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Manpower
Matters

Employment in General

Employment aspects in Indonesia have received a significant overhaul with the enactment of Law No. 11/2020 which took effect in November 2020, amending the manpower law regulated by Law No. 13/2003. This section highlights 6 (six) aspects of employment law in Indonesia:

Types of Employment

Employment in Indonesia is classified into 2 (two) types:

  • fixed-term or PKWT, whereby the employment agreement specifies the employment period and the end of the contract;

  • indefinite-term period or PKWTT, whereby the employment agreement does not specify the end of the employment period (commonly referred to as permanent workers).

Work Hours

  • 7 (seven) hours a day and 40 (forty) hours a week with 6 (six) workdays a week; or

  • 8 (eight) hours a day and 40 (forty) hours a week with 5 (five) workdays a week.

The implementation of working hours may be stipulated and agreed upon in the employment agreement, company regulation, or collective labor agreement. Ergo, working hours can deviate from the prescribed working hours in the event that the employer and employee agree.

However, the prescribed working hours mentioned above do not apply to certain business sectors or work. Companies with certain business sectors or work may implement fewer or more working hours from the provisions mentioned above. Nevertheless, such practice still needs to be regulated in the employment agreement, company regulations, or collective labor agreement.

Overtime may be done for a maximum of 4 (four) hours a day and 18 (eighteen) hours a week, and requires the employee’s approval. Employers still need to provide break time and pay for the overtime performed. Additionally, in the event of the overtime performed for 4 (four) hours or more, the employer is obliged to provide meals for the employee.

An employer is obligated to provide the employee:

  • at least 30 (thirty) minutes break after working for 4 (four) consecutive hours;

  • 1 (one) daybreak for 6 (six) workdays a week; or

  • 2 (two) daybreak for 5 (five) workdays a week.

Leave

An employer shall provide at least 12 (twelve) days annual leave for employees that have worked for 12 (twelve) months consecutively. The implementation of such annual leave should be regulated under the employment agreement, company regulations, or collective labor agreement.

Certain companies may provide longer periods of leave and the implementation shall be stated in the employment agreement, company regulations, or collective labor agreement.

Minimum Wage

Wage is determined by (i) time and/or (ii) produce. If the wage paid by an employer is lower than what is regulated by law, the employment agreement shall become null and void, and the wage as regulated shall be applicable.

 

Law No. 11/2020 simplifies the provisions on wages and provides for tiers of wages, namely (i) minimum provincial wage; and (ii) minimum regency wage. Minimum wages are determined based on economic and employment conditions, which include the following variables:

 

  • purchasing power parity;

  • labor absorption rate; and

  • median wages.

 

Inflation, economic growth of the region, and GDP growth are set out in the calculation formula used by the governor to determine the minimum wage. However, the aforementioned provisions on minimum wage do not apply to micro and small businesses.

Social Security

Anyone, including foreigners who have worked for at least 6 (six) months in Indonesia, is required to participate in the social security program held by BPJS. The social security law organizing body mandates that the employer has an obligation to register its employee to BPJS gradually. In the case that an employer does not register its employee to BPJS, the employer may be subject to administrative sanction in the form of: (i) written warnings; (ii) fine; and/or (iii) restriction on certain public services.

 

An employer also has an obligation to register its employee to job loss security which is administered by BPJS of Manpower and the central government. Benefits that will be obtained by the registered employees to job loss security are in the form of cash, access to labor market information, and training. However, such benefits do not apply to employees who have a total permanent disability, have resigned, retired, or died.

Labor Union

A labor union is an organization that is formed from, by, and for employees either within a company or outside of the company, which is unrestricted, open, independent, democratic, and responsible in order to strive for, defend and protect the rights and interests of the employee and increase the welfare of the employee and their families. Law No. 13/2003 regulates that every employee has the right to form and become a member of a labor union.

 

Pursuant to Law No. 21/2000, at least 10 (ten) workers are required to establish a labor union. The same rule also mandates that labor unions may not be formed on the initiative of employers, government, political party, or any other party. Additionally, the employee can determine the basis of the labor union itself, either based on the business sector, work type, or other forms

Foreign Workers

Law No. 11/2020 provides for minor changes in the employment process of foreign workers in Indonesia. The employment process of foreign workers is explained through 2 (two) key perspectives, namely immigration and employment permits.

Permits

ITAS

Prospective foreign workers are required to hold a visa prior to entering Indonesia, as well as an ITAS in Indonesia for work. A visa is written documentation issued by the Immigration Office that allows foreign citizens to enter Indonesia. It also serves as a basis to grant a stay permit for the foreigner. Amid the pandemic, the MoLHR enacted MoLHR Reg. No. 34/2021, which regulates that a stay permit is granted for foreigners entering Indonesia.

 

Employers play an important role for foreign workers in Indonesia as they must act as the guarantor for the foreigners throughout the employment period in Indonesia. This does not include individual employers as they are prohibited by law from employing foreign workers. Article 6 (1) MoLHR Reg. No. 26/2020 states that employers are required to apply for limited stay visa on behalf of the foreigners they wish to employ, which may now be done electronically by providing the following documents:

 

  • evidence of having received the full dose of COVID-19 vaccine;

  • statement letter willing to comply with all prevailing health protocols in Indonesia; and

  • proof of health insurance/travel insurance that includes health financing and/or a statement of willingness to pay independently if affected by COVID-19 while in the Indonesian Territory.

 

A visa serves as formal documentation upon entering Indonesia and for the government to issue a visitor stay permit. Upon receiving a visitor stay permit, the guarantor must apply for an ITAS from the Directorate General of Immigration online, which would allow the foreign workers to live in Indonesia. Depending on the circumstances, ITAS validity will vary from 30 (thirty) days up to 2 (two) years, which can then be renewed accordingly.

 

When ITAS is obtained, Article 63 (2) Law No. 11/2020 regulates that the guarantor (employer) becomes responsible for the foreigners' presence in Indonesia and is obligated to report any subsequent change of civil status, immigration status, and address of those foreigners. In doing so, the guarantor is under administrative and field supervision by the immigration office under Article 64 MoLHR Reg. No. 4/2017. Immigration supervision aims to determine the originality of data and the guarantor's ability to bear the responsibility and cover the financial costs to deport the foreigner if they fail to comply with Indonesian laws. However, the aforesaid responsibilities are exempted by Law No. 11/2020 if the foreigners' country regulates the same in their national law, applying the reciprocity principle.

Foreign Worker Utilization Plan/RPTKA

According to GR No. 34/2021, RPTKA is a plan created by an employer of foreign workers that lays out certain positions of the foreign worker and their employment period. It is subject to approval from the MoM. It serves as a permit to recruit foreign workers in Indonesia. Application for RPTKA approval shall contain at least the following information:

 

  • identity of the employer of foreign workers;

  • reasons of recruitment;

  • the position which will be filled in the company;

  • number of foreign workers;

  • period of recruitment;

  • foreign workers work location;

  • identity of foreign workers assistant; and

  • plan to absorb Indonesian workers every year.

 

Subsequently, the employer shall submit such an application of validation to the MoM by enclosing the following documents:

 

  • application letter;

  • NIB and/or business license of the employer of foreign workers;

  • deed and decision ratifying establishment and/or amendment from the competent authority;

  • proof of mandatory employment report at the company;

  • draft of an employment agreement or other agreement;

  • company organizational structure chart;

  • statement letter for the appointment of foreign workers assistance;

  • statement letter to carry out education and job training for Indonesian workers in accordance with the qualifications of positions occupied by foreign workers; and

  • statement letter to facilitate Indonesian language education and training for foreign workers.

 

Law No. 11/2020 expands the scope of RPTKA exemption for employers that wish to recruit foreigners, specifically for workers filling the positions as:

 

  • shareholders serving as the BoD or BoC in the company;

  • diplomatic staff and consular in the foreign embassy; or

  • foreign workers recruited for production activities that stopped due to an emergency, vocational roles, start-up tech companies, business visitation, and temporary research projects.

 

As mandated by Law No. 11/2020, the utilization of foreign workers is further regulated in GR No. 34/2021. The said regulation determines 4 (four) types of RPTKA depending on the employment period and status, amending the preceding PR No. 20/2018, namely (i) RPTKA for temporary work; (ii) RPTKA for work lasting more than 6 (six) months; (iii) RPTKA without utilizing compensation funds to be paid as non-tax state income or regional tax; and (iv) RPTKA for work located in special economic regions.

Limitations

The prevailing manpower law adopts a more nationalistic approach regarding employment. Employers are expected to prioritize recruiting national workers rather than foreign workers, as stipulated under its implementing regulations, specifically Article 2 (1) GR No. 34/2021, which pushes for the utilization of local manpower in all positions in the event that the employer recruits foreign workers.

 

It is also important to note that foreign workers cannot occupy all positions in a company. They are prohibited from occupying positions related to personnel among other positions, which are specified in MoM Decree No. 349/2019. Despite the said limitations, Annex I of the MoM Decree No. 228/2019 provides an exhaustive list of positions open for foreign workers in Indonesia in 18 (eighteen) work sectors, those being:

 

  • construction;

  • real estate;

  • education;

  • processing industry;

  • water, wastewater, and waste management, recycle, and remedy;

  • transportation and warehousing;

  • art, performance, and recreation;

  • accommodation and catering services;

  • agriculture, forestry, and fisheries;

  • leasing, manpower, travel agency, and other supporting services;

  • finance and insurance;

  • public health and social activities;

  • information and telecommunication;

  • mining and drilling;

  • provision of electricity, gas, steam/vapor, and cold air;

  • sales, reparation, and maintenance of car and motorcycle;

  • other service activities; and

  • professional, scientific, and technical activities.

Outsourcing

Formerly, manpower law provided that outsourcing companies or labor suppliers can be used only for supporting services or activities which are not directly related to the core business or activities of the user company. The previous regulation only allowed certain services or activities, namely cleaning service business, catering business, security business, supporting activities in mining and oil sectors, and transportation. Law No. 11/2020 revokes this restriction. Thus, all services or activities can now be outsourced.

 

An outsourcing company or labor supplier must also be in the form of a legal entity and must obtain business licensing from the central government. The requirements and procedures on applying business licensing are implemented based on regulations regarding norms, standards, procedures, and criteria of the business licensing as set out by the government.

 

Relations between the outsourcing company or labor supplier with the outsourced employee are based on the employment agreement, either a fixed-term or an indefinite term, and have to be made in writing. In the event that the relationship is based on a fixed-term employment agreement, the agreement itself has to regulate the transfer of rights for the employee if there is a change in the outsourcing company and as long as the object of work remains. This guarantees the employee’s rights and works continuity.

 

It should also be noted that the protection of the outsourced workers, wages, working conditions, and disputes that arise are responsibilities borne by the outsourcing company or labor suppliers and should be implemented in accordance with applicable laws.

Child Worker

In the discourse of labor force, children have been one of the vulnerable subjects to economic exploitation. In essence, child laboring deprives childhood, limits access to education, and disrupts the physical, mental, as well as social growth of a child. Subsequently, Indonesia is furthering its endeavors to eliminate child labor by withdrawing more than 140.000 child labor since 2008 and establishing child labor free zones across the country. 

To protect children in the Indonesian labor force, Law No. 13/2003 has stipulated certain restrictions for the employment of children. To begin with, a child is every person who is under 18 (eighteen) years old and are not allowed to be employed by the entrepreneurs. However, an exemption can be made for children aged between 13 (thirteen) to 15 (fifteen) years old for a light work that does not disrupt their physical, mental, and social developments. ILO further specified the light work for child workers as:

  • work that is not harmful for their health or development; and

  • work that interferes with their school attendance or training programs or their ability to access benefit from education.

While children have yet to be in their legal capacity to agree, the work agreement for the child workers shall be signed by their parents or guardians. Furthermore, entrepreneurs that are about to employ children for light work must meet the following requirements:

  • obtain written permission from the parents or guardians of the children;

  • establish a work agreement between the entrepreneurs and the parents or guardians of the children;

  • must not require the children to work longer than 3 (three) hours a day;

  • employ the children to work only at day or during the day without disturbing their studies;

  • meet occupational safety and health requirements in employing children;

  • establish a clear-cut employment relation between the entrepreneurs and the parents or guardians of the children; and

  • compensate the child worker in accordance with existing wage regulations.

In the event of a child working in the family business, the requirements related to the parents or guardians’ permission shall not be applicable. According to Article 185 (1) Law No. 13/2003, anyone that violates the minimum age and requirements of children employment are subject to criminal sanction in jail for a minimum of 1 (one) year and a maximum of 4 (four) years and/or fine of a minimum of Rp100.000.000,- (one hundred million Rupiah) and a maximum of Rp400.000.000,- (four hundred million Rupiah).

Aside from working for entrepreneurs, children with a minimum age of 14 (fourteen) years old may be allowed to do a job at a workplace for the school’s educational purposes which has been made legal by the authorities. In performing such job, the children should be given clear-cut instructions and protected by the occupational safety and health.

Moreover, children may also work in order to develop their talents and interest. However, it should be noted that the entrepreneurs who employ such children are obliged to meet the following requirements:

  • have the children under direct supervision of their parents or guardians;

  • must not require the children to work longer than 3 (three) hours a day; and

  • provide working conditions and environment that are not disruptive to their physical, mental, and social developments as well as their school attendance.

In accordance with Article 72 Law No.13/2003, the entrepreneurs should also keep the children’s workplace separate in case they are employed together with the adult workers. Unless it is proven otherwise, the children shall be assumed working if they are found in the workplace. Under Article 187 (1) Law No.13/2003, anyone that violates the abovementioned requirements of children employment is subject to a criminal sanction in jail for a minimum of 1 (one) month and a maximum of 12 (twelve) months and/or fine of a minimum of Rp10,000,000,- (ten million Rupiah) and a maximum of Rp100,000,000,- (one hundred million Rupiah). 

In addition, Indonesia’s commitments towards the elimination of child labor articulated upon the ratification of ILO Convention on Worst Forms of Child Labor 1999. Therefore, it is worth noting that children are prohibited to be employed and involved in the worst forms of labor including:

  • all kinds of slavery or similar practices of slavery;

  • a job that makes use of, procure, or offer children for prostitution, production of pornography, pornographic performances, or gambling;

  • a job that makes use of, procure, or involve children for the production and trade of alcoholic beverages, narcotics, psychotropic substances, and other addictive substances; and/or

  • all kinds of harmful jobs for the health, safety, and moral of the child.

Any violation towards this provision shall be subjected to a criminal sanction in jail for a minimum of 2 (two) years and a maximum of 5 (five) years and/or fine of a minimum of Rp200,000,000,- (two hundred million Rupiah) and a maximum of Rp500,000,000,- (five hundred million Rupiah).

The Conclusion and Termination of Employment Agreement

 

Considering that employment occurs pursuant to the employment agreement entered into by the entrepreneur and laborer, there is a time or chance when such employment agreement concludes or is terminated. Consequently, it is important for the employer to know the reasons which may cause the conclusion or termination of the employment agreement in accordance with the provisions of the prevailing laws.

Matters which Cause the Conclusion of Employment Agreement

 

There are 5 (five) matters which cause the conclusion of an employment agreement:

  • the employee dies;

  • the employment agreement expires;

  • completion of a certain job;

  • the court decision and/or a resolution or order of the industrial relations dispute settlement institution, which is legally binding; or

  • certain situations or incidents prescribed in the employment agreement, company regulations, or the collective labor agreement, which may effectively result in the termination of employment.

 

In the event that the employee dies, their heirs are entitled to their rights in the form of severance pay, working term pay, and compensation of rights in accordance with the applicable regulations or employment agreement, company regulations, or collective labor agreement. However, the same automatic termination of an employment agreement does not apply in the event that the employer dies or the transfer of rights over the company occurs due to sales, inheritance, or grants. In the event a company transfer occurs, the rights of the employee will become the responsibility of the new employer unless stipulated otherwise in the transfer agreement.

The Compensation which should be Given by the Employer in the event that the Employment Agreement has Concluded

 

In the event that the employment agreement concludes due to the expiry of the agreement and completion of a certain job, the employer is obliged to pay compensation to the employee. The amount of compensation depends on his/her term in the company.

 

According to Article 16 (1) GR No. 35/2021, the amount of compensation is calculated with the following provisions:

 

  • fixed-term with 12 (twelve) month continuously = 1 (one) month wage

  • fixed-term with less than 12 (twelve) months = working term/12 x 1 (one) month wages

  • fixed-term with more than 12 (twelve) months = working term/12 x 1 (one) month wages     

In the event of the termination of an indefinite-term employee, the employer is obliged to pay severance pay and/or working term pay, and compensation of rights. Provisions on the formula of severance pay, working term pay, and compensation of rights are further explained below:

Severance pay

  • less than 1 (one) year : 1 (one) month wage

  • less than 2 (two) years : 2 (two) month wages

  • less than 3 (three) years : 3 (three) month wages

  • less than 4 (four) years : 4 (four) month wages

  • less than 5 (five) years : 5 (five) month wages

  • less than 6 (six) years : 6 (six) month wages

  • less than 7 (seven) years : 7 (seven) month wages

  • less than 8 (eight) years : 8 (eight) month wages

  • more than 8 (eight) years : 9 (nine) month wages

Working Term Pay

 

  • more than 3 (three) years but less than 6 (six) years : 2 (two) month wages

  • more than 6 (six) years but less than 9 (nine) years : 3 (three) month wages

  • more than 9 (nine) years but less than 12 (twelve) years : 4 (four) month wages

  • more than 12 (twelve) years but less than 15 (fifteen) years : 5 (five) month wages

  • more than 15 (fifteen) years but less than 18 (eighteen) years : 6 (six) month wages

  • more than 18 (eighteen) years but less than 21 (twenty-one) years : 7 (seven) month wages

  • more than 21 (twenty-one) years but less than 24 (twenty-four) years : 8 (eight) month wages

  • more than 24 (twenty-four) years : 10 (ten) month wages

Compensation of Rights

The compensation of rights that should be received by the employee includes: (i) annual leave that has not been taken by the employee; (ii) costs to return home for the employee and his/her family to the place where the employee has accepted work; and (iii) other provisions that have been set in the employment agreement, company regulations, or collective labor agreement.

 

 

Reasons which cannot be used by the Employer to Terminate the Employment Agreement

To protect employees, manpower law sets forth the following reasons which cannot be used by the employer to terminate the employment agreement, namely that the employee:

 

  • is absent from work because of an illness as attested by a written statement from the doctor, unless it is for a period of longer than 12 (twelve) months consecutively;

  • is absent from work due to fulfilling his/her obligations to the State in accordance with the prevailing laws and regulations;

  • is absent from work due to practicing what is required by his/her religion;

  • is absent from work to get married;

  • is absent from work due to pregnancy, giving birth, having a miscarriage, or breast-feeding her baby;

  • has blood relations and/or marital relations with another employee within one company;

  • establishes, becomes a member of and/or an official of a trade/labor union, carries out trade/labor union activities outside working hours, or during working hours with approval from the employer, or according to what has been stipulated in the employment agreement, company regulations, or the collective labor agreement;

  • reports to the authorities a crime committed by the employer;

  • has different understanding/belief, religion, political orientation, ethnicity, color, race, sex, physical condition, or marital status;

  • is permanently disabled, ill because of a work accident, or ill because of an occupational disease whose period of recovery cannot be ascertained as attested by the written statement made by the doctor.

 

In the event that an employer terminates the employment agreement for the reasons mentioned above, the termination is null and void by law, and the employer is obliged to re-hire the employee.

 

Reasons which can be used by the Employer to Terminate the Employment Agreement

Reasons which can be used by the employer to terminate the employment agreement are as follows:

  • the company performs merger, consolidation, acquisition, or separation and the employee is not willing to continue the working relations, or the employer is not willing to accept the employee;

  • the company performs efficiency followed by the closure of the company or not followed by the closure of the company due to economic loss;

  • the company is closed due to incurring an economic loss continuously for 2 (two) years;

  • the company is closed due to force majeure;

  • the company is in a state of suspension of debt payment obligation;

  • the company is declared bankrupt;

  • there is an application for employment termination submitted by the employee because the employer has committed the following actions:

  1. assault, insult rudely or threaten the employee;

  2. persuade and/or order the employee to commit actions that are against the law;

  3. does not pay wage for 3 (three) consecutive months or more, even though the employer might pay wage on time after that period;

  4. does not meet obligations that have been promised to the employee;

  5. order the employee to perform work other than the agreed work; or

  6. give tasks that endanger life, safety, health, and morality of the employee and which are not stated in the employment agreement;

  • a decision by the industrial relations dispute settlement institution states that the employer has not committed the actions referred to as mentioned above against applications filed by the employee, and the employer decides to terminate the employment agreement;

  • the employee resigns voluntarily and must satisfy the following requirements:

  1. submit a resignation application in writing at the latest 30 (thirty) days before the date of resignation;

  2. not bound by official ties; and

  3. continue to carry out its obligations until the date of resignation;

  • the employee is absents for 5 (five) working days or more consecutively without written statement completed with valid evidence and has been summoned by the employer 2 (two) times in an appropriate manner and in writing;

  • the employee violates the provisions in the employment agreement, company regulations, or collective labor agreement and has previously been given first, second, and third warning letters, respectively valid for a maximum of 6 (six) months unless stated otherwise in the employment agreement, company regulations, or collective labor agreement;

  • the employee cannot perform work for 6 (six) months due to detainment by the authorities for allegedly committing a criminal act;

  • the employee suffered prolonged illness or disability due to work accidents and cannot perform their work after exceeding the limit of 12 (twelve) months;

  • the employee enters retirement age; or

  • the employee dies.

 

Industrial Relations Dispute Settlement

Industrial relations dispute refers to a dispute arising between an employer and their workers or labor union or a dispute between two labor unions within the same company. Article 2 Law No. 2/2004 stipulates 4 (four) kinds of dispute, which are:

 

  • the dispute caused by a disagreement on work rights, either due to unfulfillment of a certain right or a difference in understanding or interpretation of the law, contract, company regulations, or collective labor agreement;

  • the dispute caused by a conflict of interest, mainly due to disagreement in the drafting and/or the amendment of terms stipulated under the contract, company regulations, or collective labor agreement;

  • dispute arising from the termination of employment, mainly due to disagreement over the reasons leading to the termination of employment; and

  • dispute between labor unions in the same company, either due to disagreement over the union's membership or the implementation of rights and obligations in the union.

 

To facilitate the need for a proper dispute settlement mechanism for the industrial relations sector, Law No. 2/2004 creates the Industrial Relations Court. However, the law mandates that the disputing parties undergo the required preliminary procedure of alternative dispute settlement before taking the case to court.

 

Bipartite Resolution

A bipartite resolution, in its essence, is a negotiation conducted between the employer and the employee or the labor union to settle their differences amicably. Upon reaching an agreement to settle, the parties are required to sign minutes of negotiation stating explicitly that the parties have reached an agreement for an amicable resolution. The minutes serve as proof equivalent to that of a settlement agreement. According to Article 6 (2) Law No. 2/2004, the minutes must consist of at least 6 (six) points: (i) names and addresses in detail; (ii) place and date of the negotiation; (iii) summary of the dispute background; (iv) the parties' arguments or points of discussion; (v) conclusion, the date and signature of the parties.

 

However, if within 30 (thirty) days, the negotiation cannot reach an agreement or a party wishes not to engage in negotiation, the bipartite resolution is deemed unsuccessful. The parties will then proceed to the tripartite resolution or mediation phase.

 

Tripartite Resolution

Mediation

A mediation for industrial relations dispute must be carried by a mediator from the Ministry of Manpower at the regional level. Mediation means the involvement of a third party in a case that acts as the middle person between the disputing parties without prejudice. After 10 (ten) days since mediating the dispute, the mediator will issue a recommendation for the parties on their objective view of the case and how the case should be settled.

 

The parties are bound to revert their decision to accept or reject the recommendation to the mediator. If the parties accept the recommendation, they are required to sign a settlement agreement similar to that required in the bipartite resolution. Mediation is expected to be completed within 30 (thirty) days from the date of the case filing. If the parties fail to agree on the mediator's recommendation, the parties may proceed to the final stage of industrial relations dispute settlement by either opting to undergo conciliation, take the case to arbitration, or commence a lawsuit in court.

Conciliation

Disputing parties may recourse their industrial relations dispute to a third party acting as a conciliator. Conciliation adopts the same procedure as implemented in mediation. Although a conciliator generally appears to be more active in a dispute compared to a mediator, that is not the case for conciliation in the industrial relations sector. Unlike mediation that can settle all 4 (four) types of industrial dispute, conciliation excludes the scope of disputes relating to the disagreement on work rights. This means that any disagreements arising from workers' rights cannot be amended through conciliation.

 

Furthermore, conciliators are not strictly limited to employees of the MoM, which is the case for mediators. Article 19 (1) Law No. 2/2004 enlists 9 (nine) prerequisites that allow qualified citizens to become a conciliator candidate, which are:

  • believer of a religion;

  • an Indonesian citizen;

  • at least 45 (forty-five) years old;

  • minimum education of bachelor's degree;

  • physically healthy as proven by a doctor's letter;

  • has dignity, truthfulness, just, and worthy reputation;

  • has at least 5 (five) years of experience in industrial relations;

  • familiar with laws on manpower and employment; and

  • other requirements determined by the MoM.

Arbitration

Disputing parties may seek recourse in relation to industrial disputes arising from a conflict of interest and disputes between labor unions in one company through arbitration. In order to establish an arbitral tribunal, the parties are required to engage in an arbitration agreement to hand over the case and agree that the arbitration award will be final and binding to both parties.

 

In contrast with conventional arbitration, Law No. 2/2004 determines that the MoM shall appoint the arbitrator in the industrial relations sector. The arbitrators' appointment must consider 8 (eight) conditions similar to those set out for conciliators. Arbitration proceedings are conducted privately to ensure privacy unless the parties choose otherwise. From the procedural standpoint, industrial relations arbitration adopts a similar approach as civil cases whereby the proceedings begin with a push for reconciliation from an amicable settlement.

 

If the amicable settlement fails, the arbitration proceedings proceed accordingly, and the tribunal will render an award according to the regulations, agreements, customs, fairness, and public interest. The arbitration award becomes final and binding to the parties, and although a party may request the Supreme Court for annulment for certain reasons, the case itself cannot be brought up to the Industrial Relations Court thereafter.

 

 

Industrial Relations Court

The final dispute settlement method in industrial relations is by taking the case to court. However, taking the case to the Industrial Relations Court can only be done if mediation or conciliation process has previously been performed. The Industrial Relations Court is a special court established under the General Judiciary in Indonesia that hears and tries cases as the first-stage court for the 4 (four) types of industrial relations dispute as explained in the previous sub-section. Appeals can only be submitted to the court for cases involving disagreements on work rights and termination of employment.

 

Industrial Relations Court is the last resort for disputes arising in relation to employment, with its procedure mirroring the Indonesian civil procedural law. Industrial cases must be completed within 50 (fifty) days from the first day of the hearing. However, Law No. 2/2004 allows the parties to request expedited proceedings by notifying the court of the urgent reason. The following scheme illustrates the procedure implemented at the Industrial Relations Court:

Industrial Relations Court Procedure.png

Industrial Relations Court Procedure

Source: Law No. 2/2004

Based on the aforesaid elaboration, industrial relations dispute settlement under Law No. 2/2004 procedure can be summarized into the following scheme:

Industrial Relations Dispute Settlement.png

Industrial Relations Dispute Settlement

Source: Law No. 2/2004.