top of page

Employment in General

Employment aspects in Indonesia received a significant overhaul with the enactment of Law No. 11/2020, which took effect in November 2020, as it amended the manpower law previously regulated by Law No. 13/2003. These updated provisions remain in effect following the recent enactment of GRLL No. 2/2022. This section highlights 6 (six) key aspects:

The Aspects of Employment in Indonesia.png
The Aspects of Employment in Indonesia 2

The Aspects of Employment in Indonesia
Source: Law No. 13/2003.

The Amount of Compensation.png

The Amount of Compensation

Source: GR No. 35/2021.

Compensation in the event of Termination

As a general principle, the employer, employee, labor union and government must put in their maximum efforts to avoid termination.  However, in the event of termination of an indefinite-term employee, the employer is obliged to pay severance pay and/or working term pay, and a compensation of rights.  Provisions on the formula of severance pay, working term pay, and compensation of rights are further explained below:

Severance pay

The Amount of Severance Pay.png

The Amount of Severance Pay
Source: GR No. 35/2021.

Working Term Pay:

The Amount of Working Term Pay.png

The Amount of Working Term Pay
Source: GR No. 35/2021.

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 their family to the location where the employee has accepted work; and (iii) any 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 set forth the following reasons which cannot be used by the employer to terminate an 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 their obligations to the State in accordance with the prevailing laws and regulations;

  • is absent from work due to practicing what is required by their 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 understandings/beliefs, 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.


If 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 an Employment Agreement

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

  • the company performs a 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 implements efficiency measures, which may or may not result in the closure of the company, depending on economic losses.;

  • The closure of a company  due to incurring a continuous economic loss for 2 (two) years;

  • the company is closed due to force majeure;

  • the company is in a state of suspension due to a 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 disputes refer to contentions arising between an employer or group 
of employers with their workers, or labor union, or a dispute between two labor unions within the same company.  Article 2 Law No. 2/2004 outlines 4 (four) different kinds of industrial dispute, which are: 


  • disputes 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; 

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

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

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


To accomodate for the need for a proper dispute settlement mechanism for the industrial relations sector, Law No. 2/2004 creates the Industrial Relations Court. Here, it allows for one of the parties to file a lawsuit against the other, in the event the disputing parties have failed to reach a settlement after undergoing conciliation or mediation. 

Bipartite Resolution

A bipartite resolution, at 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 negotiation minutes  stating explicitly that both 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) the names and addresses in detail; (ii) the place and date of the negotiation; (iii) a summary of the dispute background; (iv) the parties' arguments or points of discussion; (v) a 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 for industrial relations dispute must be carried out by a mediator from the Ministry of Manpower at the regional level.  Mediation refers to the involvement of a third party, acting as the middle person between the disputing parties without prejudice.  After 10 (ten) days of mediating the dispute, the mediator will issue a recommendation for the parties based on their objective view of the case and their opinion on how the case should be settled.  

The parties are bound to reconsider 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. 


Disputing parties may refer their industrial relations dispute to a third party acting as a conciliator. Conciliation adopts the same procedure that is 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 conciliations 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 Ministry of Manpower, 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, of which are:

  • A believer of a religion;

  • an Indonesian citizen;

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

  • Possess a minimum education of a 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.


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

In contrast with conventional arbitration, Law No. 2/2004 determines that the MoM shall appoint the arbitrator from 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 a procedural standpoint, industrial relations arbitration adopts a similar approach  to civil cases whereby the proceedings begin with a push for reconciliation for an amicable settlement.  

Should the amicable settlement fails, the arbitration proceedings will continue accordingly, and the tribunal will render an award in accordance with regulations, agreements, customs, fairness, and public interest.  The arbitration award is considered final and binding on 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 taking the case to court. However, taking the case to the Industrial Relations Court can only be done if mediation or conciliation process had been  previously attempted.  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 the termination of employment. 

Industrial Relations Court is the last resort for disputes 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:



Foreign Workers

GRLL No. 2/2022 provides for minor changes made to the employment process of foreign workers in Indonesia, as follows:


Visa and Stay Permits

Prospective foreign workers are required to hold an active visa prior to entering Indonesia,  as well as an ITAS in Indonesia in order to work.  A visa is written documentation issued by the Immigration Office that allows foreign citizens to enter Indonesia and serves as a basis for granting them a stay permit in the country.  

Employers play an important role in assisting foreign workers in Indonesia as they must act as the guarantor throughout the employment period in Indonesia.  This does not include individual employers as they are prohibited by law from employing foreign workers.  Article 34 (1) MoLHR Reg. No. 22/2023 states that employers are required to apply for a limited stay visa on behalf of the foreigners they wish to employ, which may be done by providing the following documents: 

  • a passport valid for at least 6 (six) months;

  • proof of guarantee from the guarantor, who is the employer of the foreign workers;

  • evidence of having sufficient living expenses for themselves and/or their family while in Indonesia;

  • a recent colored passport photo; and/or

  • other documents explaining the intention/purpose of the arrival of the foreign workers.


A visa serves as formal documentation upon entering Indonesia and is a requisite document 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 allows the foreign workers to live in Indonesia. ITAS is valid for a maximum of five years and can be extended under the condition that the aggregate stay of the foreigner in Indonesia does not exceed 10 years.  Furthermore, an ITAS for work purposes, initially valid for 90 (ninety) days, can be extended provided that the aggregate stay of the foreigner does not exceed 180 days. 


An ITAS can be upgraded into an ITAP,  if an application for the change of status  is submitted by the foreigner or guarantor to the head of the immigration office, whose working area covers the residence of the foreigner. 

When ITAS is obtained, Article 63 (2) Law No. 6/2011 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 the administrative and field supervision of the immigration office as prescribed in Article 64 MoLHR Reg. No. 4/2017. Immigration supervision aims to determine the authenticity of data and assesses the guarantor's ability to bear such a responsibility and their ability to cover the financial costs of deporting the foreigner if they fail to comply with Indonesian laws.  However, the aforesaid responsibilities are exempted by GRLL No. 2/2022 if the foreigners' country  enforces similar regulations in their national law, applying the reciprocity principle.  



RPTKA is a plan created by an employer of foreign workers,  detailing certain positions for the foreign worker and their employment period.  It serves as a permit for employers to recruit foreign workers in Indonesia, subject to approval from the MoM.  

As mandated by GRLL No. 2/2022, the utilization of foreign workers is further regulated in GR No. 34/2021. This regulation defines 4 types of RPTKA, based on the employment duration and status, revising the previous provision: PR No.20/2018. The 4 types are as follows: (i) a RPTKA for temporary work; (ii) a RPTKA for work lasting more than 6 (six) months; (iii) a RPTKA without utilizing compensation funds to be paid as non-tax state income or regional tax; and (iv) a RPTKA for work located in special economic regions. 

The application for RPTKA approval must contain, at least, the following information:  

  • The identity of the employer of foreign workers;

  • The reasons for recruitment;

  • The role the foreign worker will fill in the company;

  • The number of foreign workers;

  • A period of recruitment; 

  • The foreign workers’ work location;

  • The identity of the foreign worker’s assistant; and

  • A plan regarding the yearly absorption of Indonesian workers.


Subsequently, the following documents should be attached to the said application : 


  • An application letter for RPTKA approval;

  • The NIB and/or business license of the employer;

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

  • proof of a mandatory employment report at the company;

  • The draft of an employment agreement or other agreement;

  • The company’s organizational structure chart;

  • A statement letter for the appointment of foreign workers assistance;

  • A statement letter  authorizing/mandating education and job training opportunities for Indonesian workers; done in accordance with the qualifications of positions occupied by foreign workers; and

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


GRLL 2/2022 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.


Mandatory Enforcement of Work Competence Certification for Workers in  Human Resource Management

With the issuance of the MoM Decree No. 115/2022, Indonesia mandates work competence certification for workers in the human resource management field. Mandatory work competence certification is enacted for workers in the human resource management field. 

The implementation of mandatory work competence certification aims to:  (i) ensure the availability of a competent workforce in the field of human resource management in the company; (ii) increase the productivity and competitiveness of the workforce in the field of human resource management; and (iii) realizing harmonious industrial relations in the company.

Furthermore, the mandatory work competence certification must at least be implemented in the following areas: 

  • training and development;

  • work management;

  • increased productivity;

  • industrial relations;

  • remuneration system; and

  • talent management,

as determined by the Indonesian National Work Competency Standards.

The number of competent workers in the field of human resource management in each company is adjusted to the needs of each company,  where competent workers are verified by work competency certificates in accordance with statutory provisions. 

The monitoring and evaluation of the mandatory competency certification’s implementation in the field of human resource management is carried out by the MoM, together with the Head of the National Professional Certification Agency.  In addition, employees who have previously obtained work competency certificates in the field of human resource management are declared to remain valid until the expiration of the said work competency certificate. 


The prevailing manpower law adopts a more nationalistic approach regarding employment, emphasizing that employers are expected to prioritize recruiting national workers over foreign workers. This directive is outlined in its implementing regulations, specifically Article 2 (1) GR No. 34/2021. This is a rule that places greater emphasis on the utilization of domestic manpower within Indonesia for all positions before considering the recruitment of 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 throughout18 (eighteen) work sectors, those being:


  • construction; 

  • real estate; 

  • education; 

  • The 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.


Formerly, manpower law provided that outsourcing companies or labor suppliers could only provide support services it activities that were not directly related to the core business of the user company. The previous regulation only allowed outsourcing for certain services or activities, namely cleaning service businesses, catering businesses, security businesses, supporting activities in mining and oil sectors, and transportation. GRLL No. 2/2022 provides that the company can now transfer some of its work to another company based on the outsourcing agreement made in written form.    Additionally, the government shall determine which work or type of work can be outsourced to another company and such a matter will later be regulated by government regulation. 

An outsourcing company or labor supplier must also be in the form of a legal entity and must obtain business licenses from the central government.  The requirements and procedures on applying for business licenses are established in accordance with GR No. 35/2021 outlining norms, standards, procedures, and criteria of for business licensing.  

The relationship between the outsourcing company or labor supplier with the outsourced employee is based on an employment agreement, which will either be a fixed-term or an indefinite term, made in writing.  If it is based on a fixed-term employment agreement, the agreement itself  must regulate the transfer of rights for the employee if there is a change in the outsourcing company. This is necessary to ensure the continuity of the employee’s rights and work, provided that the nature of the work remains unchanged. . 

It should also be noted that the protection of the outsourced workers, their wages and working conditions, and any disputes that arise are responsibilities borne by the outsourcing company or labor suppliers.   These responsibilities should be carried out in compliance with the relevant laws and regulations. 

Child Labor

In the discourse of labor force, children have become vulnerable subjects to economic exploitation. In essence, child labor is believed to deprive childhood, limit access to education, and disrupt the physical, mental, and social growth of a child.  Consequently, Indonesia is furthering its endeavors to eliminate child labor by withdrawing more than 140.000 children from labor since 2008 and establishing child labor-free zones across the country. 
To protect children in the Indonesian labor force, manpower law has implemented certain restrictions for the employment of children. To begin with, a child is every person who is under the age of 18 (eighteen) years 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 who will conduct non intensive tasks/works that does not disrupt their physical, mental, and social developments.  ILO further specified 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 are yet to be in a legal capacity to agree, the work agreement in order for children must be signed by their parents or guardians.  Furthermore, entrepreneurs that are about to employ children for non intensive tasks/works 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 when 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 will 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 sanctions, in particular,  jail for a minimum of 1 (one) year and a maximum of 4 (four) years and/or a 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 may be allowed to do a job at a workplace for the school’s educational purposes, of which has been made legal by the authorities.  In performing such a job, the children should be given clear-cut instructions and protected by the occupational safety and health regulations. 
Moreover, children may also work in order to develop their talents and interests.  However, it should be noted that the entrepreneurs who employ such children are obliged to meet the following requirements: 

  • have the children under the 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 from the usual workplace in case they are employed together with adult workers. Under Article 187 (1) Law No.13/2003, anyone that violates the abovementioned requirements of children employment is subject to a criminal sanction of jail for a minimum of 1 (one) month and a maximum of 12 (twelve) months and/or a fine of a minimum of Rp10.000.000,- (ten million Rupiah) and a maximum of Rp100.000.000,- (one hundred million Rupiah).

Moreover, Indonesia’s commitment towards the elimination of child labor is demonstrated through the ratification of the 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 morale of the child. 

Any violation towards this provision shall be subjected to a criminal sanction of jail for a minimum of 2 (two) years and a maximum of 5 (five) years and/or a 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 that such an agreement will conclude or is terminated. Consequently, it is important for the employer to know the reasons with which they 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 (death of an employee);

  • the employment agreement expires (expiration of employee agreement);

  • 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, all in accordance with the applicable regulations or employment agreement, company regulations, or the collective labor agreement.  However, the same automatic termination of an employment agreement does not apply if the employer dies, or if there is a transfer of rights over the company occurs due to sales, inheritance, or grants.  In the event that 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


When the employment agreement concludes due to the expiry of the agreement and/or completion of a certain job, the employer is obliged to pay compensation to the employee.   The amount of compensation depends on their term in the company.  

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

Industrial Relations Court Procedure

Industrial Relations Court Procedure

Source: Law No. 2/2004

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

Industrial Relations Dispute Settlement

Industrial Relations Dispute Settlement

Source: Law No. 2/2004.

bottom of page