INDONESIA – Amendment Clarifies Recent Rules on Employee Ratios and Business Activities

, 21/11/2015

Effective 26 October 2015, a new regulation (35/2015) has been issued, amending the regulation 16/2015 implemented in August 2015.

The most recent amendment eases the required ratio of foreign to local workers, allows business meetings without a work permit and clarifies that foreign national directors of Indonesian companies require work permits but not stay permits to travel to Indonesia for business meetings.

Ratio of Foreign to Local Employees

The previous regulation established that a ratio of foreign national to local employees of 1:10 is required. The latest amendment clarifies that a ratio of 1:1 is actually required.

However, if there are fewer than 10 local employees per foreign national employee, the Ministry of Manpower (MOM) may ask the company to hire more locals, or issue temporary work permits for only up to 6 months for some or all of the foreign national employees.

In Indonesia, as elsewhere, the government continues to try to protect jobs for local workers, while business leaders push for less regulation and more open immigration policies.

Activities Requiring a Work Permit

The previous regulation expanded the requirement to obtain an IMTA (work permit) and KITAS (stay permit) to various activities, including business meetings held with headquarters or representatives in Indonesia, which until then had only required a business visa.

The latest amendment clarifies that the following activities do not require an IMTA and a KITAS:

• Providing guidance, counseling, and training in the application of industrial and technological innovation to improve the quality and design of industrial products;
• Giving lectures;
• Attending a meeting held with headquarters or representatives in Indonesia;
• Conducting audits, production quality control, or inspection at the company's branch in Indonesia, for less than one month;
• A foreign worker in a trial for their capability to work.

The following activities do require an IMTA and a KITAS:

• Production of a film with a commercial nature;
• Conducting audits, production quality control, or inspection at the company's branch in Indonesia, for more than 1 month;
• Work related to the installation of machinery, electrical, after-sales service, or products in the exploratory business period.

Foreign National Directors and Commissioners

The previous regulation required foreign national directors and commissioners of Indonesian companies to obtain a work permit for visits to Indonesia.

The latest amendment confirms this, and clarifies that foreign nationals in this category do not require a stay permit (KITAS). They can travel to Indonesia with a visa on arrival (VOA) or a business visa, or visa-free depending on nationality.

Action Items

• Be aware of the continuing possibility that the Ministry of Manpower will not issue long-term work permits to foreign national applicants if they are not happy with the ratio of foreign national employees to local employees in the company.
• Note that work permits are not required for some business meetings, training, lectures and short-term audits and inspections.