Alert for Employers in Indonesia: Time to Amend Work Rules

When the Indonesian Government issued Law No. 11 Year 2020 on Job Creation it amended and eliminated, among other things, general provisions on termination procedures and benefits previously stipulated by the Indonesian Manpower Law. The subsequent implementing regulations also specified new rules under the Job Creation Law.

With these changes in mind, employers in Indonesia are advised to prepare amendments to their employee handbooks or work rules, known in the Indonesian regulatory regime as a company regulation (“CR”), and their employment agreements, to ensure they conform to the Job Creation Law and its implementing regulations.

A ratified employee handbook or work rules, or a company regulation, is required for companies in Indonesia with at least 10 employees. The ratified CR must at least include the following:

• rights and obligations of the employer and employees;
• working conditions;
• code of conduct of the company; and
• the validity of the company regulation.

According to the Indonesian Manpower Law, as amended, a CR must be drafted by the company or its employers and ratified by the local manpower office where the company is located.

A CR is valid for no more than two years and must be renewed after its expiration. From time to time, employers may amend the CR, provided that any changes have been agreed to by the employees and do not conflict with the prevailing laws and regulations.

Companies or employers that fail to draft and ratify a CR may be subject to criminal sanction in the form of a fine of between IDR 5 million and IDR 50 million.

Key Takeaway

On March 12, 2020, the South Jakarta District Court fined the Board of Directors of an Indonesian entity IDR 5 million, or a month in prison in lieu of the fine, because the BOD, as the representative of the company, failed to ratify a company regulation as required by the Indonesian Manpower Law, as amended. (10 May 2022).

By SSEK, Indonesia, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact indonesia@transatlanticlaw.com

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