New Regulation on Utilization of Foreign Employee
Authors: Juni Dani, Edly Febrian Widjaja, Mustafa Kocadag
On 29 March 2018, the Government of the Republic of Indonesia enacted Presidential Regulation No. 20 of 2018 concerning the Utilization of Foreign Employee (“Presidential Reg. 20/2018”). The regulation contains the consolidation of several Ministry of Manpower and Ministry of Law and Human Rights regulations, which governs the utilization, working permits and visiting permits for foreign employees, and also regulates several new regulations. Presidential Reg. 20/2018 is one of President Joko Widodo government’s legal products with the main purpose of making Indonesia a more foreign investment-friendly country.
Presidential Reg. 20/2018 revokes Presidential Regulation No. 72 of 2014 on Utilization of Foreign Employee and the Implementation of Education and Training for Accompanying Employee. However, it does not revoke the implementing regulations of Presidential Regulation No. 72 of 2014, as long as its provisions do not contravene the valid Presidential Reg. 20/2018.
Below are key provisions governed under Presidential Reg. 20/2018:
A. Foreign Manpower Utilization Plan or Rencana Penggunaan Tenaga Kerja Asing (“RPTKA”)
Pursuant to Article 43 of Law No. 13 of 2003 on Manpower (“Manpower Law”), an employer which intends to employ foreign employees is required to own a RPTKA, legalized by the Ministry of Manpower or other appointed officials. The Manpower Law excludes such requirement to own a RPTKA for government institutions, international agencies and foreign country representatives.
Article 10 of Presidential Reg. 20/2018 further excludes such requirement to obtain a RPTKA. Such exception shall be applicable to the following:
- Shareholders who are appointed by a member of the Board of Directors or a member of the Board of Commissioners of the employing company;
- Diplomatic and consular employees in the foreign representative office; or
- Foreign employees for works/jobs required by the Government of Indonesia. The types of works/jobs required by the Government will be specified under a Minister of Manpower Regulation.
Specific to point (1) above, Presidential Reg. 20/2018 did not specify whether such exemption is applicable in the event the company’s shareholders are foreign companies, e.g. when the Indonesian company appoints the foreign shareholders’ member of Board of Directors as the President Director of the Indonesian company. It is expected that the Ministry of Manpower will issue an implementing regulation to support Presidential Reg. 20/2018 and to provide a solution to this concern.
Presidential Reg. 20/2018 also provides an easier procedure for employing a foreign employee for emergency and urgent works. The employer shall apply for the RPTKA at the latest by 2 (two) business days after the foreign employee initiates his/her works in Indonesia. The RPTKA shall be legalized at the latest by 1 (one) business day after the application is received and its supporting documents are deemed complete by the Ministry of Manpower or appointed officials.
B. Foreign Manpower Employment Permit(Izin Mempekerjakan Tenaga Kerja Asing)(“IMTA”)
Presidential Reg. 20/2018 provides that IMTA is no longer required to employ foreign employee. The employer is now only required to legalize the RPTKA to the Minister of Manpower or the appointed officials. Furthermore, the Presidential Reg.20/2018 also provides that the legalization of the RPTKA shall be completed within 2 (two) days.
Furthermore, for certain business sectors (that will be regulated further under the Ministry of Manpower Regulation), an employer can employ foreign employees which have been employed by another employer, provided that the foreign employee must be employed by the second employer in the same position as its initial employer. The maximum validity period of the employment agreement between the foreign employee and the second employer shall not exceed the maximum validity period of the employment agreement with his/her initial employer.
C. Limited Stay Visa (VITAS) and Limited Stay Permit (ITAS)
Presidential Reg. 20/2018 governs that VITAS and ITAS applications, which are currently separate processes, can now be processed simultaneously at the Indonesian Embassy where the foreign employee is domiciled.
The KITAS period is similar with the previous Presidential Reg. 72/2014, which is a maximum of 2 (two) years and can be extended pursuant to prevailing laws and regulations. The KITAS shall also be issued along with the Multiple Exit Re-entry Permit (MERP) in order to allow the foreign employee to enter or leave Indonesia several times. Such MERP shall be valid as long as the KITAS is still valid.
For urgent and emergency works, the foreign employee may use the visa and staying permit intended for such works/activity.
D. Insurance Policy or Enrollment to Manpower Social Security Program (BPJSTK)
As further effort to consolidate various ministry regulations, Presidential Reg. 20/2018 now obliges the foreign employee to be enrolled to the Manpower BPJS program and/or to obtain an insurance policy issued by an Indonesian insurance company after he/she has worked for 6 (six) months in Indonesia. This was previously regulated under Ministry of Manpower Regulation No. 16 of 2015 regarding Utilization of Foreign Employee Procedure as amended by Regulation No. 35 of 2015.
Presidential Reg. 20 of 2018 shall come into effect on 29 June 2018 (or 3 [three] months after its enactment date).
The Authors would like to acknowledge the contribution of our Junior Associate Mr Vincencius Desta Galang Pratama in preparing this Legal Alert.