Outsourcing Licenses to Be Processed by BKPM; Only Granted for Single Line of Business
On January 26, 2015, the Minister of Manpower issued Reg. No. 6 of 2015 on Standard Operational Procedure for Outsourcing Business License Issuance through the One-Stop Integrated Services in the Investment Coordinating Board (“MOM Reg. 6/2015”), which delegates to BKPM (the Investment Coordinating Board) the authority to issue outsourcing licenses to PMA (foreign capital investment) companies and companies with cross-provincial scope.
MOM Reg. 6/2015 stipulates Standard Operational Procedures for the issuance of new outsourcing business licenses, as well as procedures on extension, amendment, filling and reporting by companies.
Under the regulation, outsourcing licenses may only be granted for one type of outsourcing, i.e., cleaning services, catering, security, oil & gas and mining services, or transportation.
Outsourcing licenses are now supposed to be granted within one business day after the required documentation is verified and certified complete by BKPM. Once issued, the license is valid for 3 years and may be extended.
Although BKPM issues the licenses, the Manpower Service Office remains responsible for inspection and compliance, and thus, has authority to issue recommendations to BKPM to revoke the licenses of companies that fail to comply with their licenses or other requirements under prevailing labor laws.
This delegation is aimed at streamlining the licensing procedures for PMA companies in the outsourcing business.
May 13, 2015
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Restrictions on Expatriates in Mining Sector
Since the issuance of the Labor Law (Law No. 13 of 2003), the Minister of Manpower (the “MOM”, formerly the Minister of Manpower and Transmigration—the “MOMT”) has issued 12 regulations regulating or re-regulating positions that are open for expatriates in 12 specific business sectors and one regulation on restricted positions in all business sectors, as set out in MOMT Decree No. 40 of 2012 on Certain Positions Restricted for Expatriates (“MOMT Decree No. 40/2012”).
Positions restricted under MOMT Decree No. 40/2012 are as follows:
* Under the Manpower Law, expatriates are not permitted to occupy positions “in charge of personnel.” MEMR has on at least one occasion interpreted this restriction to mean that all companies must have at least one Indonesian Director, because if not, an expatriate director will be indirectly in charge of personnel issues. We are of the view that this is an overly broad interpretation, which does not reflect the position of the MOM itself. In practice, as long as human resources functions are properly delegated to an Indonesian HR Manager, this should be sufficient to satisfy the manpower requirements.
**The reference to “Chief executive officer” created confusion for employers because many of them in practice use the term “Chief executive officer” to describe positions like President Director or similar top management in their organizations. Although the MOMT never issued any official clarification or circular letter on this, the Minister at the time went on record stating that as long as a chief executive officer did not perform personnel or other restricted functions, the position could be occupied by an expatriate.
Specifically for the mining sector, there have been no new regulations on positions for expatriates since MOMT Decree No. KEP-61/MEN/1983 on Limitation of Expatriate Usage in Mining and Energy Sector, Sub Sector of General Mining (“MOMT Decree No. 61/1983”), which remains in effect pending proposed amendments that we learned about in November 2014.
The following table sets out the positions that are open or closed to expatriates under MOMT Decree No. 61/1983:
We understand that there is a plan that the MOM will issue a new regulation on positions that are restricted and open for expatriates in the mining sector as follows:
Until the new regulation is issued, positions for expatriates in mining shall still refer to MOMT Decree No. 61/1983 and MOMT Decree No. 40/2012.
In accordance with Government Regulation No. 57 of 2014 on Development, Management, and Protection of Language and Literature as well as Increasing the Function of Indonesian Language, expatriates will be required to be able to communicate in Indonesian prior to being employed in Indonesia. In practice we understand that this requirement has not yet been implemented.
February 11, 2015
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Minister of Manpower Clarifies Statute of Limitation for Employee Claims
The Minister of Manpower (MOM) has finally issued a directive on the statute of limitations for employees to file claims for payments allegedly owed by employers, which was revoked in September 2013, when the Indonesian Constitutional Court granted judicial review of Article 96 of the Manpower Law (Law No. 13 of 2003).
On January 17, 2015, the MOM issued Circular Letter No. 1/MEN/I/2015, which interprets the Constitutional Court’s decision to mean that there is no statute of limitations whatsoever for employees to claim against their employers in respect of the employment relationship.
For purposes of implementation, the Circular Letter sets an absolute bar on claims for events prior to September 19, 2011, which is two years before the date of the Constitutional Court decision, because before Article 96 was stricken, the statute of limitations on employee claims was two years after the right to payment arose.
Although the unlimited time for employees to file claims poses a serious challenge for employers going forward, at least for now, they will not be vulnerable to an onslaught of claims relating to the distant past. In addition, the Indonesian Civil Code (ICC) and other manpower laws and regulation may provide specific statutes of limitation which remain in force, for example ICC Article 1603t, which provides a one year statute of limitation for claims of wrongful termination.
To reduce the risk of unexpected litigation, we recommend obtaining a full waiver of claims from outgoing employees whenever employment is discontinued, whether by mutual agreement, resignation, or termination in the Industrial Relations Court.
Minimum Wage for DKI Jakarta Province Increased to Rp2,700,000 for 2015
The Governor of DKI Jakarta has determined a new Provincial Minimum Wage (“UMP”) that applies to every employer in DKI Jakarta, except those covered by special sectoral minimum wages. The UMP is stipulated under Governor of DKI Jakarta Regulation No. 176 of 2014 regarding Provincial Minimum Wage for 2015, dated November 17, 2014 (“Governor Regulation”).
Based on the Governor Regulation, the UMP for DKI Jakarta Province in 2015 will be Rp2,700,000/month, starting from January 1, 2015. This is an increase of almost 11% over the 2014 UMP of Rp2,441,301/month, which was stipulated under Governor of DKI Jakarta Regulation No. 123 of 2013 regarding ProvincialMinimum Wage for 2014.
The increase is lower than that for surrounding regions, such as Banten and Jawa Barat, where the UMP will increase almost 21% and 18%, respectively. In the event an employer believes it is unable to pay the new UMP, the employer may request a suspension from the relevant manpower service office no later than 10 (ten) days before the UMP becomes effective on January 1, 2015.
December 1, 2014
Constitutional Court Decides Employee Wages Get Priority over Secured Creditors in Bankruptcy / Liquidation
Continuing the ongoing series of judicial reviews against the Labor Law,¹ the Constitutional Court rendered Decision No. 67/PUU-XI/2013 on September 11, 2014, with the result that payment of wages now receives top priority during bankruptcy or liquidation of an employer—even over satisfaction of secured creditors.
The Decision revises Labor Law provisions that initially stipulated that wages and other employee rights are “prioritized” over “other payables” when a company is bankrupted or liquidated. The applicants for judicial review argued that Article 95(4) of the Labor Law failed to provide sufficient detail about what “other payables” are preceded by payment of wages and other employee rights. In its Decision, the Constitutional Court declared that Article 95(4) shall now be read as follows:
The payment of outstanding wages of workers/laborers shall take precedence over all other types of creditors, including secured creditors’ claims and claims of states’ rights, auction houses and public institutions established by the Government, whereas the payment of other rights of workers/laborers shall take precedence over all claims, including claims of states’ rights, auction house, and public institutions established by the Government, except for claims by secured creditors.
In amending the provision, the Constitutional Court reasoned that employee wages and rights are part of the rights to life and livelihood, as contained in Article 28A of the 1945 Constitution, which cannot be reduced under any circumstance. Despite the constitutional basis for protecting employees’ livelihoods, the Decision poses serious implications for secured creditors.
♦ Types of Creditors
Ordered based on priority, there are three types of creditors:
1. Secured creditors (kreditur separatis);
2. Preferential creditors (kreditur preferen); and
3. Concurrent creditors (kreditur konkuren).
Secured Creditors
Secured creditors are those holding security over movable or immovable assets, such as pledge, hypothec, mortgage, fiducia, and warehouse receipt. In bankruptcy and liquidation, secured creditors may immediately execute the collateral and receive repayment of their loans prior to other creditors.
Preferential Creditors
Preferential creditors are those given the right by law to precede other creditors. Examples of preferential creditors include those with the following receivables:
1. Court fees;
2. Lease payments for immovable property;
3. Unpaid movable property; and
4. Insurance policy holders in the bankruptcy of a general loss or life insurance company.
Concurrent Creditors
Concurrent creditors are those not classified as either secured or preferential creditors. As such, concurrent creditors receive the lowest priority in bankruptcy and liquidation.
♦ Debts to the Government
The rights of the Government in bankruptcy and liquidation are set out under the General Taxation Law, which requires outstanding tax payments of the entity to be paid prior to liquidating the assets and settling with preferential and concurrent creditors. As such, outstanding tax payments are disposed after secured creditors are satisfied, but take precedence over preferential and concurrent creditors.
♦ Implementation Unclear
The most significant issue raised by the Decision is the impact on the status of secured creditors that are now subordinated to employee wage claims, as the source of wage payments may in some cases require the sale of secured assets. Prior to the Decision, wages and other employee rights were classified under preferential creditors, as affirmed under the ICC. As a consequence of the Decision, employee wages are now prioritized over all other creditors, including secured lenders and the Government, whereas other employee rights are positioned after secured creditors.
“Other employee rights” was not defined by the Constitutional Court, but we infer that such rights cover severance, unclaimed annual leave, compensation for housing allowance, medical and health care costs, and other compensation stipulated in the Labor Law, company regulation, collective labor agreement (if applicable) and individual work agreements
Another critical issue is the clash between the new definition provided in the Decision and the provisions of the Bankruptcy Law. As the Decision prioritizes wages over every other debt, will secured creditors be required to wait for the bankrupted company to pay the wages of their employees, or even obtain approval from the court or the receiver, before executing their securities? Under the Bankruptcy Law, secured creditors are given the right to execute their collateral (as though the debtor was never declared bankrupt) during the first 90 days after the bankruptcy decision. Will this right now be sidelined by the obligation to prioritize the wages of employees? The Constitutional Court did not address any of these issues in the Decision.
The Ministry of Manpower and Transmigration subsequently issued Circular Letter No. SE.7/MEN/IX/2014, announcing the Decision to the regional governments, but the letter offered no guidance on how to interpret or implement the Decision.
We will continue to seek confirmation regarding the implementation of the Decision. If there are inquiries regarding the impact of the Decision on a particular legal matter, we will gladly facilitate and discuss them with you.
Legal Basis
The legal bases used in this article are as follows:
1. Indonesian Civil Code (“ICC”)
2. Indonesian Trade Code (“ITC”)
3. Law No. 6 of 1983 on General Tax Provisions and Procedures, as lastly amended by Law No. 16 of 2009 (“General Taxation Law”)
4. Law No. 2 of 1992 on Insurance Companies (“Insurance Law”)
5. Law No. 4 of 1996 on Mortgage on Land and Property Affixed on Land (“Mortgage Law”)
6. Law No. 42 of 1999 on Fiducia Security (“Fiducia Law”)
7. Law No. 13 of 2003 on Labor Affairs (“Labor Law”), as amended
8. Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payments (“Bankruptcy Law”)
9. Law No. 9 of 2006 on Warehouse Receipt Systems, as amended by Law No. 9 of 2011 (“Warehouse Receipt Law”)
10. Law No. 17 of 2008 on Shipping (“Shipping Law”)
11. Law No. 1 of 2009 on Aviation (“Aviation Law”)
Jakarta, October 13, 2014
1 Previous judicial reviews of the Labor Law include: 1) Constitutional Court Decision No. 27/PUU -IX/2011, dated January 17, 2012, 2) Constitutional Court Decision No. 100/PUU -X/2012, dated September 19, 2013, 3) Constitutional Court Decision No. 115/PUU-VII/2009, dated November 10, 2010, 4) Constitutional Court Decision No. 37/PUU-IX/2011, dated September 19, 2011, 4) Constitutional Court Decision No. 012/PUU -I/2003, dated October 28, 2004, 5) Constitutional Court Decision No. 19/PUU-IX/2011, dated June 20, 2012, and 6) Constitutional Court Decision No. 58/PUU-IX/2011, dated July 16, 2012.
New Presidential Regulation on Utilization of Foreign Workers and Training for Indonesian Workers
For almost 20 years, Presidential Decree No. 75 of 1995 on Foreign Worker Utilization (“PD 75/1995”) governed the status and procedures for employing foreign workers in Indonesia. In July 2014, Presidential Regulation No. 72 of 2014 on Foreign Worker Utilization and Implementation of Education and Training of Indonesian Workers as Associates for Foreign Workers (“PR 72/2014”) was issued to better align government practice with the requirements under the Labor Law (Law No. 13 of 2003 on Labor) and the latest Minister of Manpower and Transmigration (“MOMT”) Regulation No. 12 of 2013 on Procedures for Foreign Worker Utilization (“MOMT Reg. 12/2013”).
One significant change in PR 72/2014 is that purely domestic companies may now freely employ foreigners as Directors and Commissioners, except for in human resources and certain other positions that are generally restricted to foreigners under MOMT Reg. 12/201 3 and other MOMT regulations. Previously, foreign Commissioners could only be employed by foreign capital investment (PMA) companies.
Also in July 2014, the Government issued Government Regulation No. 57 of 2014 on Development, Management, and Protection of Language and Arts, as well as Enhancement of the Function of Indonesian Language (“GR 57/2014”), which augments the foreign worker language requirements in MOMT Reg. 12/2013. MOMT Reg. 12//2013 states that foreign workers recruited to work in Indonesia must be able to communicate in the Indonesian language. GR 57/2014 stipulates that the ability to communicate in Indonesian shall be in accordance with the skills required for the relevant position, and that if the foreign worker is unable to meet the required standards, he/she shall be required to participate in language training.
In conjunction with the Labor Law and MOMT Reg. 12/2013, PR 72/2014 also requires a company that recruits foreign workers in Indonesia to have an Expatriate Manpower Utilization Plan (RPTKA) and the relevant Expatriate Work Permit (IMTA). Other than for Directors and Commissioners, PR 72/2014 requires employers to appoint an Indonesian worker as an “associate” (pendamping) to each foreign worker for education and training in the interest of technology transfer and enhancing expertise. Foreign worker utilization and education and training of companion workers must be reported to the manpower office every six months.
PR 72/2014 contains no sanctions for violation of its provisions; however, sanctions regulated in the Labor Law, such as administrative sanction, revocation of business license, and criminal sanction, may be imposed for employing foreign workers without a proper working permit and failing to report implementation of foreign workers and education and training of the companion worker.
Additional Sectors Covered under 2014 Sectoral Minimum Wage for DKI Jakarta
The Governor of DKI Jakarta Province stipulated new sectoral minimum wages (“UMSP”) in Governor Regulation No. 54 of 2014 dated April 17, 2014, and Governor Regulation No. 62 of 2014 dated April 28, 2014, on Provincial Sectoral Minimum Wage (together, the “UMSP Regulation”). The UMSP Regulation stipulates 16 industries and sectors that have to comply with the UMSP:
1. Cosmetic materials and products industry*
2. Automotive industry
3. Can packaging industry*
4. Pharmaceutical industry
5. Radio, television, voice and picture recording devices industry*
6. Household electrical appliance industry*
7. Hospital services*
8. Construction and public works
9. Chemicals, energy, and mining
10. Metals, electronics, and machinery
11. Insurance and banking
12. Food and beverages
13. Textiles, clothing, and leather
14. Tourism
15. Telecommunications
16. Retail
*newly added for 2014
The UMSP Regulation stipulates 2 types of UMSP: monthly and daily. The lowest monthly UMSP applies to the cosmetic materials and products industry, with a UMSP of Rp2,525,000, and the highest monthly UMSP applies to the automotive industry sub sector of four wheel vehicles, two wheel vehicles, and transportation and heavy vehicles industry, with a UMSP of Rp2,915,000. The lowest daily UMSP applies to the construction and general contractor industry, with the lowest UMSP applied to workers (knek), mower men (tukang babat rumput) and plumbers (tukang pasang pipa) with a UMSP of Rp102,920 per day, while the highest daily UMSP applies to Supervisors and operators of heavy equipment, with a UMSP of Rp157,901 per day.
It is mandatory for every employer in DKI Jakarta Province that engages in the foregoing sectors to comply with the UMSP for all employees whose tenure is less than 1 year, in accordance with Article 90 of the Labor Law and the UMSP Regulation. If the tenure is more than 1 year, the monthly or daily salary shall be determined through bipartite negotiation between the employee or authorized labor union and the employer.
Jakarta
May 21, 2014
New Provisions on Expatriate Working Permits
On December 30, 2013, the Minister of Manpower and Transmigration of the Republic of Indonesia (“MOMT”) enacted MOMT Regulation No. 12 of 2013 on Procedure for Employing Expatriate Workers (“Regulation No. 12/2013”), which replaced the previous regulation on the same subject (“Regulation No. 02/2008”). Regulation No. 12/2013 does not make major amendments to the expatriate working permit requirements contained in Regulation No. 02/2008. However, there are some changes and additions to the types of work expatriates may perform and requirements to obtain working permits in Indonesia.
Under Regulation No. 12/2013, employers may now employ expatriates not only under limited term or emergency contracts, but also on a temporary basis, either for a one-time project, or related to machinery and electrical installation, after sales services, or market assessment of trial products. The maximum period for temporary work is 6 months, which cannot be extended.
One of the new requirements under Regulation No. 12/2013 is that expatriates must possess both relevant education and professional certification or five years relevant experience. Under Regulation No. 02/2008, the requirement was for education or professional certification/experience.
Similar to the previous expatriate working permit requirements stated in Regulation No. 02/2008, to employ an expatriate in Indonesia, the employer must obtain an approved expatriate recruitment plan (RPTKA), visa recommendation (TA-01) and expatriate recruitment permit (IMTA). To obtain RPTKA, TA-01 or IMTA, including extension periods, the employer may apply in writing or through an online system to the Director of Expatriate Worker Utilization Control (Direktur Pengendalian Penggunaan Tenaga Kerja Asing – “Director”). If the requirements are complete, the Director is supposed to issue the permits within four working days (for each permit). Extensions of RPTKA and IMTA can be processed by regional officials, depending on the geographic scope of the work.
For expatriates married to Indonesian citizens, the TA-01 for limited stay visa is no longer required.
The RPTKA can be granted for up to five years and may be extended for the same period. The IMTA is granted for one year, and extensions can be granted for one year at a time. For expatriate directors and commissioners of companies, IMTA may be extended for two years at a time.
Regulation No. 12/2013 also regulates what types of employers may employ expatriate workers. Employers in the form of government institution, international agency, foreign representative, foreign chamber of commerce, foreign representative office, foreign representative news office, foreign private company, legal entity, social, religious, educational and cultural institutions, and performing arts businesses may employ foreign workers, while employers in the form of civil partnership, firm, limited partnership (CV), and business enterprise (UD) are prohibited from employing expatriates, unless otherwise permitted by law.
Other requirements for employers and expatriates remain as under the prevailing manpower and immigration laws and regulations.
Please contact Johannes C. Sahetapy-Engel at jsahetapyengel@aksetlaw.com or Rizki H. Nugraha at rnugraha@aksetlaw.com if you need more information.
Statute of Limitation to Claim Payment under Manpower Law
The Constitutional Court has added yet another complication to employer-employee relations in Indonesia. In Decision No. 100/PUU-X/2012 dated September 19, 2013 (the “Decision”), the Court revoked Article 96 of the Manpower Law (Law No. 13 of 2003) on the basis that it was inconsistent with the Constitution. Article 96 provided that claims with respect to payments arising from employment must be made no later than two years from the date the right to payment arose.
The Constitutional Court held that Article 96 of the Manpower Law contradicts Article 28D of the Constitution, which provides that every person is entitled to employment, to receive compensation, and to be treated fairly and reasonably in matters of employment. The Court held that such rights cannot be taken away by any person or by any law or regulation, and Article 96 was deemed to take away the rights of employees.
The petition for revocation of Article 96 was submitted by a former employee of a security company. Accordingly, it is ostensible that the petition was driven by that individual’s (or a group of individuals’) specific need, rather than the interests of employees in general under the Constitution. In our view, the Court failed to take this into account. According to the Decision, the petitioner was still in the process of resolving his dispute with the employer. We think the Court should have rejected the petition and directed the petitioner to continue pursuing his rights under the Manpower Law.
The Court also failed to consider the arguments presented by the Indonesian Parliament and the Association of Indonesian Entrepreneurs (APINDO), both of whom argued that for legal certainty it was reasonable to have a statute of limitation on claims for payment. Statutes of limitation for employment related claims are found in Government Regulation No. 8 of 1981 and in the Indonesian Civil Code. The Court did not address either of those statutes of limitation in its Decision.
It is interesting to note that one of the nine judges on the panel dissented from the Decision. The dissenting judge expressly agreed that there needs to be a statute of limitation in the Manpower Law and stated that removing Article 96 will create uncertainty for employers. Unfortunately, the dissenting opinion has no legal force.
A major problem that arises is whether the Decision applies retroactively, i.e., whether it allows current or former employees to claim damages based on events that occurred more than two years prior to the issuance of the Decision. Again, the Court failed to address this, and if the Decision does apply retroactively, the number of potential claims is almost limitless.
The Decision raises particular concern for employers when employment ends. The employer will need to ensure that departing employees waive their right to future claims, because the employer can no longer rely on Article 96 to protect them over the long term. We are reviewing the Decision further, and, in spite of the problems presented, we can continue assisting employers in ensuring that their rights and interests arepreserved when dealing with termination of employment (especially termination that took place before the Decision was issued).
September 25, 2013
ARFIDEA KADRI SAHETAPY-ENGEL TISNADISASTRA
