19 Oct 2020
Omnibus Bill Streamlines Indonesia’s Expatriate Employment Rules but Too Early to Say How Significantly

This is the third in our series of ABNR Legal Updates on the Job Creation Bill that was passed by Indonesia’s House of Representatives on Oct. 5 and sent to President Joko Widodo for signing on Wednesday, Oct.15. Today, we look at the changes it makes to the rules on expatriate employment.

While the need to reform Indonesia’s expatriate employment regime has long been recognized, the Government was hampered from significantly doing so in the past by the fact that so many micro rules on the issue were incorporated in the 2003 Manpower Law (“ML”). [1]

Given this, the Government has availed of the opportunity presented by the Job Creation Bill (“JCB”),[2] or “Omnibus Bill,” as it is often dubbed, to overhaul the law on expatriate employment.

To facilitate comparison, we will briefly describe the position prior to JCB:

Under ML, obtaining permission to employ an expatriate was a complex process that involved (1) submission by the would-be employer of an expatriate employment plan (rencana penggunaan tenaga kerja asing / “RPTKA”) to the Ministry of Manpower (“MOM”) for approval; and (2) upon approval of the RPTKA, submission of an application for an expatriate employment permit (izin menggunakan tenaga kerja asing / “IMTA”). In addition, the prospective employer needed to arrange an entry visa and residency permit for the would-be employee.

The fact that ML required the prospective employer to obtain what were effectively two separate licenses (an RPTKA approval and an IMTA) from the same ministry for the same purpose was clearly an unsatisfactory and burdensome situation.

As a stopgap measure to reform the process, the Government issued Presidential Regulation 20 of 2018 (“PR 20/2018”),[3] Article 9 of which cleverly attempted to eliminate one of the above stages by providing that an approved RPTKA would double up as an IMTA. Unfortunately, for some unknown reason, a subsequent MOM ancillary / implementing regulation for PR 20/2018[4] added a new layer of bureaucracy that was not envisaged by PR 20/2020, namely, the requirement to obtain what is termed a “notification” from the MOM. As this is in essence similar to the old IMTA, the new requirement effectively undermined the reforms introduced by PR 20/2018.

Upon the coming into force of JCB, the requirement for an IMTA will be completely abolished and, according to the letter of JCB, all that an employer should need to do to employ an expatriate is to have an RPTKA approved by MOM. Thus, the substance or essence of the change envisaged by Article 9 PR 20/2018 (prior to being rolled back by MOM) will be placed on a statutory basis. It is to be hoped that the relevant ancillary regulations for JCB will fully reflect this and that no additional bureaucratic steps will be introduced by MOM, as happened in the case of PR 20/2018.

In another development, JCB provides statutory exemptions from the expatriate-employment rules in the following cases:

1. Shareholding directors and commissioners whose shareholdings satisfy the thresholds prescribed by law;
2. Expatriates who are:
• employed in relation to production activities that have been halted by some form of emergency;
• employed in vocational training;
• employed by a technology-based startup;
• conducting business visits;
• engaged in research to be conducted over a specified period.

Meanwhile, ML’s prohibition on expats occupying positions with responsibility for personnel matters is maintained by JCB, as well as the rules that expats may only be employed on fixed-term contracts and in particular positions / roles.

ABNR Commentary

On paper, JCB significantly streamlines ML’s rules on the employment of expatriates. However, it remains to be seen whether this will actually lead to major changes on the ground or whether it will once again be a case of a new label on the bottle but the contents essentially remaining the same, as happened with PR 20/2018. Outside of government, no one can really say for sure which way the chips will fall this time around until the necessary ancillary regulation has been issued.

Contact us

Should you have any queries on the above or require legal advice as to how you can best protect your interests during this time of uncertainty, please contact the persons below, call us on +6221-2505125 or email us at info@abnrlaw.com.

Mr. Emir Nurmansyah (enurmansyah@abnrlaw.com)

Mr. Nafis Adwani (nadwani@abnrlaw.com)

Mr. Agus Ahadi Deradjat (aderadjat@abnrlaw.com)

[1] Law No. 13 of 2003 on Manpower (Undang-Undang Nomor 13 Tahun 2003 tentang Ketenagakerjaan)

[2] Rancangan Undang-undang Tentang Cipta Kerja

[3] Presidential Regulation No. 20 of 2018 on the Use of Expatriate Manpower (Peraturan Presiden No. 20/2018 tentang Penggunaan Tenaga Kerja Asing)

[4] Minister of Manpower Regulation No. 10 of 2018 on Procedures for the Use of Expatriate Manpower (Peraturan Menteri Ketenagakerjaan Nomor 10 Tahun 2018 Tentang Tata Cara Penggunaan Tenaga Kerja Asing)

This edition of ABNR News and the contents hereof are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained herein. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.