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03 June 2020 (closed)
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Law number 13 of 2003 regarding Manpower (Labor Law) and its implementing regulations are setting stringent restrictions to companies employing Foreign Workers (expatriates). Besides the licensing requirements as we discussed in our previous columns, the legislation sets other restrictions to companies which wish to employ foreign workers. In this weeks’ column we will discuss these restrictions to companies.
Restrictions to Companies Employing Foreign Workers
Company type restriction
Based on article 42 (2) Labor Law, a sole proprietorship is prohibited to employ foreign workers. Article 3 and 4 of Minister Regulation 12 of 2013 regarding Procedures for the Use of Foreign Manpower (Minister Regulation) further specify which companies can and which companies cannot hire foreign workers. The following companies are allowed to hire foreign workers:
1. Government agencies, international agencies, foreign missions;
2. Foreign trade representative offices, representative offices of foreign companies, representative offices of foreign news;
3. Foreign private companies;
4. Legal entities established under the laws of Indonesia or foreign business undertaking registered at authorized institutions in Indonesia;
5. Social, religious, educational and cultural institutions; and
6. Impresario service businesses.
The following companies are prohibited from hiring foreign workers:
1. Civil partnership;
3. Limited Partnership (CV); and
4. Trade Enterprise (UD).
Based on article 42 (4) jo. 46 Labor Law foreign workers can only be employed for certain positions and they are not allowed to occupy positions which deal with personnel. Employers of foreign workers are prohibited to employ foreign workers for multiple positions in one company or to employ foreign workers which are already employed by other companies.
Ministry Decision 40 of 2012 regarding Specific Positions of Foreign Workers (you can download the decision here) specifies a list of positions which cannot be filled by expatriates. Beside these general position restrictions, specific business fields are regulating additional restriction, which we will not cover in the column.
Based on article 42 (4) Labor Law foreign workers can only be employed for a certain period of time. This means that based on legislation expatriates cannot become permanent employees, which has been confirmed by several court decisions.
This column is provided by PNB Law Firm Jakarta