GENERAL HUMAN RESOURCE SERVICES

Category: Human Resource Services
Written by Samuel Sri Kurnia on 20/07/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.

Unlike a law attorney who focuses on one crucial issue regarding employment law or federal regulation, Human Resource (HR) consultants play a critical role in reviewing the overall management of an organization. HR consultants aim to advise clients on creating more efficient and effective business and HR policies. HR consultants offer services such as professional consulting, education, training, and HR solutions for business clients. These services are done through diverse tasks from business research, analysis, planning, and management counseling. In terms of budget constraint, teaming up with an HR consultant is profitable compared with full-time HR executives.

We will elaborate on the general scope of an HR consultant and how the figure plays a role in Indonesia.

HUMAN RESOURCE CONSULTING & ADVISORY

HR consultants are expected to be talented problem solvers. Thus, companies count on them to create advice on management, hiring procedures, and other issues related to human resources that need to be dealt as fast as possible. They develop solutions through different methods, ranging from providing employees with training and support to creating an efficient payroll system. HR consultants also solicit enterprises on creating effective human resource capabilities for long-term vision, often through designing extensive programs or collecting data to investigate a specific issue. This job description makes them different than an HR specialist, who usually focuses on hiring resources or administrative roles. HR consultants need to possess the ability to switch and implement solutions within different HR sub-departments.

Some of the most common HR consultant responsibilities are:

  1. Create an employment program and help the HR team to execute new job plans;
  2. Create and conduct research and survey plans to pinpoint underlying issues;
  3. Provide advice on managing employees and general management;
  4. Assess the company's compliance with laws and regulations;
  5. Establish a program for compliance with efficient human resources practices;
  6. Advice on proper human resources technology depending on the business niche.

Different from an HR director or an HR manager who is hired for internal use, an HR consultant is often hired externally on a contractual basis. This allows them to act as an external agent and be more open to opportunities and clients. In exchange, they have to constantly hunt for job opportunities for polishing their skills and career path.

A primary incentive for businesses to hire an HR consultant is the financial effectiveness of the arrangement. An organization spends fewer resources hiring an HR consultant than offering full-time employment to an HR specialist or manager. As a result, the consultant has fewer commitments with the company and simultaneously counsels other companies as well.

BENEFITS OF WORKING WITH HUMAN RESOURCE CONSULTANTS

HR Consultant Benefits

By engaging with specialist HR consultants, companies can benefit from budget efficiency to getting insights into HR best practices, industry benchmarking, and advances in technology that improves productivity and employee experience. The details of the benefits are as follows:

  1. Economic Efficiency

    Lack of scale and the necessary capital for small and medium businesses can pose an issue in managing the company in a cost-effective way. Outsourcing human resources from an HR consultant will save the business a significant amount of money.

  2. Time Efficiency

    Hiring the right employees can be a very time-consuming process, especially for start-up businesses. From finding good candidates to contacting them, figuring out how much they are worth, and onboarding them into your company, adding experienced HR consultant to the team allow the company to invest more time in meeting business goals and objectives. Outsourcing to an HR consultant will not only save you money, but it will also help you save time.

  3. Ensure Company Compliance

    Laws and regulations related to hiring can be overwhelming to deal with for start-up businesses. HR compliance can be a huge and complex topic, with a large range of regulations and laws ranging from performance management to health, safety, and worker’s compensation. Working with a professional HR consultant will give the company peace of mind when it comes to making sure that the business is fully compliant with all the human resources laws and regulations, and safe from claims and litigation.

  4. Access to a Professional Network

    HR professions can help you with accessing a wide range of professional networking organizations. They tend to have contacts everywhere, making it easier for them to fill vacant positions in a much shorter period of time compared to how long it would take a company founder or CEO through the access to more qualified people.

  5. Additional Hiring Experience

    Aside from helping to look for an applicant, HR consultants will also work to make sure that the company is hiring the best people in your industry for your team. They can help with from spotting undervalued yet experienced professionals in a ton of resumes, to checking up on qualifications and references. Choosing a reputable and experienced HR consultant to manage a company’s hiring process will increase the benefit of their previous experience and find the best candidates for the job openings.

  6. Additional Fresh Perspective

    For experienced businesses, an HR consultant can help by bringing a new perspective. If the business is having a high turnover rate or hired staff who does not fit the roles, an HR consultant can help to understand why these things are happening and find solutions for these problems.

EMPLOYMENT CONTRACTS IN INDONESIA

As HR Consultants revolve around choosing the best candidates to support the company, both parties should first understand employment and labor laws in Indonesia. Employment and labor laws in Indonesia are originally governed by Law No. 13/2003 concerning Manpower, and recently revised by Law No. 11/2020 concerning Job Creation Law). The Labor Law (Law No 13/ 2003) regulates all employment in Indonesia. The revision, Job Creation Law (Law No 11/2020, the Omnibus law) has also made changes to fixed-term contracts in order to organize the labor pool in Indonesia.

Employment Contract Minimum Provisions

Employers must provide the following rights for the hired employees in Indonesia:

  1. Minimum wage varies depending on sector and province;
  2. Social security, which includes pension, healthcare, life insurance, accident insurance, and old-age benefits;
  3. Religious holiday allowance (1 month’s salary);
  4. Statutory absence or payment when the employee does not take annual leave;
  5. Payment for overtime.

Specifically for foreign workers, the hiring process is regulated through Indonesia’s Ministry of Manpower’s (MoM) Regulation No. 8 Year 2021 concerning Employment of Foreign Workers. MoM Reg 8/2021 is a stipulation to Government Regulation 34/2021 and provides the requirements for businesses in detail for hiring foreign workers. For a local company to employ a foreign worker, they must prepare a Foreign Worker Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing/RPTKA). This document details the specific work, position, and length of employment the foreign employee will undertake in Indonesia. The RPTKA now also serves as the basis for the MOM to grant visas and stay permits.

The permitted position for expatriates in Indonesia is elaborated further in Indonesia’s Ministry of Labor issued Regulation No. 228 of 2019 (Reg 228, 2019). The new regulation widens the number of positions open to expatriate workers, consolidates the list of positions into one, and simplifies the approval process for foreigners and their employers. Other changes have also been made to the immigration laws under the new Omnibus Law.

According to Article 1 number 14 of Law No. 13 of 2003 concerning Manpower (Manpower Act), an Employment Contract is an agreement between workers/laborers and employers or employers that contains the terms of work, rights, and obligations of the parties. An employment relationship between employers and workers/laborers who have elements of work, wages, and orders arises through this employment contract.

  1. Name, address of the company, and type of business;
  2. Name, sex, age, and address of the worker/laborer;
  3. Job title or type of work;
  4. Place of work;
  5. Amount of wages and the method of payment;
  6. Terms and conditions that contain the rights and obligations of employers and workers;
  7. Starting and the period of validity of the employment agreement;
  8. Place and date the employment agreement was made;
  9. Signatures of the parties to the employment agreement.
Employment Contract Types

Employment contracts in Indonesia are classified into a fixed or indefinite terms.

  1. Fixed term contracts (Perjanjian Kerja Waktu Tertentu/PKWT)

    Fixed-term contract agreements are subject to more strict requirements than indefinite-term employment agreements. PKWT employment agreement has a legal basis in Minister of Manpower and Transmigration Decree No.100/MEN/IV/2004. According to the regulation, the Specific Time Employment Agreement or PKWT is an agreement between the worker/laborer and the employer to establish a working relationship within a specific time or for certain workers. PKWT agreement must be written in the Indonesian language.

    According to the rules, companies cannot apply PKWT status to all jobs. That means only a few jobs are permitted for employees with PKWT status. PKWT employment contracts may only be used for temporary work. PKWT agreement cannot include a probation period. This employment agreement that is based on a certain period of time may last for up to two years and can be extended once for a maximum period of one year. After at least 30 days, it can be renewed one time for a maximum period of two years.

  2. Indefinite term contracts (Perjanjian Kerja Waktu Tidak Tertentu/PKWTT)

    An indefinite-term contract agreement may provide for a probation period of up to three months. In the event an indefinite-term employment agreement is made verbally, the employer is required to provide a letter of appointment to the employee. The letter needs to provide at least the following information:

    • Employee’s name and address;
    • Date the work commences;
    • Scope/type of work;
    • Employee’s proposed wages.

    In contrast to PKWT, PKWTT employment contracts may be enforced for jobs that are continuous, uninterrupted, not limited by time, and become part of the production process. In other words, employees who agree with PKWTT are permanent employees. While PKWT employees are contract employees.

HUMAN RESOURCE POLICY IN INDONESIA

In Indonesia, the employee’s rights are governed through different laws and regulations such as follows: 

  1. Minimum Wages in Indonesia

    Companies are prohibited from paying their workers below the prescribed minimum wage. This includes employees that are hired for less than one year. Each province in Indonesia has a different minimum wage, but it has been increased by 8,51% starting from the 1st January 2020 through the Minister of Labor’s circular B-M 308 Year 2019. As the minimum wages are different for each province, foreign investors are recommended to seek the help of registered local advisors to help understand how these latest changes will affect their operations.

  2. Social Insurance in Indonesia

    Indonesia’s social security programs are run by two organizations, Social Security Administrator for Health (BPJS Kesehatan) for healthcare and Workers Social Security (BPJS Ketenagakerjaan) for pensions. Registered Indonesians and expatriates are eligible for free health services ranging from dental care to medicines to physiotherapy. Further, patients are also eligible for free emergency and chronic care, in addition to organ transplants.

  3. Public Holidays

    Indonesia’s government entitles its citizen to some public holidays. In addition to official public holidays, the government also provides joint leaves (collective leave days). Ministry of Manpower issued M/6/HK.04/IV/2021 on the implementation of the payment of the religious holiday allowance (Tunjangan Hari Raya/THR). The THR is a yearly bonus given to employees at least one week before the start of the religious holiday adhered by the employee (based on the employee’s religion), equivalent to one month’s salary (based on the period of employment).

  4. Payroll

    When handling payroll in Indonesia, employers must adhere to strict guidelines. Employers must withhold tax payments and social security contributions from each pay cycle to ensure payroll compliance. This aspect is specifically regulated in Law of the Republic of Indonesia No. 6 Year 1983 concerning General Provisions and Taxation Procedures.

  5. Terminating Employees

    Prior to the changes in the Omnibus Law, employers had no right to unilaterally terminate employment in any circumstance, unless the termination was agreed upon by both parties through negotiations. The employer would then be able to obtain approval for the termination from the labor courts and the employee was entitled to up to six months’ salary. Under the latest changes, the employer can now notify the employee in writing, setting out the reasons for termination, and the termination payments and entitlements at least 14 business days before the date of termination.

HIRING PROCESS IN INDONESIA

The process of hiring employees in Indonesia is as follows:

  1. Employee Background Check

    This step is not a legal requirement in Indonesia, hence it’s often overlooked. It is skipped to save time or not to spend money on it. However, the cost of bad hiring is significantly higher than spending a few extra weeks to make sure the company knows who they are hiring, especially for senior positions.

  2. Make a Formal Offer Letter

    Once the company has agreed to hire a candidate, the offer is formalized with an offer letter. As stated in the previous part, while the offer letter is not legally regulated, it sets clear expectations for both parties and is the basis for the employment contract. It’s important to specify whether the offered salary includes taxes (gross salary) or the net salary.

  3. Sign an Employment Contract

    When hiring an employee in Indonesia, the company must specify what type of employment contract they are offering. Employment contracts are legally binding and must adhere to the related Indonesian Manpower Law and/or Omnibus Law that have been described in the previous part.

  4. Introduce Company Regulations (Peraturan Perusahaan / PP)

    In addition to employment contracts, companies must also have company regulations. These regulations are the internal regulations of a company, understood and legally binding to both the company and its employees. Company Regulations too must always comply with the Indonesian Manpower Law. Clauses within the PP are typically referred to when settling industrial disputes/disagreements between management and employees that fall outside their terms of employment, for example labor strikes and lock-outs.

HOW CAN WE HELP

Indonesian Labor Law regulates the maximum working hours, minimum pay, leave allowance and termination requirements of any employment. The complex employment regulation may make it difficult for newly established businesses to adhere to the regulation when making a human resource policy, company policy, and other employment agreements.

We advise and assist our clients with the preparation and registration of company policy and ensure that they comply with the regulation. Foreign companies who have yet to establish a presence in Indonesia but require a local employee to perform remote work such as programming or market research, using our service allows clients to be more cost-efficient, especially during the preliminary market research stage before the client decides whether to invest in Indonesia.

REFERENCES

FAQs

Contracts must be in writing and in the Indonesian language or in a bilingual format. Given new legislation governing the use of Indonesian language in contracts generally, it is recommended that both fixed term (PKWT) and permanent (PKWTT) employment agreements be executed in Indonesian or in a bilingual Indonesian and English format. It is prudent to assume that in the event of a conflict or inconsistency, the Indonesian-language version shall prevail.

 

Although employment terms can be outlined in a written or verbal manner, permanent members of staff should ideally have a written contract. Understanding Manpower Regulations are a key aspect of operating a successful business in Indonesia; this will ensure your employees are fairly treated, and reduce your risks of labor lawsuits.

Workers may need to apply for an Indonesia business visa if they need to travel to Indonesia for business. Indonesia offers both single-entry and multiple-entry business visas. The Indonesia business visa is provided to foreigners who wish to attend meetings or conferences, sign a contract, or engage in any other business-related activity in Indonesia. These visas, however, do not entitle you to work for an Indonesian employer. There are a variety of visas foreign visitors can apply for depending on their purpose of visit.

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