Set-up Human Resources

After completing the company establishment process, the founders must meet the needs of the workforce that match the operational needs. Along with this fulfillment, the company also needs to consider the rights and obligations that must be obtained and carried out by workers respectively. These rights and obligations can be seen in more detail in Labor Acts Number 13 of 2003, which is supplemented by the omnibus law in 2020.

Every worker hired by a company is required to be bound by a mutually acceptable work agreement. This Agreement shall be governed by and construed in accordance with all applicable laws and regulations, whether oral or written. It must include at the very least basic information of the company and employees, the job title and location, the wage amount and payment method, the rights and obligations of both parties, and the duration of the agreement, which is ratified by the signatures of both parties and the location and date of the agreement.

The company may enter 2 (two) different types of agreements, each of which is tailored to the employee’s line of work. A work agreement for a specific period is made while keeping in mind that it excludes work probation for temporary or seasonal employment. A probationary period is available to be added to a work agreement that is made for an unspecified amount of time. While adhering to the applicable minimum wage, this period cannot last longer than 3 (three) months.

The two agreements mentioned above may be made in two languages. Naturally, one of these languages—Indonesian—is the foundation of the language that will be used if there is a misinterpretation from both parties.

During the working period, the company must comply with the working time provisions which are the employees’ rights. In general, the applicable working hours are:

• 7 (seven) hours in 1 (one) day and 40 (forty) hours in 1 (one) week for 6 (six) working days in 1 (one) week; or
• 8 (eight) hours in 1 (one) day and 40 (forty) hours in 1 (one) week for 5 (five) working days in 1 (one) week.

During the daily work time, employees are entitled to a rest time. This time can be obtained between working hours for at least 30 (thirty) minutes after working for 4 (four) hours continuously. This time is not tallied as employee working hours. If it exceeds the stipulated working time, the company may impose overtime for its employees with the approval of the employee concerned. The overtime may not exceed 4 (four) hours in 1 (one) day and 18 (eighteen) hours in 1 (one) week by paying the overtime wages stated in the collective work agreement. Companies that operate in specific industries need to see further provisions in laws, ministerial decrees, government regulations, and other regulations in order to protect the rights of employees.

Remuneration

Employees are entitled to receive wages as a form of appreciation from the company for the employee’s work contribution. Employee wages must undoubtedly adhere to all applicable laws and regulations, particularly those governing the amount of pay. These terms must be stated in a work agreement agreed upon by both parties with a minimum amount equal to the Provincial Minimum Wage (UMP) set by the local governor.

The UMP is the provincial minimum wage that applies to all districts/cities, while the district minimum wage (Upah Minimum Kabupaten, UMK) is the district/city minimum wage. The UMP and UMK are determined by the governor based on a recommendation from the Provincial Wage Council and the regent/mayor. The UMK will be bigger than the UMP. The following table shows the UMP list for each province:

Employers can conduct a review of the company’s ability and expected productivity of employees in determining wages. This amount may exceed the minimum wage based on the results of related reviews. These wages can also be structured, with basic wages and fixed allowances as components. Basic wage provisions must be set at a minimum of 75% of total wages.

Welfare and Social Security

Employees are entitled to social security benefits in addition to wage payment under the provisions of the legislation. The social security program in Indonesia is administered by the Social Security Administrative Body (Badan Penyelenggara Jaminan Sosial / BPJS), which is governed and required under Law Number 24 of 2011 and Government Regulations Number 84 of 2013 and Number 14 of 1993. Social security is also divided into two parts:

BPJS Health

Workers who already have employee status must be registered by the company as participants in the BPJS Kesehatan program. The program is divided into three classes, which are as follows:

• Class 1: Grade 1 participants will receive inpatient room facilities at a minimum of 2-4 people. Can apply for a room transfer to VIP by paying an additional fee outside of BPJS Health’s coverage.
• Class 2: Grade 2 participants will receive inpatient room facilities at a minimum of 3-5 people. Can apply for a room transfer to class 1 or VIP by paying an additional fee outside of BPJS Health’s coverage.
• Class 3: Grade 3 participants will receive inpatient room facilities at a minimum of 4-6 people. Can apply for moving the room to class 2 or 1 by paying an additional fee outside of BPJS Health’s coverage.

BPJS Health contribution for PPU participants who work in private companies is 5% (five percent) of a month’s wages with the following conditions:

1. 4% (four percent) is paid by the Employer and 1% (one percent) is paid by the Participant.
2. The lower limit of BPJS contribution wages is the minimum wage for regencies/cities/provinces.
3. The upper limit of wages whose BPJS contributions are borne by the company is IDR 12,000,000 (twelve million rupiah) per month.

BPJS Employment

Employers who employ 10 or more workers, or pay a wage of at least IDR 1 million a month, are required to include the workforce in the labor social security program. BPJS Employment includes management of the Work Accident Insurance, Retirement Plan, Pension Insurance, Death Insurance and Severance Insurance programs.

1. Pension Insurance (JP), regulated in Government Regulation (PP) of the Republic of Indonesia (RI) Number 45 of 2015 Article with contributions of 3% (three percent) as referred to in paragraph (2) must be jointly borne by Employers other than state organizers and Participants provided that:
   1. 2% (two percent) of a monthly wage is borne by the Employer; and
   2. 1% (one percent) of a monthly wage is borne by the Participant.
2. Retirement Plan, regulated in PP RI Number 46 of 2015 Article 16 with contributions of 5.7% (five-point seven percent) of wages, provided that:
   1. 2% (two percent) is borne by the Worker; and
   2. 3.7% (three-point seven percent) is borne by the Employer;
   3. For JHT contributions specifically for migrant workers, the nominal to be paid is IDR 50,000 to IDR 600,000 a month.
3. Work Accident Insurance (JKK), regulated in PP RI Number 44 of 2015 with the following contributions:

1. Very low risk: 0.24% of wages a month
2. Low: 0.54% of wages a month
3. Medium: 0.89% of wages a month
4. High: 1.27% of wages a month
5. Very high: 1.74% of wages a month

4. Death Insurance (JKM), regulated in PP RI Number 44 of 2015 with contributions of 0.30% (zero-point three percent) of a monthly wage.
5. Severance Guarantee (JKP), regulated in PP RI Number 37 of 2021 Article 11 with the source of contributions is from contributions paid by the central government and JKP funding sources, which are re-compositions of JKK and JKM program contributions. The highest wage limit set is IDR 5,000,000. So, if monthly wages exceed the wage limit, then the calculation of fixed contributions is the highest wage limit which is IDR 5,000,000 per month.

WORK LEAVE

While carrying out their work, employees are entitled to get allotted leave. Following laws and regulations, the minimum annual leave an employee can get is 12 (twelve) working days after the employee has served a period of work exceeding 12 (twelve) consecutive months.

In addition to annual leave, certain rest periods can be obtained by employees based on several conditions, including:

1. Menstruation period for women: it is not obligatory to work on the first and second day of menstruation.
2. Pregnant women: 1.5 (one and a half) months before delivery and 1.5 (one and a half) months after delivery, according to obstetrician or midwife calculations.
3. Women who have had a miscarriage: 1.5 (one and a half) months or according to a certificate issued by the obstetrician or midwife.

Every employee has the right to form or join a union. The general purpose of union formation is to protect the interests of employees while carrying out their work within the company. Unions have the right to collect and manage finances, including strike funds, which are adjusted and regulated in the statutes and/or bylaws concerned.

TERMINATION

Each work agreement can be terminated at any time based on the following conditions:

1. Worker dies;
2. Expiration of the term of the work agreement;
3. There is a court decision and/or decision or determination of an industrial relations dispute resolution institution that has permanent legal force; or
4. Some certain conditions or events that are stated in the work agreement, company regulations, or collective bargaining agreement and possibly cause the end of the employment relationship.

In protecting the rights of both parties, it is stated that if one party terminates the employment relationship before the expiration of the period specified in the employment agreement for a certain time, or the employment relationship ends not because of the conditions above, the party terminating the employment relationship is required to pay compensation to the other party in the number of wages of workers/laborers until the expiry date of the work agreement.