Employment Jakarta Client Alert October 2015 Update: Amendment to Minister of Employment Regulation No. 16 of 2015 on Guidelines for the Utilization of Foreign Manpower ("Regulation 16") issued As mentioned in our client alert last Friday (click here), last Thursday we became aware that the Ministry of Employment was considering revising Regulation 16 and that the amendments may be issued in December 2015. This morning we became aware that the Ministry of Employment issued Regulation 35 of 2015 on Amendment to Minister of Employment Regulation No. 16 of 2015 on Procedure for Utilization of Foreign Manpower ("Regulation 35") last Friday. Regulation 35 amends Regulation 16. There have been increased lobbying efforts by a number of international chambers of commerce and others on Regulation 16 in the past few weeks. This may be why Regulation 16 has been amended and why Regulation 35 has been issued much earlier than expected. Set out below is the current position following the issuance of Regulation 35. It should be noted that some of the copies of Regulation 35 that are circulating are missing page 7. 1. Non-resident Director and Commissioner Work Permits There is no longer a requirement for non-resident directors and commissioners to obtain work permits. Regulation 35 has removed this requirement. Regulation 35 states that foreign directors and commissioners that reside in Indonesia need to obtain a work permit. This is not new and was the case even before Regulation 16 was issued. 2. Temporary Work Permits Regulation 35 has reduced the activities that require a temporary work permit from the 8 activities listed in Regulation 16 to the following 3 activities only: (i) making a commercial movie that has received authorization from the relevant agency (ii) conducting audits, production quality control or inspections of Indonesian branches for more than 1 month - see comment below (iii) work related to machinery installation, electrical, after-sales service, or products that are in business exploration stage Employment 2 Update: Amendment to Minister of Employment Regulation No. 16 of 2015 on Guidelines for the Utilization of Foreign Manpower ("Regulation 16") issued October 2015 In relation to the activity referred to in point (ii) above, Regulation 16 did not include a specific period for the activities of "conducting audits, production quality control or inspections of Indonesian branches". Regulation 35 clearly states that for these activities a temporary work permit is only required if the activity is conducted for more than 1 month. Under Regulation 35 a temporary work permit will be issued for a maximum period of 6 months and cannot be extended. In light of Regulation 35, a temporary work permit is no longer required for the 5 following activities listed in Regulation 16: 1. providing guidance, counseling, and training in the implementation and innovation of industrial technology to improve the quality and design of industrial products as well as overseas marketing cooperation for Indonesia 2. giving lectures 3. attending a meeting held with the headquarters or the representatives in Indonesia 4. foreign workers undergoing testing of capability to work 5. work that is completed in one go 3. Ratio Regulation 35 has removed the requirement for there to be a 10:1 ratio. It remains to be seen whether the 10:1 ratio will be applied based on unwritten policy (which was the case before Regulation 16 was issued). 4. New Matters (a) PMDN Companies Regulation 35 states that a domestic investment (PMDN) company cannot have foreign commissioners. This was not mentioned in Regulation 16. Under the 2007 Investment Law, "PMDN" is defined as investment by domestic investors using domestic capital to conduct business in Indonesia. A 1995 Presidential Decree stated that a foreigner cannot hold the position of commissioner of a company where all shares are owned by Indonesians. This 1995 Presidential Decree was revoked in 2014 and the Presidential Regulation that replaced it did not include a similar prohibition. Regulation 35 has now re-introduced this prohibition. (b) Transfer of Knowledge & Counterparting Regulation 35 states that provisions in relation to "transfer of knowledge" and "counterparting" will be further stipulated in a decree of the Director General for Development of Placement Employment 3 Update: Amendment to Minister of Employment Regulation No. 16 of 2015 on Guidelines for the Utilization of Foreign Manpower ("Regulation 16") issued October 2015 of Workers and Expansion of Job Opportunities (Director General). We do not yet know what will be stipulated in that decree and will monitor this closely. (c) DKP-TKA Regulation 35 has removed the requirement for the Compensation Fund for Foreign Worker Utilization ("DKPTKA") to be payable in Indonesian Rupiah. As such, the DKPTKA is still payable in US Dollars. This is consistent with the Bank Indonesia Regulation and Circular Letter on currency which allows the payment of Non-Tax State Income to be in foreign currency. DKP-TKA is considered as Non-Tax State Income. In addition Regulation 35 states that if DKP-TKA has already been paid for: work permits for non-resident directors and commissioners; and temporary work permits for the 5 activities that have been removed from Regulation 16, it will not be refunded. 5. Language Regulation 16 did not include any requirement for foreigners to be able to communicate in Indonesian. This requirement was set out in the regulation that Regulation 16 replaced (i.e. Minister of Manpower and Transmigration Regulation No 12 of 2013 on the Procedure for Employing Foreign Workers). Recent media reports have indicated that the Minister of Employment is considering reintroducing a language requirement for foreigners. Regulation 35 makes no reference to language. It is not yet clear whether the language requirement is now off the table or is still being discussed. It is possible that it may be included in the provisions in relation to transfer of knowledge and counterparting, which are to be further stipulated in a decree of the Director General (as mentioned above). Timing Regulation 35 is effective as of Friday, 23 October 2015. Word of Warning Clients should still be mindful of the fact that regular visits to Indonesia (or visits for an extended period) can be regarded by authorities as an indication that someone is "working" in Indonesia. If a foreigner works in Indonesia, they need a work permit and other related documents. www.hhp.co.id For further information please contact Alvira M. Wahjosoedibjo Associate Partner +62 21 2960 8503 firstname.lastname@example.org Robertus K. Adinugraha Senior Associate +62 21 2960 8573 email@example.com Rian Thamrin Associate +62 21 2960 8575 firstname.lastname@example.org Hadiputranto, Hadinoto & Partners The Indonesia Stock Exchange Building, Tower II, 21st Floor Sudirman Central Business District Jl. 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