Background information on applicants

Background checks

Are there any restrictions or prohibitions against background checks on applicants? Does it make a difference if an employer conducts its own checks or hires a third party?

There is no prohibition against background checks on applicants. Employers in Indonesia can perform background checks on applicants themselves or by using a third-party service. Certain background checks are, in practice, subject to the consent of the applicant.

Medical examinations

Are there any restrictions or prohibitions against requiring a medical examination as a condition of employment?

An employer can require a potential employee to undergo a medical examination as a condition of employment, as long as the same treatment is applied to all potential employees. The potential employee should give his or her written consent to both the examination and the release of the results to the employer. An employer can refuse to hire an applicant who does not submit or agree to the release of the results to the employer.

Drug and alcohol testing

Are there any restrictions or prohibitions against drug and alcohol testing of applicants?

Drug and alcohol testing can be carried out only in limited circumstances; for instance, where working under the influence of drugs or alcohol could give rise to health and safety considerations (eg, where employees drive or operate machinery) or serious damage to the employer’s business. The applicant must consent to the test. Drug and alcohol testing should be carried out during employment only if justified, necessary and proportionate, and with the consent of the employee.

Hiring of employees

Preference and discrimination

Are there any legal requirements to give preference in hiring to, or not to discriminate against, particular people or groups of people?

The Labour Law provides that each employee shall be entitled to equal treatment from the employer without discrimination. Each employee has the same rights and opportunities to obtain a decent job and livelihood without discrimination by sex, ethnic group, race, religion or political orientation, under the interests and abilities of the employee, including equal treatment for disabled persons. It is not considered discriminatory for an employer to select candidates based on abilities required for the job (ie, employing a person with a certain language ability to serve customers speaking that language or dialect).

Must there be a written employment contract? If yes, what essential terms are required to be evidenced in writing?

Generally, an employment contract in Indonesia can either be a fixed-term (definite) or an indefinite-term (permanent) contract. Fixed-term employment agreements are subject to stricter requirements than indefinite-term employment agreements. A fixed-term employment agreement must be in writing and the Indonesian language. If it is not made in writing, a fixed-term employment agreement is deemed an indefinite-term employment agreement. Additionally, a fixed-term employment agreement cannot include a probationary period. Indefinite-term employees are employees who do not fall into the category of fixed-term employees. This type of worker is also known as a permanent worker.

To what extent are fixed-term employment contracts permissible?

A fixed-term employee is also known as a contract worker. Based on the Labour Law, the types of work that can be performed by a fixed-term employee under a fixed-term employment agreement are either time-based or project-based.

For time-based work, the work must fulfil the following criteria:

  • work that can be completed within a short period;
  • seasonal work; and
  • work that is related to a new product, new activity or a product that is still in the experimental stage.

 

For project-based work, the work must fulfil the following criteria:

  • work that can be completed at one time; or
  • temporary work.

 

GR 35/2021 provides that fixed-term employees employed for a certain period (time-based) can only be employed for a maximum of five years (including any possible extensions thereof) unless the contract is project-based in which case the employee can be employed until the work or project is completed.

Probationary period

What is the maximum probationary period permitted by law?

Only a permanent employment agreement may provide for a probationary period. A fixed-term employment agreement cannot include probation.

The Labour Law allows a maximum probationary period of three months, during which time the employer can terminate the employee without having to follow the termination procedures as prescribed by law.

A probationary period of employment applies only if it is specified in writing to the employee when he or she is hired. The duration of the probation for any employee must be communicated in advance to the employee concerned. A probationary period can be neither extended nor repeated. Violation of this restriction will mean that the employee automatically acquires permanent status.

Classification as contractor or employee

What are the primary factors that distinguish an independent contractor from an employee?

An employer and employee relationship is a relationship between a superior and a subordinate governed by the Labour Law. The relationship between a company and an independent contractor is a relationship between contracting parties governed by contract law and other applicable legislation. In an employment relationship, the employee is entitled to a salary or wage, where the payment of the salary does not require an invoice. In the case of an independent contractor, the terminology of the payment is ‘fee’, where the independent contractor agreement will usually require a contractor to submit an invoice for payment of the fees.

Temporary agency staffing

Is there any legislation governing temporary staffing through recruitment agencies?

GR 35/2021 allows a company to engage in outsourcing (alih daya) to assist with specific work based on a contract with the company using the service, as long as such outsourcing company is properly licensed as an outsourcing company (perusahaan alih daya).

In the framework of outsourcing, outsourced employees do not have an employment relationship with the company using the outsourcing services where the outsourced employees are placed, but rather with the outsourcing company. The outsourced employees shall enter into an employment contract with the outsourcing company, which may be a permanent employment contract or a fixed-term contract.

If a company wishes to use outsourced employees to perform certain activities in the company, the company will enter into an outsourcing service agreement with the outsourcing company, and not an employment contract directly with each outsourced employee.