Foreign Employees/Workers in Indonesia: Termination Benefits

After the Constitutional Court Decision Number 91/PUU-XVIII/2020, the Indonesian Government issued a Government Regulation in lieu of law No. 2 of 2022 on Job Creation to amend Law No. 11 of 2020 on Job Creation (the “Perppu”). The Perppu, however, did not make any significant changes on the utilization of foreign workers because the previous Government Regulation No. 34 of 2021 on Foreign Workers Utilization (“GR 34/2021”) is still applicable.

This article should call to mind the prevailing labor laws and regulations on foreign employees’ recruitment, termination, and its termination benefits.

Employment of Foreign Employees

Under Article 6 of GR 34/2021, employers need to submit a Foreign Worker Utilization Plan (“RPTKA”) to the Ministry of Manpower. Further, Article 16 of GR 34/2021 classifies RPTKA into 4 (four) groups based on their validity period, which consists of:

– RPTKA for temporary work;

– RPTKA for work of more than 6 (six) months;

– RPTKA Non-Compensation Fund for the Use of Foreign Workers;

– RPTKA Special Economic Zones (SEZ).

In addition to the licensing requirements above, the transfer of skills/knowledge from a foreign employee to a companion worker (Indonesian employees appointed as companions for foreign employees who are trained in the context of technology transfer and skills transfer) is still required under Article 4 of the Ministry of Manpower Regulation No. 8 of 2021 on the Implementing Regulation of Government Regulation 34 of 2021 on Foreign Workers Utilization.

Lastly, the foreign employees can only be employed with a fixed-term employment contract (“PKWT”) (See the Perppu and Supreme Court Circular Letter No. 1 of 2017 on the Implementation of the 2017 Supreme Court Meeting as a Guideline for the Role of Indonesian Courts).

Termination of Foreign Employees

Notice for terminating foreign employees under PKWT must be submitted a maximum of 14 (fourteen) days prior the date of termination, according to Article 37 of Government Regulation No. 35 of 2021 on Fixed-Term Employment, Outsourcing, Working Hours and Rest Times, and Employment Termination (“GR 35/2021”). And the termination of employment can be done for the reasons under Article 36 of GR 35/2021.

Termination Benefits

Although Article 15 paragraph (5) of GR 35/2021 excludes the provision of compensation money for foreign employees who experience termination of employment, but foreign employees is still entitled for the following forms of compensation:

– Monthly salary and fixed allowances

Based on Article 61 paragraph (1) and Article 62 of Law No. 13 of 2003 on Manpower jo. Law No. 11 of 2020 on Job Creation jo. the Perppu (the “Manpower Law”), if a foreign employee is terminated before the work contract ends, the employer is obliged to compensate by paying wages until the expiry date of the work contract.

– A return flight tickets to the country of origin

Based on Article 7 paragraph (1) letter c of GR 34/2021, employers are required to return foreign employees to their place of origin after the work agreement ends.

Written by: R. Bayu Perdana and Sita Narawita

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