“Based on the prevailing manpower regulations in Indonesia, company regulation must first be approved by the Manpower Agency in order to apply internally in the company. Furthermore, prior to the expiry of the validity of the company regulation, the company must conduct a renewal of the company regulation in order to stay compliant with the law.”
Under the Law No. 13 of 2003 concerning Manpower (as has been modified by Law No. 11 of 2020 concerning Job Creation, which hereinafter shall be collectively referred to as the “Manpower Law”), there is an obligation for certain enterprises (hereinafter referred to as “Company” or “Companies”) to have company regulation to prevail internally.
As such, the company regulation is stipulated to contain at least:
- The rights and obligations of the company;
- The rights and obligations of the employees;
- Working conditions;
- Company discipline and rule of conduct; and
- The period of validity of the company regulation.
Obligation for Existence of Company Regulation
Pursuant to the Manpower Law, company regulation is not mandatory for any company. Instead, there are thresholds for the obligation as mentioned, which are:
- The company must at least employ 10 (ten) employees; and
- The company has not made or entered into collective labor agreement (Perjanjian Kerja Bersama) with the employees.
Therefore, the obligation to create company regulation only applies to the Companies with the requirement as mentioned.
Legalization of Company Regulation
In order for the company regulation to have a valid legal enforceability, it must first be legalized by the Manpower Agency. 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 advices and considerations from the representative(s) of its employees. Prior to any administrative submission to the Manpower Agency, the company must present the company regulation draft to its employees and garner their advices and considerations within the course of 7 (seven) days. If the period of 7 (seven) days has elapsed or the company has received and addressed all advices and considerations, the company shall proceed to apply for legalization to the Manpower Agency.
An application for legalization consists of:
a. a formal application letter;
b. company regulation draft signed by the company; and
c. supporting documents recording advices and considerations from the employees.
Upon submission, the application for legalization shall be subject to a verification process by the Manpower Agency. By law, such verification process shall take no longer than 6 (six) working days. Where it is found that the application is incomplete or invalid, the company is granted a period of 14 (fourteen) days to fulfill all requirements. Where it is found that the application has been completed in accordance with the Regulation 28/2014, the Manpower Agency shall issue a decree letter legalizing the submitted company regulation, no later than 30 (thirty) working days following the receipt of the application.
Validity Period and Renewal of Company Regulation
Pursuant to the Manpower Law, the validity period of company regulation which has been legalized is at the maximum of 2 (two) years. Further, after the lapse of the validity period of the company regulation, such company regulation must be renewed. Regulated further in the Regulation 28/2014, a company regulation must be renewed within the maximum of 30 (thirty) working days prior to the expiry of the company regulation.
Generally, the renewal procedure of the company regulation is similar to the legalization procedure. In which case, the company must submit an application for renewal of company regulation to the Manpower Agency. This also entails an obligation for the company to inform its employees of the draft of the company regulation, as well as to recollect all advices and considerations for the draft of the company regulation.
Compliance and Sanction
As has been previously alluded, a company which employs 10 (ten) employees or more is obligated to establish a company regulation which has been legalized by the Manpower Agency, 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 5,000,000 (five million rupiah) to IDR 50,000,000 (fifty million rupiah).
Similarly, failure of the company to conduct renewal of company regulation is stipulated by the Manpower Law to be punishable by criminal sanction in the form of a fine, anywhere from the amount of IDR 5,000,000 (five million rupiah) to IDR 50,000,000 (fifty million rupiah).
Author: Yohana Veronica Tanjung
Gaffar & Co., an Indonesian Boutique Law Firm specializing and focusing on commercial law areas and relates e.g Corporate Secretarial and Employment Law.
For further queries and information, contact us:
+62 811 877 216 | info@gaffarcolaw.com | www.gaffarcolaw.com
