Legal Labour and Employment Requirements with Bagoes soehariadji.ppt

1. Legal Labour and Employment Requirements
13/ 2003
1

2. EXPATRIATESWORKINGIN INDONESIA
1. They are employed only in positions which cannot be
filled by Indonesians
2. They are required to carry out training and skills transfer
to Indonesian employees
3. Employer needs to submit periodic manpower planning
reports (RPTKA)
4. The employer must obtain the work permit (IMTA) from
manpower Dept, usually issued for 12 months period
2

3. RECRUITMENT,HIRING AND PLACEMENT
1.Proper recruitment and selection criteria need to be established to enable
the Company to hire highly competent and motivated candidates who are
trainable and have good attitude.
2.Recruitment may be done through the company’s own HR Department or
with the help of an external recruitment agent (outsourcing).
3.Recruitment manpower from other than area of work location, or from
other provinces, requires special arrangement AKAD Program. Under this
program the company must provide transportation from the place of
recruitment and return upon completion of the contract, as well as
housing.
4.Orientation and induction program is important not only to brief the
company policies / regulations, and work procedures to the new
employees, but also to foster good attitude and adjust their mindset.
5.Explanation and signing of employment agreement is mandatory to avoid
misunderstandings and misinterpretations.
3

4. EMPLOYMENTAGREEMENTFORADEFINITEPERIOD:
1. Is only permitted for certain work activities which will be completed
within a certain period, i.e.
a. One time completed type of work or temporary in nature.
b. Work which is not expected to take a long time and no longer than 3
(three) years to complete.
c. Seasonal work, or
d. Work relating to new products, new activities or products which are still
experimental or trial.
2. Work of a non-permanent nature
Note :
• However, every though the work may be continuous, not periodic, not
of a specific duration, and forms part of a production process, the
company may employ new workers under PKWT condition if there is a
temporary manpower shortage that cannot be fulfilled by
• existing employees.
4

5. PKWTFORSHORT TERMWORK/
NON-PERMANENTWORK
1. PKWT to accomplish certain work/job
2. Maximum of 3 (three) years duration
3. The condition that the work/job may be declared
completed should be mentioned in the PKWT
4. PKWT will be terminated once the job is completed
5. PKWT can be renewed if the job has not been
completed
6. The renewal may only be carried out with 30 (thirty)
days break after the termination of the agreement
7. The parties can have alternative arrangements other
than stipulated.
5

6. PKWT FOR SEASONAL WORK
1. Seasonal work/job are those which are
dependent upon the weather or season
2. Only applicable for the type of work in
certain season
3. The works/jobs that have to be carried out
can only be conducted with PKWT or seasonal
job
4. Applicable only for employees to perform
additional work / jobs
5. Make a list of such employees
6. Shall not be renewed
6

7. PKWTFORFREELANCEDAILYWORKER
1. The time and work volume are not regular
2. The wage is based on attendance
3. The worker works less than 21 (twenty one)
days a month
4. If the worker works for 21 (twenty one) days
or over for 3 (three) consecutive months or over,
than the Employment Agreement becomes
PKWTT (permanent)
5. Written Employment Agreement and list of
employees have to be submitted to the Local
Manpower Office
7

8. BASIC EMPLOYMENT LAWS
WORKING HOURS
1.40 working hours a week = 173 hours a month
2.5 working days a week, 8 hours a day
3.6 working days a week, 5 days of 7 hours continuous work
4.½ hour rest time (minimum) after 4 hours continuous work
5.1 day rest after every 6 working days
6.2 days rest after every 5 working days
7.There are 13 gazette public holidays, which include Chinese New Year. If a
holiday falls on a Saturday or a Sunday it is not automatically replaced by a
Monday as holiday unless so declared by government.
8

9. O VERT IM E
1. Employees working in excess of the basic number of working hours is entitled
for overtime pay
2. The maximum overtime work is 3 hours a day and 14 hours a week
3. The company wishing to employ workers in excess of nine hours a day and 54
hours in a week would need to seek approval for such deviation from the
Ministry of Manpower
4. Other requirements include providing nutritious on food and drink of at least
1400 calories, and transportation for women working the night shift
5. The overtime payment does not apply to employees holding" Staff” positions.
The criteria of “Staff” are as follows :
a. Those who hold structural position in the company;
b. Those who have obligations, responsibilities and authorities in the Company;
c. Those who ears salaries which are more than those of the other workers /
employees;
d. Those who receive better fringe benefits than the other employees
9

10. CALCULATIONOFOVERTIME
1. The Basis for Overtime Wage Calculation:
• a. Basic Salary
• b. All kinds of fixed allowance (fixed allowance is the allowance given in
money paid regularly on monthly basis without considering the
attendance or absenteeism of the employee)
2. The calculation of overtime on a working day
• a. For the first hour : 1 x hourly wage
• b. For the succeeding hours : 2 x hourly wage
3. The calculation of overtime on weekly rest days or public holidays
• a. For the first seven hours : 2 x hourly wage (6 working days)
• b. For the first eight hours : 2 x hourly wage (5 working days)
• c. For the first hour in excess : 3 x hourly wage
• of the above
• d. For the first hour in excess : 4 x hourly wage
• of the above
4. The hourly wage rate is calculated as follows:
• a. Monthly paid employees : 1/173 x monthly wage
• b. Daily paid employees : 3/20 x monthly wage
10

11. WAGESYSTEM
1. Definition: Salary is compensation from an employer to an employee for work or services already undertaken or to
be performed, expressed or valued in the form of money and determined according to an agreement or legislation
and paid based on an employment agreement between the employer and the employee including fixed allowance.
2. General principle : no work no pay
3. Wages are paid in monetary form or otherwise, if paid in kind (no cash remuneration) it shall not be considered as
part of the wage.
4. Each province, through a system, may decide their own provincial minimum wage.
The wage components maybe broken down as follows :
1. Basic wage
2. Fixed allowance is a regularly monthly and fixed payment in relation to work done by the employee, which may
include housing allowance, transportation allowance and meal allowance, etc. It is not given on the basis of the
employees attendance.
3. Non – fixed allowance is the allowance that is paid on the basis of the attendance of the employee or other criteria.
If employee is absent, the allowance is not paid.
4. Non-wage components are benefits, which are given in kind such as car, housing, meal, etc. Bonus and religious
allowance are considered as non-wage components.
5. In the event that a wage consists of basic wage and fixed allowance, the amount of basic salary shall be at least 75%
of the total of the basic wage and fixed allowances.
6. A delay in payment of wages of up to 3 days is reasonable. Penalties for late payment are calculated as follows:
• a. 4th day to 8th day of delay : 5% for each day.
• b. 9th day to 30th day of delay : 1% for each day up to max 50%
• More than 30 days : charged on a loan interest rate based on a loan by the bank.
7. Before the termination of an employment relationship, the wages paid to an employee who is continuously ill and
cannot perform the work shall be as follows :
• a. For the first 4 (four) months : 100% of the wages
• b. For the second 4 (four) months : 75% of the wages
• c. For the third 4 (four) months : 50% of the wages
• d. For the fourth 4 (four) months : 25% of the wages
11

12. LEAVES
1. All workers are entitled to at least 12 days annual paid leave after one year of
continuous service. If the leave is not taken within six months after entitlement then it
lapses.
2. For certain type of companies, employees may also be given a long leave of at least two
months after having work continually for six consecutive years. The leave entitlement
should be taken one month at a time in the 7th and 8th year of work.
3. Indonesia labor law also provides for maternity leave of 1 months before and 1 months
after confinement or miscarriage. Female employees who are breast feeding are to be
given time to breast feed during working hours.
Other permitted leaves with full pay are as follows :
• Own wedding -----> 3 days
• Circumcision of child -----> 2 days
• Baptism of child -----> 2 days
• Marriage of son / daughter -----> 2 days
• Birth of child / Miscarriage -----> 2 days
Death of husband / wife, parents / -----> 2 days
• parents in law, child or daughter / son-in-law
• Death of non immediate family -----> 1 day
12

13. LEAVES (CONT)
1. Menstruation leave of up to two (2) days for women
employees who are ill during their menstruation.
2. Sick leave (with medical certificate from Company
appointed doctor) has no limitation unless it is long
(continuous) sick leave, where the company may adopt the
labor law article 93 (3) on the wage percentage to be paid to
the employee up to the 12th month.
3. Religious duties leave given to Moslem employees (up to
3 months) is paid leave (religious duties include pilgrimage to
Mecca the “Hajj”).
4. Retirement age is 55 years. If still employed, then the
maximum retirement age may be extend up to 60 years.
13

14. JAMSOSTEK
(Employee’sSocialSecurityProgram)
1. Every employee and his/her family (including expatriates) is entitled
to subscribe the social security program.
2. Any employer having 10 employees or more and paying total wages
in excess of Rp.1.000.000 per month is obliged to participate in the
Jamsostek program.
3. Jamsostek program comprised of 4 benefit schemes.
4. Occupational Accident Security: paid by employer; percentage is
based on line of business category (Cat-1 = 0,24%, Cat-2 = 0,54%,
Cat-3 = 0,89%, Cat-4 = 1,27%, Cat-5 = 1,74%).
5. Death Security : 0,30% paid by employer
6. Old Age Security : 3,7% paid by employer & 2% paid by
employee
7. Health Care Security: 3% (Single), 6% (Married) paid by employer
8. The Health Care Security contribution is optional if employer is able
to prove that they already provide equal or better health care
through other Medicare system.
14

15. BASICINDUSTRIALRELATIONSIN THE
COMPANY
THE TOOLS TO MAINTAIN HARMONIOUS INDUSTRIAL RELATION
1.Labor law.
2.Employment Agreement.
3.Company Regulation / Collective Labor Agreement (CLA)
4.Bipartite / Tripartite Negotiations.
5.Labor Union / Employer Association.
6.Employees Cooperative.
15

16. BIPARTITE& INTERNALCOMMUNICATION
1. Bipartite a communication forum at the company level
with members from employees and/or Union
representatives and employer representatives to
discuss and resolve matter of common interests e.g.
productivity, discipline and industrial peace.
2. The objective is to develop and establish harmonious
industrial relations and peaceful work environment in
the company.
16

17. LAWNO.21 /2000 ON ESTABLISHMENTOF
LABORUNION
Provide that:
1.Establishment of Labor Union is employees right.
2.Allows for Registration of House Union.
3.List the Right and Obligations of House Union.
4.Allows for more than one (1) House Union to be formed in a
company.
17

18. PREVENTIVEMEASURES
1. Proper recruitment and selection process to get
the right candidate, with good working attitude.
2. Orientation and inducting program to prepare the
newly hired employees to understand their role,
responsibility and job specification as well as to
orientate their mindset toward the job.
3. Comply with the Minimum Labor Standard
Requirements, Employment Agreement, Company
Regulation, Bipartite Communication Forum, etc.
4. Engage qualified and capable Indonesian HR
Executive to have better communication with the
workers / Union.
18

19. AVOIDINGINDUSTRIALDISPUTES
Early attempts for settlement must be made to prevent industrial disputes. This may
be achieved through the following actions :
1. FAIR TREATMENT.
Employment policies should be as transparent as possible, especially with regard to
promotion and awards. Employees should be able to see that a promotion is based on
merit and not other reasons.
2. TREAT THE LABOR UNIONS AS A PARTNER.
Most employers are wary and distrustful of the Labor Union in their companies. In fact,
if treated as a partner, the Union can assist the employer in conveying difficult
decisions such as lower wage increase or mass termination of employment. This avoids
industrial dispute.
3. TREAT THE EMPLOYEES AS A PART OF A BIG FAMILY.
It is important to show the employees that the management (represented by at least
the employees direct supervisor) cares for their wellbeing. This can be demonstrated
by attending the employee’s wedding, visiting the employee if there is a death in his
family or visiting the employee who is in hospital.
4. ORGANISE ROUTINE DIALOGUES AND MEETING WITH THE LABOR UNION OR
EMPLOYEES.
This should be done regularly to discuss and to settle issues which arise within the
company. Involving their employees in making of decisions concerning their welfare
will increase their sense of belonging to the company.
5. CONDUCT PERIODIC OUTINGS WITH EMPLOYEES AND/OR THEIR FAMILIES.
These not only create a convivial atmosphere but are also good means to get to know
the employees and their families. 19

20. UPDATINGOFDOCUMENTS
• Employers should review carefully and regularly their
existing Collective Labor Agreements Or Company
Regulation as well as their standard Employment
Agreement to ensure that they are updated in
accordance with the prevailing laws.
• There are specific provisions that can be included into
these documents in order to reduce exposure or to
introduce further certainty into applicable procedures.
In particular, clear and unequivocal provisions for
disciplinary action should be inserted into the
documents as well as clear descriptions of all actions
required.
20

21. TERMINATIONPROCEDURES
• The basic tenet of Indonesia Labor Law is that employment
termination should be minimized.
• The labor law provides for compensation when the employment
relationship is terminated.
• Before terminating an employee, the first important step is to
hold “bipartite” negotiations between employee and employer to
discuss the termination.
• Approval/decision from PPHI is needed for terminating an
employee.
• Dismissing an employee due to “minor mistakes” should be made
only after a least three consecutive warning letters have been
given to the employee over a period of time as stated in the
Company Regulation / CLA.
• The employment agreement with the employee may be
suspended pending the approval from PPHI, but the employee is
still entitled to full pay. The suspension must be in writing.
21

22. SEPARATIONPAY
• The new labor law No. 13 Year 2003, on Manpower
Affairs introduced a new termination benefit called:
“SEPARATION PAY” to be given to the employee whose
employment is terminated due to serious mistakes,
such as being absent for 5 consecutives days without
valid reasons, or resign on his/her request, and whose
task and function do not directly represent the
employer and the implementation of which shall be
regulated in an Employment Agreement, Company
Regulations or Collective Labor Agreement.
22

23. GUIDELINESONTERMINATIONBENEFITSLABORACT13/2003
NO.
Severance
Pay
Long
Service
Pay
Compensa
tion
Separation
Pay
1. Employer can terminate the employees who have
committed a serious violation. Such termination shall be
supported by evidence and if the employee disagree to
the termination he/she can lodge a lawsuit to the
Committee for the Settlement of Industrial Dispute. (Art.
158 (4))
NA NA Provided Provided
based on
Company
Regulation
2. Employer can terminate the employment after the first, the
second, and the third warning letter were consecutively
issued to the employee for committing violation (Art. 161
(3))
1x
Art.156
1x
Art.156
Provided -
3. Employee resigns on his/her own request (Art. 162) Not Provided Not
Provided
Provided Provided
based on
Company
Regulation
4. Employer can terminate the employment of an employee
not because of his/her, but the employee accepts the
decision
Not
Regulated
Not
Regulated
Not
Regulated
-
5. Employer can terminate the employment due to the
closing down of the company as a result of continuous
financial losses, validated by audited financial statement
for the last two years. (Art. 164 (1))
1x
Art.156
1x
Art.156
Provided -
6. Employer can terminate the employment not because of
the closing down of the company nor under force majeure
condition, but for improve efficiency. (Art. 164 (3))
2x
Art.156
1x
Art.156
Provided -
23

24. GUIDELINESONTERMINATIONBENEFITSLABORACT13/2003
NO.
Severanc
e Pay
Long
Service
Pay
Compen
sation
Separatio
n Pay
7. Employer terminate the employment due to change
in the status, merger, consolidation, or ownership of
company and the employees are not read to
continue their employment with the company (Art.
163 (1))
1x
Art.156
1x
Art.156
Provided -
8. Employer terminate the employment due to change
in the status, merger, consolidation, or ownership of
company and the employees are not read to
continue their employment with the company (Art.
163 (1))
2x
Art.156
1x
Art.156
Provided -
9. Employer terminates the employee who has
entered retirement age, but the employee is not
included under the retirement program. (Art. 167 (2))
2x
Art.156
1x
Art.156
Provided -
10. Employment is creased because employee passes
away. (Art. 166)
2x
Art.156
1x
Art.156
Provided -
11. Employee being detained by the authorized party
for alleged crime in the case of the court decide the
criminal case before six (6) month period and being
declared guilty (Art. 160 (7)).
Not
Regulated
1x
Art.156
Provided -
12. Company went bankrupt /liquidated. (Art. 165) 2x
Art.156
1x
Art.156
Provided -
13. Employee being absent for 5 (five) working days or
more consecutively without written notice supported
by legitimate evidence and having been reasonably
summoned in writing twice by the employer can be
Not
Regulated
Not
Regulated
Provided
24

25. GUIDELINESONTERMINATIONBENEFITSLABORACT13/2003
NO.
Severance
Pay
Long
Service
Pay
Compens
ation
Separation
Pay
14. a. Employee can apply for termination of employment to the
Committee for the Settlement of Industrial Dispute in the
case of employer commit violations. (Art. 169 (2))
2x
Art.156
1x
Art.156
Provided -
b. If the Committee for The Settlement of Industrial Relation
Dispute declaring that the company do not commit the
alleged action, then the employer can terminate
employment without the stipulation of the Committee for
the Settlement of Industrial Relations Dispute. (Art. 169 (3))
Not
Provided
Not
Provided
Provided -
15. Employee having chronic illness, suffering from physical
disability due to occupational accident and incapable to
performing the job after exceeding a period of 12 months
may apply for the terminating of employment. (Art. 172)
2x
Art.156
2x
Art.156
Provided -
25

26. No.
PHK case based on Article 73 this Company
Regulation paragraph :
Indemnity
Severance
Pay
Long
Serv
ice
Pay
Compensati
on
Separati
on
Pa
y
1. (3 Months – Probation Period) - - - -
2. a. Resignation less than 30 days - - - -
b. Resignation within 30 days - - Received Received
3. Pension Age 2x 1x Received -
4. Incompetent / Unperformance 1x 1x Received -
5. Consecutively Warning Letter Issued 1x 1x Received -
6. Death / Passed Away 2x 1x Received -
7. Dishonored Dismissal - - Received -
8. Absent for 5 consecutive days - - Received Received
9. Prolonged Sickness 2x 2x Received -
10. Detained by Competent Authority - 1x Received -
11. Sentenced guilty by Judge / Court - 1x Received -
12. PKWT period expires - - Received -
13. The Company is closing down for improve efficiency 2x 1x Received -
14. Company conducts efficiency 2x 1x Received -
15. a. Change of status, but Employer
not ready to accept
2x 1x Received -
b. Change of status, but Employee
not ready to continue their employment
1x 1x Received -
16. The Company is closing down as result of continuous
financial losses
1x 1x Received -
17. The Company bankrupt / liquidated 1x 1x Received -
26

27. CALCULATIONONTERMINATIONBENEFITSLABORACT13/2003
SEVERANCE PAY (UANG PESANGON)
WORKING PERIOD:
Less than 1 year
1 years or more but less than 2 years
2 years or more but less than 3 years
3 years or more but less than 4 years
4 years or more but less than 5 years
5 years or more but less than 6 years
6 years or more but less than 7 years
7 years or more but less than 8 years
8 years or more but less than 9 years
1 month salary
2 months salary
3 months salary
4 months salary
5 months salary
6 months salary
7 months salary
8 months salary
9 months salary
SERVICE PAY (UANG PENGHARGAAN MASA KERJA)
WORKING PERIOD:
3 years or more but less than 6 years
6 years or more but less than 9 years
9 years or more but less than 12 years
12 years or more but less than 15 years
15 years or more but less than 18 years
18 years or more but less than 21 years
21 years or more but less than 24 years
24 years or more
2 months salary
3 months salary
4 months salary
5 months salary
6 months salary
7 months salary
8 months salary
10 months salary
27

28. COMPENSATION (UANG GANTI RUGI)
Untaken annual leave that has not been forfeited. v
Untaken long leave if such leave is provided by the company. v
Transportation cost for the employee and his/her family to the place of hire. v
Housing/medical allowance equal to 15% of the total severance pay and service pay (if
the
working period fulfils the requirement for service pay).
v
Other matters as stipulated by P4D/P4P, work agreement, company rules & regulation or
CLA
v
SEPARATION PAY (UANG PISAH)
Given to employees whose employment is terminated and whose task and function do
not
directly represent the employer’s interest. The nominal value and the implementation of
which is stipulated in the work agreement, company rules and regulations or
collective labor agreement.
v
28