Indonesia: New ministerial regulation on requirements for employment expatriates

On 23 October 2015, the Ministry of Manpower issued a new ministerial regulation (No. 35 of 2015) which amends and clarifies certain requirements under Regulation 16 concerning the procedures to employ foreign workers in Indonesia. Regulation 35 relaxes some of the key requirements under Regulation 16 as follows:

• The requirement to have 10 Indonesian employees whenever an employer hires one expatriate has been removed. It is currently not clear what expatriate to Indonesian employee ratio will now be applied, but we understand from our recent discussion with the Ministry of Manpower that this may be interpreted to mean that it is possible for an employer to only hire one Indonesian employee whenever the employer hires one expatriate. We anticipate further developments in this area in the near future.
• The requirement on employers to apply for an IMTA (ie, an employer’s permit to employ foreign workers) for the appointment of non-resident foreign directors and commissioners in Indonesian companies has been removed.
• Temporary IMTAs will be issued to employers who intend to invite foreign visitors to carry out (i) commercial film production which has received the relevant regulatory approval, (ii) audits, quality control or inspection on an Indonesian branch for a period of more than one month, or (iii) a role that relates to machine or electrical installation, after sales activities or product pre-testing. Temporary IMTAs are no longer required by employers who intend to invite foreign visitors to “attend meetings to be held at the head or branch offices in Indonesia or carry out a one-off type of role”.

Impact for employers

In broad terms, the amendments introduced in Regulation 35 in relation to abolishing the requirements to have an IMTA for non-resident directors and commissioners, and the removal of the 10 to 1 local to expatriate ratio, are to be welcomed. Such incremental improvement is a positive signal that the Indonesian government is focused on the effort to gradually reduce the red tape that foreign investors currently face in seeking to operate in Indonesia.

Further details are available here.