“In order to clear any doubt throughout an industrial relation between the company and its employees, a company regulation serves to tie all loose ends left by the vague provisions of the Manpower Law.”
Pursuant to the Law No. 13 of 2003 concerning Manpower (“Manpower Law”), every company which employs at least ten employees is under an obligation to establish a set of company regulation. It is defined as a set of rules made in writing by the enterprise that specifies the applicable work requirements, disciplinary procedures, and rule of conduct in the company.
While the Manpower Law obligates every company – which employs at least ten employees – to establish a company regulation, such obligation may be set aside if the company already has a collective labor agreement, which is made by and between the company and one or more trade/labor unions. From this regulation, it can be concluded that the existence of a collective labor agreement diminishes the necessity of company regulation. The reason for such a concept is because there is an overlap of coverage between the company regulation and the collective labor agreement.
Objective and Mandatory Provisions
As has been stipulated by the Manpower Law, an industrial relation shall be applied through, among other things, a company regulation. Considering how the law is silent on specific matters within the industrial relationship, a company regulation serves to tie any loose ends concerning it.
Generally, a company retains a sense of liberty to determine the provisions contained within the company regulation. The Manpower Law only demands that a company regulation must at least contain:
- the rights and obligations of the company (or its management);
- the rights and obligations of the employees;
- working conditions;
- disciplinary procedure and rule of conduct; and
- the period of validity of the company regulation.
In the event the company intends to broaden the scope of the company regulation, it is allowed to do so. Within its provisions, the Manpower Law even encourages for matters that have not been specified by the law to be further regulated in the company regulation, e.g. employee entitlements in case of termination or ongoing dispute.
Furthermore, company regulation enables the company to determine and modify any procedures or company policies without having to amend every single employment agreement with each of its employee. What must be regarded is that no provision under the company regulation may violate any prevailing laws and regulation.
Legalization and Procedure
In order for the company regulation to have valid legal enforceability, it must first be legalized by the Ministry of Manpower. The procedure for such legalization is briefly covered by the Manpower Law; however, the complete terms of legalization are found in Regulation of the Ministry of Manpower No. 28 of 2014 (“Regulation 28/2014”). Having defined the company regulation in a similar manner as the Manpower Law, Regulation 28/2014 covers the step-by-step procedure to be undertaken by the company.
Firstly, a company regulation must be formed by the company by taking into account all pieces of advice and considerations from the representative(s) of its employees. Prior to any official submission to the Ministry, the company must present the company regulation draft to its employees and garner their advice and considerations within the course of 7 days. If the period of 7 days has elapsed or the company has received and addressed all advice and considerations, the company shall proceed to apply for legalization to the Ministry of Manpower.
An application for legalization consists of:
- a formal application letter;
- company regulation draft signed by the company; and
- supporting documents recording advice and considerations from the employees.
Upon submission, the application for legalization shall be subject to a verification process by the Ministry. By law, such verification process shall take no longer than six working days. Where it is found that the application is incomplete or invalid, the company is granted a period of 14 days to fulfill all requirements. Where it is found that the application has been completed in accordance with the Regulation 28/2014, the Ministry of Manpower shall issue a decree letter legalizing the submitted company regulation, no later than 30 working days following the receipt of the application.
A company regulation which has been legalized by the Ministry shall have the validity period in the maximum of 2 years. Within the latest of 30 days prior to the expiry, the company must submit an application for renewal of the company regulation.
As of 2019, the procedure for the legalization of company regulation can be conducted online via the Ministry of Manpower’s official website. The online procedure ensures stark transparency as the company can stay updated on the verification process from the tracking feature on the website.
Compliance and Sanction
As has been previously alluded, a company which employs ten employees or more is obligated to establish a company regulation which has been legalized by the Ministry of Manpower, unless it already has a registered collective labor agreement. If a company is obligated to have a company regulation but fails to do so, the Manpower Law stipulates an imposition of criminal sanction in the form of a fine, anywhere from the amount of IDR 5 million to IDR 50 million.
Author: Yohana Veronica Tanjung
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas include Employment Law.
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