On 29 March 2018, the Indonesian Government issued President Regulation No. 20, 2018 on Expatriate Utilisation (`PR 20/2018'). Several changes have been made to the preceding regulation, with particular reference to expatriate licenses. The purpose of `PR 20/2018' is to cut red tape by clarifying the standard for obtaining a work permit in Indonesia and simplifying the process. The ultimate intention of the regulation is to improve the national economy and increase the Indonesian foreign investment climate. As certain provisions of PR 20/2018 have drastically changed requirements under the existing regime, we envisage that implementing regulations on applying and interpreting the meaning of PR 20/2018 will be issued expediently. It is also believed that certain local business groups may challenge PR 20/2018 thus raising doubt over how PR 20/2018 will be implemented in practice.

What are the key changes?

Employers are no longer required to obtain a license to employ expatriates (Izin Mempekerjakan Tenaga Kerja Asing - IMTA)

The key feature of PR 20/2018 is that it does not require employers to obtain an IMTA in order to hire an expatriate. Under the current regime, an employer requires an IMTA, issued by the ministry of manpower, in order to employ an expatriate, which can only be obtained after the employer has been granted with a Manpower Utilisation Plan (or a Rencana Penggunaan Tenaga Kerja Asing - RPTKA). The IMTA is then linked to that particular expatriate, employer, job title and work location(s), specifying the name, title and permissible work locations of the relevant expatriate.

This mandatory requirement has been abolished under the enactment of PR 20/2018. Thus, under a strict reading of PR 20/2018, once an RPTKA is granted, the relevant expatriate employee will only need to apply for a limited stay permit to work and reside in Indonesia. This interpretation is provided with a caveat, however it remains unclear how PR 20/2018 will be implemented in practice. This is due to the fact that RPTKA and Limited Stay Permit application forms remain unmodified, despite the new requirements under PR 20/2018. As mentioned above, we anticipate that further implementing regulations on this matter will be issued by the Ministry of Manpower and the Ministry of Law Of Human Rights via the Immigration Office shortly.

Expatriates working in specific industries are authorised to work for more than one employer

Unlike the existing regime, prohibiting expatriates to hold roles in more than one Indonesian entity, PR 20/2018 allows expatriates to work for multiple Indonesian entities, provided that:

  1. the expatriate holds the same position in the Indonesian entities; and
  2. the duration of work is the same as the duration of work with the other Indonesian entity.

This will only be applicable to companies engaging in specific industries (which are yet to be determined by the Indonesian Government).

An RPTKA is not required for a Director or Commissioner who is also a shareholder of the Indonesian company

Another change under PR 20/2018 is that an RPTKA is no longer required when appointing a Director or Commissioner whom is also a shareholder of the company. This is a major shift from the old regime though, as discussed above, it will be interesting to see the practical implementation of this once more detail emerges. Without the RPTKA, there will be no requirement for a permit from the Ministry of Manpower to hire expatriates who are also shareholders of the same entity (instead, only a permit from the Immigration Office to work and stay in Indonesia will be required).

Expatriates can perform immediate and urgent work without securing an RPTKA in advance

One of the common difficulties expatriates face when carrying out urgent work in Indonesia, is the inability to obtain an RPTKA to start immediate work. The PR 20/2018 will allow expatriates to commence work immediately without needing an RPTKA in advance in certain circumstances. However, the employer will still be required to apply for an RPTKA for the relevant expatriate no later than 2 working days after they start work. The Minister of Manpower must then ratify the application no later than 1 working day after its submission.

Key takeaways

The regime will only be effective from 29 June 2018 before when we expect the Indonesian government will issue implementing regulations to clarify certain points as discussed above. As noted, a challenge from local business players is also anticipated so it is unclear if this may impact the proposed changes.

In the meantime, the transitional clause of PR 20/2018 states that any RPTKA and manpower related permits that have been obtained by the employer prior to the enactment of the PR 20/2018, will remain valid until their expiry date.

Employers should consider the impact of the proposed changes on their business and look out for the implementing regulations and any changes to the current proposal ahead of their implementation.