Despite the government’s push to increase the amount of badly needed foreign investment in Indonesia, the Manpower Ministry has just issued a new set of regulations, which will, in theory, make it much more difficult for foreign nationals to work and conduct business here.
Issued by the Manpower Ministry on June 29, Regulation Number 16 of 2015 on the Procedures to Employ Expatriates (New Expatriate Regulation) overturns the previous policies set forth in Regulation number 12 of 2013.
You can find a link to the full text of the new regulations below but we’ll give you some of the highlights:
Companies must have a 10:1 ratio of local employees to foreign hires
Companies were always meant to adhere to a rule of hiring a certain ratio or foreign nationals to local employees. Previous regulations did not specify the exact ratio but in general practice the it was usually 1 foreign employee to 3 or 5 local employees. The newly issued regulations specify that companies may now only hire 1 foreign national for ever 10 local employees, although there are exceptions to this rule.
As noted in an analysis of the new regulations by PNB Law Firm Jakarta, “The new ratio will have a huge impact on establishment of representative offices in Indonesia, which are usually small companies and cannot apply for above-mentioned exemption.”
Foreigners need a special permit just to have business meetings in Indonesia
Technically, anybody conducting regular business meetings in Indonesia needs a business visa which was meant to cover meetings and other short-term business related activities. But for one-time meetings, site inspections, lectures and similar one-off activities, foreigners could simply use the regular Visit Stay Permit (Izin Tinggal Kunjungan) also used by tourists.
The new regulations stipulate that foreigners attending meetings, doing trainings, giving lectures and several other business activities will now have to apply for both a Temporary Work RPTKA approval and a Temporary Work IMTA from the government, every single time they have a meeting in Indonesia (which sounds like a bureaucratic nightmare for compliant companies).
Other new regulations include:
- Local employers of foreign nationals must make sure their employees possess an insurance policy from an Indonesian entity, hold a Taxpayer Registration Number (NPWP) and be enrolled in the National Social Security Program (SJSN)
- Company directors not residing in Indonesia will now be required to get an IMTA work permit.
One thing that the new regulations don’t mention is an Indonesian language requirement for foreign nationals, which was fervently discussed earlier this year but has now apparently been dropped.
How strictly these new regulations will be enforced is questionable, as similar rules have often been overlooked by the government and companies in the past. In fact, the new regulations are technically already in affect, without any sort of transition time given to companies to adapt to the new policies, making it unclear when or if the government will start enforcing them in earnest.
You can read the full text of the new regulations (in Indonesian) here. Santa Fe Relocation Services also has an article with more details and translated sections of the regulations.
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