Contentious foreign worker rules revised

There has been a new development in the regulation of foreign workers in Indonesia.

New regulation issued

On 23 October, Minister of Manpower Regulation No. 16 of 2015 on Procedures for Expatriate Utilisation (MOM Regulation 16/2015, which we reported on in August 2015) was amended by MOM Regulation No. 35 of 2015 (MOM Regulation 35/2015). MOM Regulation 35/2015 removes many contentious provisions found in MOM Regulation 16/2015.

Key changes

Indonesian-foreign employee ratio: The requirement for an employer to have at least 10 Indonesian employees for each expatriate hired has been removed. The previous unwritten policy of a minimum ratio of 3:1 will remain in effect.

Permits for temporary work: The requirement to obtain a temporary Expatriate Utilisation Plan (Rencana Penggunaan Tenaga Kerja Asing or RPTKA) and a temporary Expatriate Employment Permit (Izin Mempekerjakan Tenaga Kerja Asing or IMTA) for foreigners to give lectures or participate in meetings with a head office or representative office in Indonesia has been removed. A temporary RPTKA and IMTA are still required for the following activities:

• producing commercial films with a permit from the competent authority;
• conducting audits, quality control on production and inspections of Indonesian branches lasting more than one month; and
• performing work related to machinery and electrical installation, after-sales service, and product testing in the market.

Foreign directors and commissioners: Work permits are no longer required for non-resident directors and commissioners. Foreign directors and commissioners of an Indonesian company and foreign members of the boards of patrons, management and supervisors of an Indonesian foundation who reside overseas are no longer required to obtain an IMTA. In addition, wholly Indonesian-owned companies can no longer have foreign commissioners.

Skill Development Fund: Contributions to the Expatriate Utilisation Compensation Fund (Dana Kompensasi Penggunaan Tenaga Kerja Asing or DKP-TKA) do not need to be converted from US dollars to Indonesian rupiah, despite the central bank requirement to use rupiah currency for transactions conducted in Indonesia (reported here).

Conclusion

These positive changes for expatriates and foreign investors in general are in line with a statement from Indonesian President Joko Widodo earlier this year that his government would simplify the procedures for foreigners to do business in Indonesia.