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Labor Laws in Indonesia: A Guide for Foreign Direct Investment Company (PMA) Employers

Updated: Jul 7, 2023

International companies operating in Indonesia through a PMA firm must be well-versed in local labor legislation in order to maintain compliance and provide a favorable work environment. Vidhi Law Office, in collaboration with PT. ABM, concentrates on employment law and provides comprehensive assistance to foreign employers through the complexities of Indonesian labor legislation. We've outlined the most important aspects of labor legislation in this article so that foreign businesses are aware of them.

Minimum Wage Requirements: In Bali, the provincial minimum wage for 2023 has been established at Rp 2,713,672 (about US$177) per month; however, this minimum wage differs for the eight cities/regencies specified in Governor Bali Decree No. 869/03-M/HK/2022. Adhering to minimum wage regulations not only guarantees that employees are fairly compensated, but it also creates a happy work atmosphere.

Working Hours and Rest Periods: In Indonesia, the maximum weekly working hours is fixed at 40 hours. Employees are entitled to a half-hour break after four hours of work, as well as a one-day weekly rest day. Respecting these work-hour restrictions and providing adequate rest breaks for your employees is crucial for fostering a healthy and productive work environment.

Severance Pay: In the event of dismissal, permanent employees are entitled to severance pay, whereas definitive employees are entitled to compensatory pay based on their length of service. Understanding the severance compensation criteria is critical for avoiding legal problems and maintaining a pleasant employer-employee relationship.

Mandatory Insurance and Permits: Employers are required by Indonesian labor legislation to provide health insurance coverage for their employees through BPJS Kesehatan. Employees must also obtain social security insurance through BPJS Ketenagakerjaan.

Foreign Worker: One of the required requirements for lawfully hiring a foreign worker in your firm is to obtain a KITAS and a working permit based on their occupation. The above regulation also apply to foreign visitor.

An employment agreement must include the most important aspects above, the employee's rights and liabilities.

We can help you navigate the aforementioned procedure, including providing assistance and support for work permits and KITAS (Kartu Izin Tinggal) applications for your international staff, thereby simplifying the legal and government-related parts of your business.

Contact us today to learn more about our services and how we can help your company comply with Indonesian labor rules. Allow us to be your trusted legal partner as you navigate the complexities of labor legislation, handle pertinent issues, and build a fair and vibrant work environment for your employees.

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