Manpower Law Amended

17 years after the enactment of Law No. 13 of 2003 dated March 25, 2003 on Manpower (the “Manpower Law”), certain provisions of the Manpower Law are now amended. On October 5, 2020, the House of Representatives passed the Job Creation Law (or publicly known as the Omnibus Law) which contain certain amendments of the Manpower Law (the “Amended Manpower Law”) along with amendments to other 80 existing laws.

At the time this newsflash is issued, the Job Creation Law is still undergoing final redactional reviews and the promulgation process with the State Secretary (for the signing by the President). The Omnibus Law is not effective yet until it is signed by the President and promulgated. If the President does not sign the Omnibus Law in 30 days from October 5, 2020, the Omnibus Law becomes effective then by law. Accordingly, the final draft we reviewed may not be promulgated verbatim, and we should expect changes (albeit non substantial) in the latest version of the Law that is enacted.

Among the numerous amended laws, the Amended Manpower Law is one controversial issue which results in a series of demonstrations and opposition from the labor workforce. The Amended Manpower Law may be found at Chapter 4 Article 81 of the Omnibus Law. The highlights of the salient points of the Amended Manpower Law are as follows:


Principally, an employer that wishes to employ an expatriate must have a Foreign Manpower Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing – an “RPTKA”). Under the Amended Manpower Law, an RPTKA is not required in the following cases: (i) for directors or commissioners with certain shares ownership or shareholders in accordance with applicable laws, (ii) for diplomats and consulars working at representative offices of foreign countries, or (iii) for foreigners who are needed for the production activities that are halted due to an emergency, vocational, start-up companies, business visits, and research for a certain period. Further provisions on utilization of expatriates will be stipulated in a Government Regulation.


It appears that the Amended Manpower Law no longer stipulates the maximum period of fixed-term employment agreements. But, the Amended Manpower Law still states that fixed-term employment agreements shall not be entered into for the work that is permanent in nature. So in our view, it is very unlikely that an employer may use a ‘perpetual’ fixed-term employment agreement given the ephemeral nature of a fixed-term employment agreement in the first place.

Previously, fixed-term employment agreements entered in a foreign language only and not in Roman alphabets would convert into indefinite-term employment agreements. This provision is not in the Amended Manpower Law.

The Amended Manpower Law introduces new provisions regarding compensation pay payable to fixed-term employees upon completion of the employment period or the completion of the work. The amount of such compensation pay is based on the completed year(s) of service. However, there is no change in the provision regarding the compensation entitlement for termination of fixed-term employment prior to the completion of employment period as stipulated in Article 62 of the Manpower Law.

Further provisions on fixed-term employment agreements and compensation pay for fixed-term employees will be stipulated in a Government Regulation.


Subcontracting service (business to business) provisions under the Manpower Law are revoked. This revocation now allows companies to freely subcontract any work to any third party based on commercial terms agreed by the parties.

For outsourcing, the Amended Manpower Law is now silent on the types of work that may be outsourced to outsourcing companies. The outsourcing arrangement itself remains acknowledged. Note that the Amended Manpower Law requires an outsourcing company to ensure that an outsourced employee will continue to work in the same work if the outsourcing is granted to another outsourcing company.


Previously, the Manpower Law provided that overtime work is allowed for a maximum of 3 hours per day and 14 hours per week. The Amended Manpower Law stipulates that overtime work may be performed for a maximum of 4 hours per day and 18 hours per week.  While there is an increase of the overtime hours, the approval of the employees for any overtime is still required.


Wages are determined based on time unit and/or output unit. Article 88C of the Amended Manpower Law provides that Governors must determine the provincial minimum wages and may also determine regency/city minimum wages subject to regional economic growth and inflation. The determination of a Governor on minimum wages shall taking into account the economy and manpower conditions based on data derived from the statistics agency. Note that micro and small businesses are exempt from the minimum wages requirement. We note that further detailed provisions on wages will be stipulated under a Government Regulation.

In addition, Article 95 of the Amended Manpower Law accommodates the previous Constitutional Court Decision against the Manpower Law regarding payment of wages during bankruptcy or liquidation of an employer. When a company is bankrupt or liquidated, the Amended Manpower Law provides that the payment of employee’s outstanding wages are prioritized over payment to other creditors, including secured creditors’ claims, claims of state’s rights, auction houses, and public institutions established by the Government. Meanwhile the payment of other employees’ rights are paid in advance against all creditors except secured creditors.


Under the Amended Manpower Law, a long leave may be given by certain companies and it shall be governed under an employment agreement, a company regulation, or a collective work agreement.

Other provisions on paid leave regulated under the Manpower Law remain unchanged, including paid menstrual leave and maternity leave.


Consistent with the Manpower Law, the Amended Manpower Law does not recognize the concept of termination-at-will. Therefore, employers may not dismiss employees without cause. In the event of employment termination and the employee does not accept the termination, Article 151 of the Amended Manpower Law requires the parties in dispute to go through the dispute settlement procedures (i.e., the bipartite negotiation, the tripartite mediation, and the court proceeding at the Labor Court) as regulated under Law No. 2 of 2004 dated January 14, 2004 on Industrial Relation Dispute Settlements.

Under the Amended Manpower Law, there are no longer multipliers of the termination benefits arising from termination of employment under specific circumstances (e.g., in the event of efficiency measures, mergers, acquisitions, changes of ownership, consolidations, spin offs, death, retirement, or prolong illnesses). We understand that these changes appear to be the most controversies and objection from the labor workforce, since these entitlements in the event of employment termination are reduced.

The formula to calculate the amount of termination pay and service pay under the Amended Manpower Law remains the same with that of the Manpower Law. However, we note that the Amended Manpower Law omits one of the components of the compensation pay which was previously regulated under the Manpower Law, namely the ‘housing, medical, and health care allowance’ which was determined to be 15% of the total amount of the severance and the service pay.

While there are no multipliers of severance pay and service pay like in the Manpower Law, the Omnibus Law introduces a new social security program called the job loss security/coverage. The job loss security/coverage will be organized by the Social Security Administrator Agency for Manpower (BPJS Ketenagakerjaan) and the Government. The program will provide benefits for employees whose employment is terminated in the form of cash, job training, as well as access to job market information. This additional security/coverage is subject to payment of a premium or contribution to BPJS Ketenagakerjaan. It is unclear yet who shall be responsible for the premium or contribution for the job loss security/coverage.

Further provisions on the job loss coverage/security will be stipulated in a Government Regulation. So it remains to be seen how the job loss security/coverage will be implemented and paid to the employees whose employment is terminated.



October 8, 2020

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