1. Minimum statutory terms

1.1 Key statutes

In addition to the general civil laws that apply to all types of contracts, employment in Indonesia is specifically regulated under legislation including Law No 13 of 2003 (Employment Law) and Law No 2 of 2004 (Industrial Disputes Law). These are supplemented by government regulations, presidential decrees, as well as ministerial regulations, circulars and instructions, which are subject to change from time to time.

In addition to applicable laws, terms and conditions will be set by contracts of employment. Furthermore, companies with 10 or more employees must have Company Regulations that supplement the individual employment contracts. Company Regulations are made by the company and must be approved by the Minister of Manpower and Transmigration.

Some companies will have a Collective Labour Agreement that applies to them and their employees, which replaces the Company Regulations. A  Collective Labour Agreement is made by the company and the labour union/s of the company and must be registered with the Ministry of Manpower and Transmigration.

Since Indonesia is a civil law jurisdiction, unlike the common law jurisdictions, there is no doctrine of binding precedent in the courts.

1.2 Probationary period

The Employment Law recognises 2 types of employment agreements – definite/fixed period employment agreements (see further at 1.9 below) and indefinite/permanent employment agreements.

A probationary period cannot be provided for in a fixed period employment agreement. It is however possible to provide for a probationary period of up to 3 months in a permanent employment agreement.

1.3 Minimum wage

There is no national minimum wage in Indonesia. Each local provincial government is responsible for setting minimum wage levels, which may vary from one industry to another.

1.4 Remuneration structure

Remuneration is generally seen as falling into 2 categories:

• Salary/wage components, including basic salary, fixed allowances (ie paid regularly to the employee) and non-fixed allowances (ie may be paid depending on circumstances).
• Non-salary components, including facilities, bonuses and religious holiday gratuities.

1.5 Working hours

Hours of work
Standard hours of work under the Employment Law for daytime employees are up to 40 hours per week, being up to 7 hours per day for a 6 day work week and up to 8 hours per day for a 5 day work week. Certain businesses or jobs may be exempted from these requirements by ministerial decree.

Overtime
Employers are obliged to pay overtime to workers who work in excess of the standard hours of work. In general, overtime may not exceed 3 hours on any one day and 14 hours in any one week.

The quantum of overtime payments due is governed by ministerial decrees and is complex. In general, certain employees with positions of responsibility are not entitled to overtime payments.

Company Regulations and Collective Labour Agreements often contain prescriptions regarding overtime and overtime payments.

Rest periods
Employees are entitled to one rest day for a 6-day work week or 2 rest days for a 5-day work week pursuant to the Employment Law.
Under the Employment Law, an employee is entitled to a 30 minute rest period after 4 hours of continuous work.

1.6 Public holidays

Generally, employees are entitled to a paid day off on gazetted public holidays. However, employees in certain types of work may be required by their employer to work on public holidays (eg medical, transportation, tourism, supermarkets, security, etc). In such cases, an overtime pay rate will apply under the applicable ministerial regulation/decree.

1.7 Paid annual leave

Pursuant to the Employment Law, all workers (including those on fixed period employment agreements and those on permanent employment agreements) are entitled to 12 days’ paid annual leave after 12 months’ service. Untaken leave must be paid out in the event of termination or resignation.

1.8 Other types of leave

Leave entitlements are generally regulated in some detail by applicable Company Regulations and Collective Labour Agreements. Some examples of statutory leave entitlements include:

Maternity leave
Female employees are entitled to paid leave for 1.5 months before the birth and a further 1.5 months after the birth.  Employers are required to employ the employee in the same position after the employee’s return from maternity leave.  Maternity leave can be extended with medical certification.

Miscarriage leave
In the event of a miscarriage, female employees are entitled to 1.5 months of miscarriage leave.

Menstruation leave
Female employees may be granted leave on the first and second day of their menstrual cycle.

Sick leave
employees are entitled to be absent from work due to sickness provided that the sickness is substantiated by a doctor's certificate.  An employee who is sick and requires long term treatment based on doctor's advice is entitled to sick leave according to the following provisions:

Haj leave
An employer must provide haj leave to its Muslim employees who wish to travel on a pilgrimage to Mecca.  The detailed requirements and procedures for haj leave should be regulated in the employment agreement or Company Regulations or Collective Labour Agreement of the company.

Long service leave (if applicable)
Employees of certain companies who have worked for 6 consecutive years are entitled to at least 2 months of long service leave.  The companies required to implement this kind of leave are companies which had already implemented such long service leave before the issuance of Decree of the Minister of Manpower and Transmigration No.KEP-51/MEN/IV/2004 dated 8 April 2004 regarding Long Service Leave for Certain Companies.

Other leave
Employees are entitled to paid leave for their own wedding (3 days), circumcision of child (2 days), baptism of child (2 days), marriage of child (2 days), paternity leave (2 days), death of husband/wife, parents/parents in-law, child or son in-law/daughter in-law (2 days), death of a relative who lives in the same house (1 day).

1.9 Fixed term employment arrangements

Fixed term employment agreements are only available for certain work, as follows:

• Work to be carried out and completed at one time or work which is temporary by nature.
• Work that is estimated to be completed within 3 years.
• Seasonal work.
• Work that is related to a new product, a new activity or an additional product that is still in the experimental stage or try out phase.

Fixed term employment agreements can be made for a maximum period of 2 years and may only be extended once for a maximum period of 1 year.  A fixed term employment agreement may thereafter be renewed once for a maximum period of 2 years. However, the renewal of a fixed term employment agreement for a further 2 year term may only be carried out after the passage of a ‘grace period’ of 30 days as from the expiry date of the relevant agreement, which can be waived by written agreement between the parties. 

If the fixed term employment agreement does not comply with the above formal statutory requirements, then it could be treated as a permanent employment agreement, entitling the relevant employee to all the benefits for permanent employees under the Employment Law.

If either party to a fixed term employment agreement terminates the employment relationship prior to the end of the agreement, or if the agreement must end for any reasons other than the exceptions referred to below, then the party that terminates the relationship is obliged to pay compensation to the other party in the amount of salary that the employee would be entitled to receive from the point of termination until the end of the agreement. The exceptions are where:

• the employee dies;
• the fixed term agreement expires;
• a court ruling or an IRC order ends the agreement; and/or
• circumstances apply as are prescribed in the employment agreement, the Company Regulations or the Collective Labour Agreement that effectively result in the termination of employment.

1.10 Social security

Companies with 10 or more employees or that pay salaries to employees collectively worth at least Rp1,000,000 (approximately US$90) per month must register the employees in the Worker Social Security Program (Jamsostek Program).

The Jamsostek Program consists of:

• Occupational Accident Insurance: The contribution amount to be made by the employer is based on the type of business of the company, and varies from a minimum of 0.24% up to a maximum of 1.47% of the relevant monthly salary
• Life Insurance: 0.30% of the monthly salary
• Retirement Benefits: 5.70% of the monthly salary
• Health Insurance: 6% of the monthly salary for married employees and 3% of the monthly salary for unmarried employees.

The Jamsostek contributions are mostly borne by the employer on a monthly basis.  However, 2% out of the total percentage of 5.70% of the monthly salary for the Retirement Benefits contribution is borne by the employee, and is deducted from the employee’s monthly salary by the employer.