Manpower Compliances of a Company “In order to ensure the welfare of employees, Indonesian laws and regulations stipulate multiple obligations of a company with regard to manpower, such as employment agreement, company regulation or collective labor agreement, and mandatory manpower report.”
In 2003, Indonesian government issued the Law No. 13 of 2003 concerning Manpower, which was then amended by the Law No. 11 of 2020 concerning Job Creation (hereinafter collectively referred to as the “Manpower Law”).
The promulgation of the Manpower Law is intended for the purpose of maintaining the balance of positions between a company and its employees as mentioned. Considering such intent, companies are made legally responsible for the employees’ welfare in measures which will be elaborated in this article.
Employment Agreement
Under the Manpower Law, all industrial relationships between a company and its employees must be based on an employment agreement. Such agreement can be made in writing or drawn verbally, insofar as the parties consent to the respective rights and obligations stipulated therein.
If an employee is hired as a fixed-time (temporary) employee, the Manpower Law stipulates that the employment agreement must be made in writing, which is commonly known as a Fixed-term Work Agreement (Perjanjian Kerja untuk Waktu Tertentu or “PKWT”).
On the other hand, if the employee is hired as a permanent employee, the Manpower Law stipulates that the employment agreement can be made in writing or drawn verbally, which is commonly known as a Permanent Work Agreement (Perjanjian Kerja untuk Waktu Tidak Tertentu or “PKWTT”).
Alternatively, while PKWTT can be drawn verbally, it must be regarded that it does not result in an absence of agreement. Indonesian law recognizes the principle of verbal agreements, in which a consent is not required to be expressed in writing. Insofar as the parties are legally capable to enter into an agreement, mutual consent therebetween shall constitute a valid agreement all the same.
Furthermore, in the event a PKWTT is drawn verbally, the company is obliged to issue an appointment letter to the employee, which must at least include the following information:
- Name and address of the employee;
- Starting date of the employee;
- Type of job; and
- Amount of wages.
Company Regulation
While the industrial relationships between a company and its employees are based on employment agreements as elaborated, the Manpower Law stipulates that if a company employs 10 (ten) or more employees, the company is obliged to establish company regulation to be applied in the company. Every company regulation is valid for 2 (two) years and shall be renewed upon expiration.
Considering how company regulation are established by the company, the provisions are not required to be agreed by the employees. However, it must be regarded that in order for company regulation to be in force, the company must obtain prior approval from the Manpower Authorities by means of Company Regulation Legalization (Pengesahan Peraturan Perusahaan).
This legalization procedure shall ensure that the company regulation made by the company comply to the prevailing laws.
Collective Labor Agreement and Labor Union
While it has been stated that a company which employs 10 (ten) or more employees must establish company regulation, such obligation can be waived if there exists collective labor agreement (“CLA”) between the company and a labor/trade union(s) in the company.
The Manpower Law allows there to be more than 1 (one) labor unions in a company. However, there must only be 1 (one) CLA which applies in a company to bind all employees. The CLA must be made in writing and formulated by means of deliberations between the company and the labor union(s) representative.
In contrast to company regulation, CLA is not subject to prior approval from the Manpower Authorities. This is because CLA is not made one-sidedly, but rather by mutual consent from both parties. However, every CLA must be registered to the Manpower Authorities.
CLA is valid for 2 (two) years and may only be extended for 1 (one) year based on a written agreement between the company and the labor union(s). For the next CLA, the Manpower Law allows the negotiations to be started as early as 3 (three) months prior to the expiration of the existing CLA.
In the event the negotiations as mentioned fail to result in any agreement, the existing CLA shall remain valid for a maximum period of 1 (one) year.
Mandatory Manpower Report
Despite not being regulated specifically in the Manpower Law, a company is obliged to submit regular manpower report to the Manpower Authorities, which is commonly known as Mandatory Manpower Report (Wajib Lapor Ketenagakerjaan or “WLK”). This reporting obligation is stipulated by the Law No. 7 of 1981 concerning Mandatory Manpower Report in the Company (“WLK Law”).
Pursuant to the WLK Law and its implementing regulation, a company is obliged to submit WLK within 30 (thirty) days as of its establishment as a legal entity. Afterwards, the company must submit a renewed WLK regularly every 1 (one) year.
In practice, WLK records detailed information concerning industrial relationships in the company, such as working hours, company facilities, number of manpower, structure of wages, as well as insurance membership status of the employees.
Furthermore, if the company has established any branch office(s), this reporting obligation extends to the branch office(s) as well, in which all branch office(s) must submit its own WLK for the employees placed therein, who are not placed in the head office.
In line with the intent to uphold the employees’ welfare, WLK obligation is a measure by which the Manpower Authorities ensure that the company has provided the employees with their legal rights in accordance with the prevailing laws and regulations.
Author: Yohana Veronica Tanjung
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas e.g. Capital Market & Financial Services.
For further queries and information, contact us:
+62 21 2271 5060 | info@gaffarcolaw.com | www.gaffarcolaw.com
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