - PKWT

PKWT (Perjanjian Kerja Waktu Tertentu, or Fixed Time Employment Agreement) is a relatively new employment policy. According to the PKWT regulation, Law Number 35, Year 2021, PKWT is an employment agreement between workers and employers to establish a working relationship within a specific time or for a specific job.

Workers who do permanent work in companies, in contrast to those who are on a temporary role, have the status of PKWTT (Perjanjian Kerja Waktu Tidak Tertentu or Indefinite Time Employment Agreement).

There are several pointers for PKWT employees:

1. A PKWT contract must be in writing.
2. Workers must keep the original documents after signing the PKWT.
3. The contract requires that all workers' rights be respected.
4. Try to value all wage components in a single wage value.
5. The salary must be in accordance with the rules.

Permanent Employment Agreement- PKWTT-: Indefinite Employment Agreement

A PKWTT (Perjanjian Kerja Waktu Tidak Tertentu), also known as an Employee Agreement for an Indefinite Period, is a permanent employment agreement or contract. Unlike PKWT (Perjanjian Kerja Waktu Tertentu), PKWTT may require a probation period of no more than 3 months, during which the employer is required to pay the employee's wages.

PKWTT can be made verbally or in writing. If the PKWTT is made verbally, the clauses between employer and employee are those specified in the applicable labor law. Employers are not required to register PKWTT with the Manpower Office or any other related labor institution/agency in Indonesia.

required

Fixed Term Contract (PKWT)

Applies to the following types of work:

1. Temporary Jobs
2. Seasonal Jobs
3. Trial Stage Related Jobs
4. Daily Freelance Jobs

No Probation Period

Made in Writing

Registered to manpower office located in employers regency/city

Required in Bahasa (Bi Lingual)

Permanent Contract (PKWTT)

Applies to the type of work not stipulated for PKWT, mostly work not stipulated with characteristics of permanence

Probation Period max. 3 months

Made in Writing or verbal

No registration needed

Required in Bahasa (Bi Lingual)

Minimum Wages and Working Hours in Indonesia

Working Hours in Indonesia

In Indonesia, regular working hours are 40 hours per week, either 7 hours per day for 6 working days per week or 8 hours per day for 5 working days per week.

Overtime working hours rule

Employers must pay overtime if employees work more than 7 hours in 6 working days or 8 hours in 5 working days, or if employees are required to work on weekends or public holidays. Working hours over 4 hours per day and 18 hours per week are not permitted.

Overtime work hours Overtime pay calculation Overtime on weekdays

1.5 times the hourly wage for the first hour and 2 times hourly way for the following hours

Overtime on weekly holidays or public holidays:

1. Companies with 5 working days:

2 times the hourly wage for the first 8 hours, 3 times the hourly wage for the 9th hour, and 4 times the hourly wage for all hours after that.

2. Companies with 6 working days:

2 times the hourly wage for the first 7 hours, 3 times the hourly wage for the 8th hour, and 4 times the hourly wage for all hours after that.

The hourly wage is calculated by multiplying 1/173 by the monthly wage.

Overtime pay is not available to employees who work as "thinkers, planners, implementers, or controllers," and their hours cannot be regulated. However, they are usually entitled to higher pay.

After 4 hours of continuous work, all employees are entitled to a 30-minute break. Workers on a 5-day week have the right to take Saturdays and Sundays off, while those on a 6-day week have the right to take Sundays off.

At more than $300, Jakarta has by far the highest provincial minimum wage. The government sets the minimum wage for each of Indonesia's 34 provinces. In 2022, wages will go up in Indonesia, but not by much.

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