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New Rules for Foreign Workers in Indonesia

Indonesia’s Ministry of Manpower (“MOM”) has issued a new regulation to simplify the procedures to obtain work permits, help improve the national economy, and encourage investment in Indonesia. MOM Regulation No. 10 of 2018 on Procedures for the Utilisation of Foreign Workers (“Reg 10/2018”), which implements President Regulation No. 20 of 2018 on Expatriate Utilisation (“PR 20/2018”), which was issued on 11 July 2018.

Key aspects of expatriate permits under prior regulations1 are also discussed here.

What are the key changes?

We summarise below the key changes under Reg 10/2018:

1. Work Permit Application through Online Single Submission

Each application for an expatriate work permit is to be integrated under an online service known as Online Single Submission (“OSS”)2 which is coordinated by all relevant ministries, including the application of Indonesia’s mandatory social security programme (BPJS). Since 31 October 2018 applications for expatriate work permits now have to be made through the OSS system instead of the MOM website (http://tka-online.kemnaker.go.id/).

2. Employers no longer required to obtain a Permit to Employ Expatriates (Izin Mempekerjakan Tenaga Kerja Asing or IMTA

PR 20/2018 and MOM 10/2018 together introduce a major change by no longer requiring employers to obtain an IMTA. The IMTA is a long-standing requirement for employing expatriates in Indonesia, and can only be obtained when the employer is granted a Manpower Utilisation Plan (Rencana Penggunaan Tenaga Kerja Asing or “RPTKA”). PR 20/2018 allows an expatriate to work in Indonesia after obtaining only an RPTKA and a visa/stay permit known as a KITAS.

Please note that before employers proceed with the visa/stay permit application, they must first notify the MOM Directorate General in writing. The document is similar to the IMTA, and contains the following information:

  • name of employer;
  • identity of expatriate;
  • permitted working location(s);
  • permitted working period; and
  • Compensation for Utilisation of Expatriate Employee (DKP-TKA) payment code3, which is used as a warranty payment for hiring the expatriate employee.

3.Expatriates in certain industries may now work for more than one employer

One of the limitations under the previous regime was that expatriates could not work for more than one employer at a time (except in a director or commissioner position). This restriction has been changed by Reg 10/2018, which allows expatriates to work for more than one employer under the following conditions:

a. They are employed in the same position; and

b. The other position(s) cannot outlast the contract with the first employer.

However, we note that this will only apply to certain industries, and that the implementing regulation has not yet been issued.

4. Expatriates can undertake immediate and urgent work without first obtaining an RPTKA

Previously, a practical problem for immediate and urgent work, such as emergency work to manage a crisis, was the difficulty for an employer to obtain an RPTKA promptly. While Reg 10/2018 states that an expatriate can commence immediate and urgent work without the employer first obtaining an RPTKA, the employer will still need to submit an RPTKA application within two working days after they commence work. In such cases, the MOM should ratify the RPTKA within one working day after the complete application is received.

5. Obligation for employers to arrange Indonesian language training for expatriates

Employers are now required to arrange Indonesian language training for expatriates. Reg 10/2018 does not, however, provide further guidance on what type of language training or certification must be obtained by the expatriate. From our discussions with MOM officials, we understand that the MOM plans to issue further guidance on this particular requirement in the near future. This requirement does not apply to expatriates who hold a director or commissioner position, or those intending to undertake immediate and urgent work in Indonesia.

6. BPJS and Indonesian health insurance for expatriates

Employers must register expatriates intending to work in Indonesia for no more than six months under an insurance programme managed by an Indonesian insurance company. For expatriates intending to work for more than six months in Indonesia, employers must enrol them in both the Manpower BPJS and Health BPJS programs.

7. No RPTKA required for a director or commissioner who is also the shareholder of an Indonesian company

Under Reg 20/2018, a director or commissioner of an Indonesian company does not need an RPTKA if they are also a shareholder of that company, while the old regime only exempted non-resident directors and commissioners from this requirement.

8. What about non-resident directors and commissioners?

The previous regulations exempted foreigners holding director and commissioner positions who reside overseas from having to obtain a work permit. Reg 10/2018 is silent on this particular exemption, only expressly exempting a director or commissioner who is also a shareholder of an Indonesian company, as covered above. From our discussions with officials, we understand that the MOM and the Indonesian government as a whole are currently focussing policy on investment into Indonesia, including expatriates wishing to reside and work in Indonesia. So the supervision of expatriates will not generally cover non-resident directors and commissioners.

While Reg 10/208 is intended to simplify the procedures for employing expatriates, it remains to be seen how this regulation will be implemented in practice. We will need to gauge whether the removal of the provision exempting non-resident directors and commissioners from requiring a work permit will indeed have a positive impact on the overall investment climate in Indonesia.

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1 MOM Regulation No. 16 of 2015 as amended by the MOM Regulation No. 35 of 2015

2 See our recent bulletin on the OSS system here.

3 Payment (USD 100/month, paid upfront for a 12-month period) must be made within 24 hours after receiving the notification. Otherwise, the application will be considered incomplete and the system will require the applicant to submit a new application.

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