Overview of Employer According to Manpower Regulations in Indonesia
Mochamad Fahmi Try Hindami, S.H
• Manpower & Immigration • 17 Jan 2022

During the Covid-19 pandemic, many people are trying their luck by opening a business and developing their business. Some even establish legal entities to run their business. They hire other people to help run their business. As an entrepreneur as well as an employer, several things need to be considered. Before futher discussion, it is necessary to know how exactly does the law in Indonesia regulate the definition of an employer? Who is the employer? And what are the employer's obligations?

Article 1 point 4 of Law Number 13 of 2003 concerning Manpower (“Manpower Law”) explains that an employer “is a person, entrepreneur, legal entity, or other entity that works as a workforce by paying wages or other forms of imbalance”.

Meanwhile, Article 1 number 5 of the Manpower Law provides the following explanation:

Entrepreneurs are:

a.      an individual, partnership, or legal entity that operates a self-owned company;

b.      an individual, partnership, or legal entity that runs a company that is not his/her own;

c.    individual, partnership, or legal entity residing in Indonesia representing a company domiciled outside the territory of Indonesia.”

Based on the explanation, it can be concluded that the entrepreneur and the employer are two different things.

As an employer, several things must be considered and carried out based on the provisions of the applicable regulations, one of which is if the employer has a
employment relationship with it’s workers. Employer obligations, including:

1.       Giving money to workers, including:

a.     wages based on the structure and scale of wages in the company (Vide Article 21 paragraph (1) Government Regulation No. 36 of 2021 concerning Wages (“PP 36/2021”)).

b.    Compensation money to Workers whose employment relationship is based on PKWT (Vide Article 15 paragraph (1) Government Regulation Number 35 of 2021 concerning Work Agreements for Certain Time, Outsourcing, Working Time and Rest Time, and Termination of Employment (hereinafter referred to as “PP 35 /2021)).

c.     overtime pay (Vide Article 31 paragraph (1) PP 35/2021).

d.   severance pay and/or service pay and compensation that should have been received (Vide Article 40 paragraph (1) PP 35/2021).

2.    Provide protection that includes the welfare, safety, and health of both mental and physical workers (Vide Article 35 paragraph (3) of the Manpower Law).

3.       Fulfill the rights of Workers/Labourers including the right to social security programs (Vide Article 11 paragraph (3) PP 35/2021).

4.     Must have a Plan for Employment of Foreign Workers (RPTKA) which is legalized by the Minister or appointed official in terms of Employment of Foreign Workers. (Vide Article 6 paragraph (1) Government Regulation No. 34 of 2021 concerning the Use of Foreign Workers).

One thing that is always highlighted by employers is the wage of workers. In addition to providing wages based on the UMP, Employers are required to withhold PPh 21 from the wages of workers and deposit it to the state (Vide Article 1 point 4 Regulation of the Minister of Finance No. 252/PMK.03/2008 concerning Instructions for Implementing Withholding Taxes on Income Related to Work, Services, and Personal Activities). Then, employers are required to register their workers for the BPJS program (Vide Article 15 paragraph (1) of Law No. 24 of 2011 concerning the Social Security Administering Body). Exceptions applied to freelance workers. Freelance workers have the right to register themselves as BPJS participants.

Keep in mind, offering wages based on the UMP can be excluded for employers that you get as a Micro Business and Small Business (Vide Article 36 paragraph 1 PP 36/2021). In summary, Micro businesses and Small Businesses are businesses that are shaped based on the criteria for business capital or annual sales results (Vide 35 paragraph (1) Government Regulation No. 7 of 2021 concerning Ease, Protection, and Empowerment of Cooperatives and Micro, Small and Medium Enterprises (Vide 35 paragraph (1)). “PP 7/2021”))

Micro-enterprises have a capital of up to IDR1,000,000,000 (one billion rupiahs) and Small Businesses have a business capital of more than IDR1,000,000,000 (one billion rupiahs) up to a maximum of IDR5,000,000,000 ( five billion rupiahs) excluding land and buildings for business premises (Vide Article 35 paragraph (3) (Vide Article 35 paragraph (3) letter a and letter b PP 7/2021).

Meanwhile, the criteria for annual sales results for Micro Enterprises is that they have annual sales of up to a maximum of Rp 2,000,000,000 (two billion rupiahs) and Small Businesses have annual sales of more than Rp 2,000,000,000 (two billion rupiahs) up to a maximum of Rp 15,000,000,000 (fifteen billion rupiah) (Vide Article 35 paragraph (5) letters a and b of PP 7/2021). So that medium enterprises and small enterprises employers are allowed to provide wages below the minimum wage, provided that it is based on a mutual agreement between the employer and the workforce. (Vide Article 37 PP 36/2021).

If you are an employer, kindly ensure that you have fulfilled your obligations as described above. This is important to minimize legal risks that may arise in the future when your business grows.

This Article is generally made for the purpose of ANR Law Firm publication only and should not be treated as legal advice for your legal problem. Shall you have any further question, kindly contact the Advocate who authored this article at anrlawfirm@anr-lawfirm.com.

Author: Mochamad Fahmi Try Hindami, S.H.