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Client Update: Employment Law
NEW PRESIDENTIAL REGULATION STREAMLINING EXPATRIATE USAGE PROVOKES MIXED REACTION
Consistent with his public statements on the need to improve business conditions in Indonesia and attract foreign investment, President Joko Widodo issued Presidential Regulation 20 of 2018 on the Use of Expatriates (PR 20/2018) on 29 March 2018. PR 20/2018 will come into force on 29 June 2018, replacing Presidential Regulation 72 of 2014 on the Use of Expatriates and the Implementation of Education and Training for Indonesian Counterpart Workers (PR 72/2014), and significantly changing the current legal regime.
The implementing regulations to PR 72/2014 (in particular, Minister of Manpower Regulation 16 of 2015 on the Procedure for the Use of Foreign Employees, MoMR 16/2015, as amended) will generally still apply after 29 June 2018 to the extent they do not contradict PR 20/2018, and have not been revoked or replaced.
(To revisit our summary of MoMR 16/2015, please click here.)
Despite its best intentions, the government has been forced to defend its decision to simplify the expatriate licensing process, with the President’s predecessor, Susilo Bambang Yudhoyono, warning in the Indonesian press of an “invasion” of foreign workers as a result of PR 20/2018.
Much of the criticism is based on a misperception that PR 20/2018 is dispensing with the existing stringent requirements rather than merely simplifying them. The criticism also ignores the fact that PR 20/2018 prioritises the usage of Indonesian workers for all positions and only permits the engagement of expatriates for positions unable to be filled by Indonesian workers.
PR 20/2018 introduces the following main changes.
1. Work permits for expatriates will be simplified by:
(a) removing the requirement for a separate Permit to Employ an Expatriate (Izin Mempekerjakan Tenaga Kerja Asing, IMTA); and
(b) treating the required Expatriate Deployment Plan (Rencana Penggunaan Tenaga Kerja Asing, RPTKA) as both an RPTKA and IMTA.
2. The procedure for expatriates to apply for a Limited Stay Visa (Visa Tinggal Terbatas, VITAS) and a Limited Stay Permit (Izin Tinggal Terbatas, ITAS) will be simplified by providing for their application at the same time, not sequentially.
3. An expatriate employee will be permitted to work for more than one employer, as long as the expatriate holds the same position for the same employment period (but only applicable in certain, as yet undefined, business sectors).
Changes PR 20/2018 will bring
1. Work permit simplification
An employer currently needs to obtain RPTKA approval and an IMTA to employ an expatriate. Under PR 20/2018, an employer will only need to obtain a Ministry of Manpower (MoM) approved RPTKA to employ an expatriate, without the need to obtain an additional separate IMTA.
Following the effectiveness of PR 20/2018, an approved RPTKA will be considered as approval for both the employer’s “expatriate deployment plan” as well as a “permit to employ an expatriate”.
Client Update 2
After an MoM approved RPTKA has been obtained, instead of then applying for an IMTA, an employer will be required to submit certain statutory information to MoM on its expatriate employees (including personal identification details and period of employment contract). After MoM is satisfied with the completeness of the submitted information, it will then issue a receipt (Notification), which it will send to the employer and copy to the Directorate General of Immigration. After receiving the Notification, the employer must then pay the statutory expatriate employee deployment fee (Statutory Fee).
It is unclear how the form of the RPTKA and the criteria for RPTKA approval may change after PR 20/2018 becomes effective. Currently there are no regulations to implement and provide guidance for the changes to the RPTKA/IMTA regime. To avoid such uncertainty, MoM will need to issue implementing and guiding regulations before PR 20/2018 becomes effective.
An RPTKA is currently valid for a maximum of 5 years, extendable. PR 20/2018 curiously states that an approved RPTKA will be valid “for as long as an employer has stated in its RPTKA application” regarding its intention to employ the expatriate. We could only speculate as to whether this may mean a validity period of greater or less than 5 years, and will again need to wait for implementing regulations to be issued.
Expatriates employed by government institutions, diplomatic missions of foreign countries and international organisations are not required to obtain an RPTKA or pay the Statutory Fee.
Although an RPTKA must be obtained for expatriates employed by social organizations, religious institutions and for certain academic positions, no Statutory Fee is required.
An RPTKA is also not required for an expatriate who is:
(a) a shareholder, but also a member of the Board of Directors or Board of Commissioners of an Indonesian company;
(b) a diplomat or consular official working in a foreign country’s diplomatic mission in Indonesia, or
(c) working in certain government positions as set by the MoM.
2. Immigration permits simplified
In addition to an employer being required to obtain an MoM approved RPTKA and IMTA for an expatriate employee, the relevant visa and immigration requirements must also be satisfied by securing a VITAS and an ITAS, which will enable the expatriate employee to respectively enter and stay in Indonesia to work.
Under the current regime, an expatriate wishing to be employed in Indonesia must (in cooperation with the Indonesian sponsor company) first apply for and obtain a VITAS from the relevant Indonesian Embassy or Consulate in their country of origin. The VITAS would then be used as the basis for issuance of an ITAS, which would have to be obtained as a separate procedure within 30 days of the expatriate entering in Indonesia.
Client Update 3
VITAS/ITAS applications under PR 20/2018
PR 20/2018 regulates that the employer or expatriate may now apply to the Indonesian Embassy or Consulate in their country of origin for a VITAS and ITAS at the same time by submitting:
(a) evidence of payment of the Statutory Fee; and
(b) a copy of the Notification
(together, the Submission Documents).
Following successful application, the relevant Indonesian Embassy or Consulate will give a VITAS to the expatriate no later than 2 days following submission of the complete application, and an ITAS will be given at the Indonesian airport or seaport of entry without the need for any further application.
Under PR 20/2018, an ITAS will initially be issued for up to two years, extendable, with the right of multiple re-entry for the same period.
Unfortunately, the current regulations do not provide any guidance on the procedure to apply for a VITAS and ITAS at the same time from the relevant Indonesian Embassy or Consulate. Hopefully Ministry of Law and Human Rights will issue such guidance before PR 20/2018 becomes effective.
3. Working for multiple employers
Under the current legislative regime, an expatriate is prohibited from working for more than one Indonesian employer. However, under PR 20/2018, an expatriate may be employed by more than one Indonesian employer, as long as:
(a) employment is in the same position;
(b) such multiple employment is restricted to certain business sectors; and
(c) the employment period with the additional employer does not exceed the term of the original employment contract.
There are no regulations or guidance on the available positions, business sectors and procedures for an expatriate to be employed by more than one employer, so further MoM regulations are anticipated.
It is unclear at this point whether this multiple employer provision is in fact a type of secondment arrangement between more than one employers for the same expatriate. The actual nature and usefulness of this multiple employer provision will only become clear once appropriate implementing regulations and guidance have been issued by MoM.
Criticism of streamlining voiced by both politicians and workers
Media reports indicate that following its issuance in late March 2018, PR 20/2018 immediately drew strong reactions, particularly from labour unions and the President’s political opponents, who have since used the issue to attack the government.
Those who have publicly denounced the regulation appear to include the Confederation of Indonesian Workers Union (KSPI), lawmakers at the House of Representatives and even former president Susilo Bambang Yudhoyono. However, in a reported interview, Manpower Minister, Hanif Dhakiri, has insisted PR 20/2018 has not removed any existing requirements for expatriates to work in Indonesia but merely simplified procedures, and streamlined the licensing process.
Client Update 4
Conclusions The political furor in the wake of PR 20/2018 does not bode well for the survival of the more progressive aspects of PR 20/2018, being the: 1. simplification of procedures for expatriates to be able to work in Indonesia without compromising the selection criteria; 2. simplification of the visa/immigration permit procedures for expatriates working in Indonesia; and 3. potential for an expatriate to have more than one employer under certain limited circumstances. The above progressive aspects of PR 20/2018 have been tentatively welcomed by investors who wish to engage expatriates. However, it remains to be seen if the government will be forced to roll back the potential achievements of PR 20/2018 and whether the required implementing regulations and guidance will be enacted in a timely manner.
We will keep you updated on any developments with PR 20/2018 and hope to be able to report on the proposed implementing regulations and guidance in the near future.
Soemadipradja & Taher
S&T is one of Indonesia’s leading law firms with a recognised market leading employment law practice.
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Arsandy Rananda D.