According to data from Human Resources Consulting, one of the considerations for foreign companies to invest in Indonesia is because Indonesia has a lot of natural resources (SDA) as raw material. In addition, Indonesia is also a country that has a large population so that there are many consumers. Security stability in Indonesia is also guaranteed, and Indonesia also has a lot of cheap labor.
Human resources consulting also said that human resources in Indonesia have other advantages that are not inferior to the human resources of other nations. One of them is loyalty, willingness to develop, and not taking work time into account.
But now the rise of foreign workers in Indonesia is not only due to growing investment from abroad but also because of the lack of local human resource (HR) expertise, through this resource consulting article, we will help you how to undergo the procedure and what are the requirements when hiring workers. local or foreign work, come on!
Mechanisms for the use of foreign and local workers
Currently, based on data from human resource consulting, Indonesia has become one of the countries with the largest economy and market with the greatest potential in the world. Indonesia has also become a destination that offers increasingly attractive options for local residents to work in other cities and for foreigners to work in other countries.
As a company that is expanding and requires a lot of talent and manpower, companies have two options when it comes to their operations in Indonesia :
- Hiring foreigners with special skills.
- Recruiting local residents to meet demand.
As such, you must comply with labor laws and regulations in Indonesia if you wish to employ employees. If not, the company will face the law if it commits a violation.
Well, as a company owner in Indonesia, this article has all the information you need to know about the regulations for hiring foreign workers or local employees in Indonesia. Because we are experienced and professional human resource consulting.
Employing Foreign Workers in Indonesia
As a company expands and becomes international, one of the most important components of success is employee knowledge. Therefore, by recruiting foreign workers, companies will gain knowledge that they do not have. Foreign recruitment will usually provide an in-depth understanding of certain skills, products, systems, and policies.
TKA must comply with immigration laws in Indonesia.
As of September 2018, the labor law includes Government Regulation No. 20 of 2018 concerning Foreign Workers (TKA) which is effective from 29 June 2018 (PP20), and the Ministry of Manpower Regulation No. 10 of 2018 concerning Procedures for the Use of
Foreign Workers which became effective on 11 July 2018 (RM10). Both regulations are complex, and changes may be introduced from time to time.
You are advised to contact BINKA Consulting for more details regarding human resource consulting and free consultations for information on local resources and foreign workers.
Requirements for hiring foreign workers
A regulation from the Ministry of Manpower in Indonesia states that only the following organizations or institutions can employ foreigners:
- Foreign legal entities registered in Indonesia
- Representatives of foreign countries, international organizations, international agencies, government agencies
- Representative offices of foreign companies, representative offices of foreign trade companies, and foreign news agencies incorporated in Indonesia
- Limited Liability Companies (PT) and foundations
- Educational, social, cultural, and religious institutions
- Organizers of sports, entertainment, and arts events
Requirements for hiring foreign workers
Companies are required to go through the following stages to employ foreigners:
- RPTKA – Plan for the Use of Foreign Workers approved by the Ministry of Manpower or the authorized official
- Submission of US $ 100 per month as compensation for DKP-TKA for each position held by foreign workers (this does not apply to certain institutions and organizations, please contact Cekindo to find out more)
- Registration of insurance programs for foreign workers. The insurance program must be under an insurance company registered in Indonesia
- Appointment of Indonesian Companion Employees to share the expertise and technology of foreign workers
- Provision of training for Associate Workers
- Plans for the Placement of Foreign Workers (RPTKA) and Exemption of RPTKA
Currently, it is not mandatory for companies to obtain RPTKA for certain positions held by foreigners and pay compensation funds :
- Shareholders who are the Board of Commissioners
- Shareholders who are the Board of Directors
- Officials from the Government of Indonesia based on the Ministerial Decree
- Diplomatic officer of a foreign representative office
- An international agency with foreign recruitment
- Other social, educational, and religious bodies, but applicable on a case-by-case basis according to the Ministry’s decision
Taxes for Foreign Workers
Based on the results of data collection by human resource consulting, foreign workers are considered as individual taxpayers if they are domiciled in Indonesia for more than 183 days in 12 consecutive months. Therefore, foreign taxpayers are required to register a Taxpayer Identification Number (NPWP) at the tax service office.
Percentage of progressive tax for individual taxpayers with foreign resident status in Indonesia based on annual income:
- IDR 1-50 million: 5%
- IDR 50 – 250 million: 15%
- IDR 250 – 500 million: 25%
- Above IDR 500 million: 30%
Work Visa for Foreign Workers in Indonesia
Based on Government Regulation no. 20/2018 to simplify the work permits of foreign workers and their work visas. It is certain that the implementation of this new regulation will help the process more efficiently and quickly for companies.
According to a survey by human resources consulting, foreign workers are entitled to work visas that are valid for one month to two years, and these visas are extendable and must be sponsored by the company based on their position and market sector.
The following sectors do not allow foreigners to occupy positions, namely:
- Quality Control and Inspection
- Legal entity
- Human Resources
- Health, Safety, and Environment
- Supply Chain Management
- The different types of work are urgent work permit (validity period of 1 month), temporary work permit (2-6 months), and long term work permit (7-12 months).
Just like not registering as taxpayers in Indonesia, foreigners who do not get a work permit are deemed to have violated Indonesian law and will be subject to a fine of IDR 500 million and/or 5 years in prison.
BINKA Consulting as a human resources consulting company always recommends companies in Indonesia to consult on local human resources as well as foreign workers with trusted agencies to get the latest information on immigration laws.
Hiring Local Employees in Indonesia
Based on data from BINKA Consulting as a human resources consulting company. Hiring foreign or local workers certainly has different advantages and disadvantages. However, it is not surprising that currently, local talents are increasing due to Indonesia’s dense population and the growing demographic growth of the young population. There is a lot of potentials that can be explored by Indonesian workers, thus increasing company profits with the right recruitment strategy.
To make the recruitment process easier, it is of course very important for companies to employ Indonesian citizens who are familiar with local customs, ways of doing business, conventions, and local culture. Additionally, hiring local employees in Indonesia helps international companies penetrate the Indonesian market more efficiently.
Recruitment process by trusted Resource Consulting
Many employers believe that the process of hiring new employees is a waste of time and money. For this reason, companies need to conduct due diligence using the services of a professional human resource consulting. The following are some of the tests carried out, namely :
- Credential check
- Personal background check
- Reference checks
This detailed review process is much more important for professional positions to verify the factual information listed on the resume. The Resource Consulting team will always create a due diligence checklist to ensure successful hiring.
Outsourcing Recruitment System
Based on human resource consulting, the recruitment process will be very strict and will take a very long time if there are many applicants for several positions. When the person in charge of recruiting is under pressure from a time frame or a lack of experience, the hiring decision is sometimes not considered carefully.
This is where you need the resource consulting Team, which will help you find local and foreign workers who are competent in their fields and match your company’s criteria.
By outsourcing the recruitment process through trusted human resource consulting, companies can focus on key business activities, improve employee quality, reduce costs and meet recruitment needs and demands and not be left behind, reduce employee turnover rates.
We are always here to be a solution for your company!
For information regarding the recruitment, due diligence, taxation, or work permits in Indonesia, BINKA Consulting as human resource consulting is ready to serve you. Contact us now and get the latest information along with a free quote for your business.
We, as human resources consulting who are experienced in the recruitment process, will help you decide whether hiring foreign workers or local talent is the best requirement for your business. These benefits can be significant in a country like Indonesia with a large local workforce and lots of talent, jobs, and business opportunities.
Don’t hesitate anymore to immediately have a free consultation with us, and prepare everything that makes you confused and wants to find a solution with us.
We are BINKA Consulting as experienced and professional human resources consulting ready to help you!
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