INDONESIA Law and Practice Contributed by: Agus Ahadi Deradjat, Gustaaf Reerink and Adri Dharma, ABNR Counsellors at Law
10. Employment and Labour 10.1 Employment and Labour Framework The primary employment legislation in Indonesia is Law No 13 of 2003 on Manpower, as amended by the Job Creation Law (the “Manpower Law”), and Law No 2 of 2004 on Industrial Relations Dispute Settle - ment (the “IRDS Law”). In 2021, the Indonesian gov - ernment also issued four government regulations, the key aspects of which cover expatriates, fixed-term employment contracts, outsourcing, working hours and rest entitlement, termination of employment, wages and job loss security. Indonesian employment law provides protection to employees who are performing, or about to perform, work for employers in Indonesia. The Manpower Law recognises two types of employment agreements: permanent and fixed-term. Expatriates are employed under a fixed-term employment agreement subject to their work permit. In principle, in any employment relationship, the employment terms and conditions are determined by agreement of both the employer and employee. Employment terms and conditions, however, may not be less than those regulated under the prevailing man - power laws and regulations. Moreover, employment can only be terminated in accordance with the pro - cedures and reasons stipulated under the Manpower Law and its implementing regulations, the employ - ment agreement, a collective labour agreement (CLA) or company regulation (CR). The Manpower Law recognises the CLA as an instru - ment of collective bargaining between a registered labour union, or several registered labour unions, and an employer, several employers or employer organisa - tions. A CLA contains the rights and obligations of the employer, labour union and employees but in greater detail compared with those regulated in the prevail - ing laws and regulations. More specific employment terms and conditions may be agreed in an individual employment agreement. As far as employment terms and conditions are con - cerned, the Manpower Law also recognises a CR for companies that do not yet have a registered labour
union. A CR is obligatory for companies employing at least ten employees, and its formulation is the respon - sibility of the employer. As a general rule, the quality and quantity of the content regulated in the CLA and the CR must not be less than that regulated under the prevailing laws and regulations. Essentially, rules related to labour unions are stipu - lated under Law No 21 of 2000 on Employee/Labour Unions (the “Labour Union Law”). Under the Labour Union Law, a labour union will be recognised if, fol - lowing its establishment, (i) it provides notification of its establishment in writing to the local office of the Manpower Agency for registration purposes; and (ii) it provides notification of its establishment and regis - tration number to its employer, to which the employer has no right to object. A recognised labour union is entitled to: • negotiate a CLA with management; • represent employees in industrial relations dispute settlements; • represent employees in manpower institutions; • establish an institution or carry out activities related to efforts to improve employee welfare; • carry out other manpower or employment-related activities that do not violate prevailing laws or regulations; • establish and become a member of a labour union federation; and • become affiliated or co-operate with an internation - al labour union or other international organisation. Works councils are recognised as bipartite co-opera - tion bodies (BCBs) under the Manpower Law. Compa - nies that employ more than 50 employees are obliged to establish a BCB, which functions as a communica - tion and consultative forum between an employer and the representatives of a labour union and/or employ - ees within the framework of improving industrial rela - tions. Members of a BCB are representatives of the employer and the employees/labour union, with a 1:1 composition and at least six members. 10.2 Employee Compensation Employees who undertake work are entitled to receive wages. The amount paid is by agreement between
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