FOREIGN WORKER SERVICES

Category: Human Resources Services, Compliance Services
Written by Samuel Sri Kurnia on 19/05/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

Employee knowledge plays a critical role in determining a company’s success, especially when the business took a step to the international level. Hiring foreign workers allows a company to gain more experience and perspectives that are currently lacking. This foreign hire will usually carry a deep understanding of particular skills, products, systems, and policies.

WHAT IS A FOREIGN WORKER?

According to Regulation Number 13 Year 2003 concerning Manpower, a foreign worker (Tenaga Kerja Asing / TKA) is a foreign resident who holds visas with the intention of working in Indonesia. TKA can start to work in Indonesia by Assignment and Recruitment. An assignment is the placement of employees by multinational companies to occupy a certain position in one of the branches or subsidiaries in Indonesia.

Recently, Indonesia has become well known as one of the largest economies and emerging markets in the world. Ministry of Law and Human Rights of the Republic of Indonesia and Directorate General of Immigration of the Republic of Indonesia reported that the total number of foreign visits to Indonesia (July 2018) reached 9.06 million. It has also transformed into a destination with increasingly attractive options for locals to work in a different city, and for foreigners to work in a different country. It sums up that Indonesia is an attractive country for foreigners who want to both work and stay in this exotic archipelago.

Similar to every other country in the world, a foreign employees must comply with the latest immigration laws in Indonesia. With that being said, hiring in Indonesia must adapt to the country’s human resource regulations and labor laws. Noticeably, employers will have to face legal repercussions if they violate these laws.

WHY HIRE FOREIGN WORKERS?

Certain foreigners may have some advantages in Indonesian industries. Foreigners who are highly skilled and knowledgeable will be able to teach their skills to and share their knowledge with Indonesian workers.

The number of TKA who are currently working in Indonesia has gradually been increasing. The Investment Coordinating Board (BKPM) reported that there are 95,335 foreign workers currently in Indonesia. However, although this number has been increasing, it is much less than what one might assume. When this figure is compared to that of the country’s total workforce of over 127 million individuals, the proportion of foreign workers in Indonesia can be seen to be one of the world’s lowest at just 0.075% of the workforce.

This fact was supported by BKPM chairman Thomas Lembong. In a recent interview, Lembong stated that the foreign workforce in Singapore makes up 36% of its total workforce, while Malaysia’s and Thailand’s respective foreign workforces account for 15.3% and 4.5% of those countries’ total workforces. One of the countries with the highest proportion of foreign workers in the world is Qatar. In Qatar, foreign workers comprise 96% of the nation’s entire workforce.

The newest immigration regulation stipulated through Ministry of Manpower Regulation No. 8/2021, allows a greater degree of flexibility for TKA to work in Indonesia. With the newly regulated procedures, employing TKA for business creates more opportunities, such as:

  1. Eligibility for a Double Position

    TKA can now be employed by another employer in the same position as long as the working duration is similar to the first employment. A director or commissioner at a foreign investment company (PT PMA) has the most considerable chance to be eligible for this requirement. In general, a TKA usually obtains a one-year visa. Another additional requirement worth noticing is that TKA should prepare curriculum vitae and diploma or certificate of competency pertaining to the position appointed to the TKA. These documents are mandatory to be furnished to the official when applying for the job.

  2. Expatriate Placement Plan and Compensation Fund

    Employers shall not be mandated to obtain Expatriate Placement Plan (Rencana Penggunaan Tenaga Kerja Asing / RPTKA) and pay compensation funds for TKA employment. This shall apply to:
    • Government institution;
    • Representative of a foreign country; and
    • International body employing a TKA.

    TKA may be exempted from paying compensation funds to TKA social institutions, religious entities, and specific positions in education entities. This regulation still applies on a case basis since the practice is related to respective Ministries.

  3. Length of a Work Stay Permit

    A TKA will be eligible for a work stay permit (Izin Tinggal Terbatas / ITAS) for up to two years. It might be extended based on the applicable law. This regulation has not been widely implemented, but it concerns positions as a shareholder and director at PT PMA Company.
Benefit of hiring foreign employee in Indonesia

LAWS GOVERNING FOREIGN WORKER IN INDONESIA

Foreigners are allowed to hold positions where Indonesian nationals are not available or do not meet the requirements to do the job and are subject to the conditions that such positions are open for foreigners. Foreigners can be employed in Indonesia only for certain positions and periods.

Employers of TKA in this shall include:

  1. Government body(s), International body(s), and Representatives of a foreign country;
  2. International organization;
  3. Foreign Company Representative Office (KPPA), Foreign Company Trade Representative Office (KP3A), Foreign Press Office;;
  4. Foreign private company, foreign business entity;
  5. Legal Entity established under the Indonesian Law in form of a Limited Liability Company (PT) or foundation established under Indonesian law or a foreign business entity registered with the competent authority;
  6. Social institutes and other institute for religious, education, or cultural purpose; and
  7. Impresario/Impresariat service business entity.

Employers of foreign workers can only employ TKA in an employment relationship for a certain position and a certain time. Employers of TKA in the form of Federal Civil Firm (Firma / Fa), the Limited/ Federal Partnership (CV), Associated Business (Usaha Bersama / UB), Trading Company (Usaha Dagang / UD) are prohibited from employing TKA except as provided in the State Law.

For all FDI, a foreigner could hold a position as a member of:

  1. Board of Director (BOD);
  2. Board of Commissioner (BOC);
  3. Builder Members;
  4. Board Members; and
  5. Supervisory.

Except for DDI, a foreigner cannot hold a position as a member of the Board of Commissioners. According to the Attachment of Manpower Decree No. 40 of 2012, TKA cannot hold a position as:

  1. Personnel Director;
  2. Industrial Relation Manager;
  3. Human Resource Manager;
  4. Personnel Development Supervisor;
  5. Personnel Recruitment Supervisor
  6. Personnel Placement Supervisor;
  7. Employee Career Development Supervisor;
  8. Personnel Declare Administrator;
  9. Chief Executive Officer;
  10. Personnel and Careers Specialist;
  11. Personnel Specialist;
  12. Career Advisor;
  13. Job Advisor;
  14. Job Advisor and Counseling;
  15. Employee Mediator;
  16. Job Training Administrator;
  17. Job Interviewer;
  18. Job Analyst; and
  19. Occupational Safety Specialist.

Under Ministry of Manpower Regulation No. 8/2021, the work permit for foreign workers in Indonesia is called an RPTKA Approval (Pengesahan RPTKA), issued through the TKA Online system. The RPTKA Approval further serves as the basis to grant both the visa and stay permit for TKA. While an approved RPTKA was also the work permit for foreign workers under the Ministry of Manpower Reg. 10/2018, it did not serve as the basis to grant immigration permits. Instead, the employer had to apply separately for a Notification (Notifikasi), which served as the basis to grant a Limited Stay Visa (Visa Tinggal Terbatas/VITAS). The VITAS further served as the basis to grant a Limited Stay Permit (Izin Tinggal Terbatas / ITAS) for work purposes.

Generally, any employer that intends to employ TKA must obtain an RPTKA Approval. An exception applies in cases where a foreigner is:

  1. A member of the Board of Directors (BOD) or Board of Commissioners (BOC) and has certain share ownership in the company;
  2. A diplomatic or consular staff member at a foreign state representative office;
  3. Required by the employer in connection with a production activity that has ceased due to any emergency, vocational activities, tech-based start-ups, business visits, or research for a set period of time.
Steps of employing foreign worker in Indonesia

TYPES OF RPTKA APPROVALS AND VALIDITY PERIOD

Pursuant to Ministry of Manpower Reg. 8/2021, there are four types of RPTKA Approval

  1. Temporary:
    This approval is valid for no more than 6 months and is not extendable.

  2. Over 6 Months:
    This approval is granted for no more than 2 years and are extendable.

  3. Non-DKPTKA:
    This approval is granted for no more than 2 years and are extendable.

  4. Special Economic Zone (Kawasan Ekonomi Khusus / SEZ). :
    This approval is granted for no more than 5 years and is also extendable. Specifically, the SEZ RPTKA for a member of a company’s BOD and/or BOC is granted once and is valid as long as the foreign worker in question is employed.

PROCEDURES TO EMPLOY FOREIGN WORKERS TO WORK IN INDONESIA

Employers who will employ TKA shall have RPTKA. RPTKA is a basis to obtain Foreign Worker Employment Permit (Izin Menggunakan Tenaga Kerja Asing / IMTA). In order to receive RPTKA, the employer must apply online to the Directorate General of Guidance Employment and Broaden Employment Opportunities through the Director of Foreign Manpower Management by enclosing:

  1. Explanation and reason to employ expatriates;
  2. Completed RPTKA form;
  3. License from authorized ministry;
  4. Article of association of legal entity that has been legalized by the authorized ministry;
  5. Organization structure of the employer company;
  6. Letter of the employer domicile from the regional government;
  7. Letter of Appointment for Indonesian manpower as assistant to the foreigner and mentoring program plan;
  8. Letter of Statement for the capacity to provide education and training for Indonesian manpower in accordance with the qualifying position occupied by the foreign worker;
  9. Employer Tax ID (NPWP);
  10. Copy of valid obligatory report of employment in accordance to State Law No. 7 of 1981; and
  11. Recommended position that will be occupied by the foreign worker from technical ministries (if required).

Once approved, the Indonesia Ministry of Manpower of the Republic of Indonesia will issue RPTKA Endorsement to the employer. The RPTKA Endorsement will then be used for the application of a TKA Employment Permit (IMTA). This application should be submitted via online to the Directorate General of Guidance Employment and Broaden Employment Opportunities through the Director of Foreign Manpower Management or go to BKPM OSS-C.

The general requirement for IMTA are as follows:

  1. RPTKA Endorsement;
  2. Transfer receipt of Compensation Fund for Foreign Worker (Dana Kompensasi Penggunaan / DKP) with the value of USD 1,200 per year from the Government Bank, which is appointed by the Minister of Manpower of the Republic of Indonesia;
  3. Proof of insurance policy from the insurance company incorporated in Indonesia;
  4. Foreign worker’s passport;
  5. Photo size of foreign worker 4×6 cm (2 copies);
  6. Sufficient educational background proof from the foreign worker for the job position;
  7. Competency certificate or working experience minimum 5 years correspondent with the job position;
  8. Contract agreement between the foreign worker and the employer; and
  9. Recommendation for the foreign worker from the authorized agency based on the job field (if required).

After receiving IMTA, the employee will then be able to apply for a temporary stay visa (Visa Tinggal Terbatas / VITAS). The general requirement for VITAS application are as follows:

  1. Application letter;
  2. Copy of savings book;
  3. Valid passport with a minimum of 18 months validity for 1 year stay period or 30 months validity for 2 years staying period; and
  4. Recommendation letter: RPTKA & IMTA.

TAXES FOR FOREIGN WORKERS

Foreign workers are considered individual taxpayers when they reside in Indonesia for more than 183 days within a consecutive 12 months. Hence, foreign taxpayers are required to register for Taxpayer Identification Number (Nomor Pokok Wajib Pajak / NPWP) at the tax service office.

The progressive tax rates for a foreign resident individual taxpayer in Indonesia based on the yearly earnings:

  1. IDR 1-50 million: 5%
  2. IDR 50 – 250 million: 15%
  3. IDR 250 – 500 million: 25%
  4. Over IDR 500 million: 30%
Foreign worker taxes

CONDITIONS FOR EMPLOYING FOREIGN WORKERS IN INDONESIA

According to Ministry of Manpower Regulation No. 8/2021, an Employment Supervisor (Pengawas Ketenagakerjaan) of the Ministry of Manpower may issue a Memorandum of Examination (Nota Pemeriksaan/Memo) if it finds any alleged violations of foreign workers’ employment norms by an employer. The Memo must be enforced by the employer in question or a second Memo will be issued. If compliance is still lacking following the second Memo a notification letter on the imposition of administrative sanctions will be issued to the employer (see below for details on administrative sanctions).

Specifically, according to Article 49 (1) of Ministry of Manpower Regulation No. 8/2021, administrative sanctions shall be imposed on employers for the following violations of foreign worker employment norms:

  1. No approved RPTKA by the Ministry of Manpower or authorized officials;
  2. No RPTKA Approval for foreign workers being employed by another employer;
  3. No RPTKA Approval for foreign workers employed by a tech-based startup or vocational activities provider for more than the maximum period of three months;
  4. Failure to facilitate Indonesian-language education and training for foreign workers;
  5. Failure to enroll foreign workers in the national social security or insurance program;
  6. Does not report annually to the Ministry of Manpower regarding the implementation of foreign workers employment, education and job training, and transfer of technology and expertise;
  7. Does not report to the Ministry of Manpower on the implementation of foreign workers employment for temporary work after the expiration of the employment agreement;
  8. Does not report to the Ministry of Manpower an employment agreement that has expired or been terminated before the expiration of the term of the agreement;
  9. Employing foreign workers not in accordance with the RPTKA Approval;
  10. Employing dual-position foreign workers in the same company;
  11. Employing foreign workers in personnel management positions; and
  12. Failure to pay the DKPTKA for each employed foreign worker.

Companies that violate the requirements, procedures, and procedures for licensing foreign workers, will be given the following sanctions:

  1. Service Delay

    If the company does not register foreign workers in the insurance and Social Security programs that have been determined by the government, they will be subject to sanctions for delaying the service of worker permits by the Ministry of Manpower.

  2. Temporary Termination of the Licensing Process

    This sanction applies if the company that uses foreign workers does not have an RPTKA that is legalized by the government. In addition, companies that do not appoint assistants for foreign workers are also subject to similar sanctions.

  3. Work Permit Revocation

    If the company has employed foreign workers in personnel positions, this sanction will be imposed. Then, if the company does not pay the DKP-TKA fees, the foreign workers will also be subject to this penalty.

HOW CAN WE HELP

All foreigners traveling to Indonesia for longer than 30 days stay must have a valid visa. Indonesia is known for having difficult immigration procedures that are tedious and frustrating. Long-term stay visas such as Business Visa, Social Visa, Dependant Visa, Work Permit, and ITAS require local sponsorship. Local sponsors may be an Indonesian company having relations with you, a visa agency, or an Indonesian citizen.

Putranto Alliance has a team of immigration lawyers and consultants who specialize in Indonesia Immigration regulation. Through experience and regular training, we are equipped with accurate and up-to-date regulations in order to provide timely immigration services to our clients. Putranto Alliance is a local company and may act as your sponsor if required.

REFERENCES

Peraturan Menteri Ketenagakerjaan Nomor 8 Tahun 2021

Peraturan Pelaksanaan Peraturan Pemerintah Nomor 34 Tahun 2021 Tentang Penggunaan Tenaga Kerja Asing

FAQs

Ministry of Manpower Reg. 8/2021 provides that an RPTKA Approval must be extended at least 30 days prior to its expiration.

 

The TKA should apply for KITAS from the local immigration office where he/ she is domiciled in Indonesia within 7 days after entering Indonesia. The following procedures also apply to the temporary hired foreigner/ expertise, such as specialized technician for temporary repair work, expert personnel for a short-term job position, and any affiliated foreigner for a specific work function.

Fines may be imposed for the violations in points 1 to 3 of the foreign worker employment norms above. Temporary suspension of RPTKA Approval application may be imposed for the violations in points 4 to 8 above, as well as for failing to pay imposed fines within two weeks. And the RPTKA Approval may be revoked for the violation in points 9 to 12 above, and for failing to execute the obligations contained in the temporary suspension of RPTKA Approval within three months.

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