What You Need To Know About Expatriate Work Permits In Indonesia?
Article 1 point 13 of Law Number 13 of 2003 concerning Manpower (“Labor Law”) defines Foreign Workers (“Expatriates”) as foreign visa holders who come to Indonesia with the intention of working in Indonesian territory. Expatriates are foreign workers who live outside their country of origin and settle abroad, for example in Indonesia. Employers who wish to employ foreign workers to work with them in Indonesia must ensure that the foreign workers have obtained a complete work permit for foreign workers as stipulated by the Ministry of Manpower in Indonesia.
In this article, we will outline 4 (four) important things that all Employers who employ and/or are in the process of hiring Expatriates must know and understand:
1. Who can be a Work Visa Sponsor?
Only the following entities are allowed to become sponsors for Expatriates in Indonesia:
• Government Agencies, International Agencies, Representatives of Foreign Countries;
• Representative offices of foreign chambers, foreign companies, or foreign news;
• Foreign Investment Companies (Foreign Investment or PMA);
• Legal entity established under Indonesian law or foreign business entity registered with an authorized institution in Indonesia (ie Foreign Representative Office);
• Social, religious, educational and cultural institutions; and
• Entertainment organizer business services (impresariat).
Entities in the form of civil partnerships, firms, limited partnerships, business partnerships, and individuals are prohibited from employing and/or acting as sponsors for Foreign Workers unless otherwise stipulated by Laws and Regulations.
DKP-TKA Payment Obligations for Employers/Sponsors
Employers or sponsors are required to pay a Skills and Skills Development Fund (“DKP-TKA”) of USD 100/month (USD 1200/year) for each Expatriate employed in Indonesia. DKP-TKA are paid in full at the beginning of the Work Permit application procedure in Rupiah (Rp), for the length of service that has been approved by the Minister of Manpower.
The following employers or sponsors are not required to pay DKP-TKA:
• Government Agencies/Institutions;
• International agencies (eg WHO, ILO, UNICEF, etc.);
• Foreign Country Representatives;
• Social institutions; and
• Religion institution.
2. Prohibited Positions for Expatriates
The following are reasons why Expatriates work in Indonesia:
• As the Owner of the sponsoring company (Investor/Shareholder) and/or acting as a member of the Executive Board in the company (namely: President Director/Director);
• As an expert in a particular area of expertise, to transfer knowledge to Indonesian society.
Please note that Indonesian Law regulates that Expatriates are not allowed to hold certain positions in Indonesia. Most of the prohibited positions are in the field of Human Resources Development (HRD), such as Personal Director, Human Resources Manager, and HRD-related Supervisors. A complete list of prohibited positions for foreign workers is regulated in the Decree of the Minister of Manpower No. 40 of 2012 (“Employment Decree No. 40 of 2012”).
Apart from the prohibited positions listed in Permenaker No. 40 of 2012, there are other positions that are prohibited for foreign workers who work in certain fields, such as in the oil and gas industry.
Prohibition for Expatriates to Concurrent Positions
According to article 41 of the Minister of Manpower No. 16 of 2015 (“Employment Decree No. 16/2015”) Employers are not allowed to hold concurrent positions as Foreign Workers, such as:
• Hiring Expatriates for multiple positions, whether the two positions are in the same company, or in different companies;
• Employing Expatriates who are currently employed by another Employer.
Excluded from the prohibition on concurrent positions are foreign workers who work as members of the Board of Directors or the Board of Commissioners.
3. Procedures for Obtaining a Work Permit
Every employer who employs foreign workers must obtain written permission from the Ministry of Manpower (“Work Permit”). Following are the Procedures for obtaining a Work Permit in Indonesia:
Permits to be owned by the Sponsoring Company:
• Foreign Worker Recruitment Plan (RPTKA));
• Telex Vitas;
• Permit to Recruit Foreign Workers (Permit to Employ Foreign Workers or “IMTA”);
Permits that must be owned by the hired Expatriate:
• Limited Stay Visa (Kartu Permit Limited Stay or “KITAS”);
• Multiple Exit / Re-Entry Permit (“MERP”);
• Letter of Registration (Letter of Reporting or “STM”);
• Letter of Registration for Temporary Residence (Certificate of Registration for Temporary Residents or “SKKPM”);
• Arrival Permit Card (Migrant Permit Card or “KIJ”); and
• Proof of Arrival Reporting (Arrival Report or “LK”).
The data required from the sponsor company at the beginning of the procedure consists of the plan: (1) the name of the sponsor company; (2) the domicile of the company’s business; (3) the name of the head of the company; (4) Expatriate work; (5) expatriate job descriptions; (6) the number of foreign workers employed; (7) hired expatriate work locations; (8) expatriate work period; (9) expatriate wages; (10) start work; (11) the number of Indonesian workers employed in sponsoring companies; (12) appointment of Indonesian workers as expatriate assistants; and (13) training programs for Indonesian workers.
4. Obligation to Obtain Other Licenses for Foreigners
After a certain period of time, foreign workers working in Indonesia are required to obtain another permit in order to fulfill their obligations as stipulated in Employment Decree No. 16 of 2015. These obligations are as follows:
• Tax compliance
Article 36 Labor Regulation No. 16 of 2015 requires Foreign Workers who have worked for more than 6 (six) months in Indonesia to obtain a Taxpayer Identification Number or “NPWP”). NPWP functions as a taxpayer compliance for legal subjects in Indonesia.
• Local Insurance Policy
Article 36 of the Labor Law no. 16 of 2015 requires foreign workers to have an insurance policy at an insurance company that is currently established in Indonesia as an Indonesian legal entity.
• Registration of BPJS or Social Security Administering Body
Since the issuance of Law Number 24 of 2011 concerning the Social Security Administration Agency, foreign workers who have worked for a minimum of 6 (six) months in Indonesia are also required to follow the National Security System. Employers must register their workers with the Social Security Administration Agency (BPJS) with 2 (two) security programs: Employment and Health.
