Indonesian Labor Law and the Hospitality Industry

461474_56633212

By Richard D. Emmerson

Indonesia’s hospitality industry is enjoying strong growth. Both domestic and foreign operators are opening new hotels and Indonesia’s National Statistics Board reported that foreign tourist arrivals to Indonesia between January and November 2014 reached 8.52 million, an increase of 7.29 percent from the same period in 2013. There were 251 million trips by domestic tourists during that same period.

As hospitality companies enter the Indonesian market, it is important that they understand the employment law regime and how it applies to the hospitality industry. Below is a primer on Indonesian labor law and the hospitality industry.

If a company wants to bring employees to a new hotel chain located in Indonesia, how are job titles, type of work performed, length of assignment and nationality relevant to the immigration process?

Foreigners are eligible to obtain work permits to perform certain specified types of jobs in the hospitality industry subject to certain time limits. The work actually performed must be consistent with the job title specified in the work permit. Nationality is not relevant provided that the candidate is a citizen of a country having diplomatic relations with Indonesia.

The Stay Permit is issued by the immigration division of the Ministry of Law, and the Work Permit is issued by the Ministry of Manpower. An additional Recommendation Letter from the Ministry of Tourism may be required.

Note: The analysis of specific positions mentioned below is based on the former decree, which is being updated.

How is the immigration process different for a low-level position, such as desk clerk or bellhop?

Work permits are not ordinarily available for low-level positions.

How is the immigration process different for a mid-level position?

A work permit for the Manager of Internal Affairs, Rooms Division Manager and Food & Beverage Manager is valid for two years. The positions of Executive Assistant to the Manager, Administration Manager and Sales Manager are all closed to foreigners. Other positions may only be approved by the Ministry of Manpower with a Recommendation Letter from the Ministry of Tourism.

How is the immigration process different for a high-level position, such as the company CEO or hotel manager?

A work permit for the General Manager or Director is valid for up to five years.

If a foreign employee relocated to Indonesia needs to be terminated, what does the employer need to know before firing the employee?

Comparison of Termination Systems:

  • Employment/Termination at will (no wrongful dismissal damages – only basic employment standards plus illegal terminations).
  • Wrongful dismissal regimes – notice or pay in lieu of notice.
  • Indonesia – Labor Court approval. Full salary during litigation.

Generous Termination Benefits in Indonesia:

Basic Severance Pay:

Maximum = 9 months for 9-plus years of service

Service Pay:

Maximum = 10 months for 24-plus years of service

Compensation:

  • Accrued annual Leave
  • Relocation expenses, if any
  • Additional benefits, if any, under contract
  • 15% of the above-noted severance plus service entitlements

Are foreign employees subject to the laws of Indonesia, their home country or both?

In order to obtain a work permit, the candidate must have an employment contract with the employer entity in Indonesia. The employment relationship is always governed by Indonesian law. Employers hiring expatriates should consider secondment arrangements to avoid the application of the generous Indonesian termination benefits and Labor Court approval process (i.e., home employment, temporary secondment to Indonesian employer, return to home jurisdiction clause).

Comments are closed.