Regulations Foreign Workers and Indonesian Workers

TERMS OF EMPLOYING FOREIGNERS

Q: ⮞ What is BPJS and LKPM?

BPJS stands for Social Security Administering Board, which is a special institution tasked with administering health and employment insurance for the public, civil servants, and private employees. BPJS has 2 types, namely: BPJS Healthcare and BPJS Employment. Where every registered company that has employees is required to register its employees in the BPJS program, both BPJS Healthcare and BPJS Employment. LKPM stands for Investment Activity Report. It is a report on the progress of investment realization and problems faced by business actors that must be prepared and submitted periodically.

Indonesia continues to position itself as one of Southeast Asia’s most attractive destinations for foreign investment, driven by strong domestic consumption, infrastructure growth, and regulatory reforms. As a result, many foreign entrepreneurs, directors, and professionals are looking to actively work and manage businesses in Indonesia. However, employing foreigners in Indonesia is highly regulated and must comply with Indonesian manpower, immigration, and investment laws. Understanding these rules is essential to avoid costly sanctions, business disruptions, or reputational risk.

Legal Framework Governing Foreign Employment in Indonesia

The employment of foreign workers in Indonesia is primarily regulated by:

Manpower Law and its implementing regulations.
Government Regulations on Foreign Workers (TKA).
Ministry of Manpower (MoM) regulations.
Immigration Law and visa regulations.
OSS-RBA (Online Single Submission – Risk Based Approach) system.

Indonesia applies a selective employment policy, meaning foreigners may only be employed when their expertise is genuinely required and cannot be fulfilled by local talent. This policy aims to protect local employment while still supporting foreign investment and technology transfer.

Positions That Foreigners May and May Not Hold

One of the most critical points foreign employers must understand is that not all job positions are open to foreigners.

Positions Commonly Allowed for Foreigners:

Directors and Commissioners.
CEOs and Managing Directors.
Technical experts and specialists.
Senior consultants.
Marketing directors (limited scope).
Investment and business development advisors.

Positions Strictly Prohibited for Foreigners:

Human Resources (HR) roles.
Personnel and recruitment positions.
Legal compliance officers related to employment.
Certain operational and administrative roles.

The Ministry of Manpower maintains a list of permitted and prohibited positions, which is periodically updated. Employing a foreigner in a prohibited role can result in license revocation and deportation.

Mandatory Work Permit: RPTKA and Its Importance

Before a foreigner can legally work in Indonesia, the employer must obtain an approved Foreign Worker Utilization Plan (RPTKA) from the Ministry of Manpower.

Key points about RPTKA:

It specifies the job title, duration, and location of work.
It is company-specific and position-specific.
It must align with the company’s business classification (KBLI) under OSS-RBA.
It serves as the legal basis for visa and stay permit issuance.

Without a valid RPTKA, any work activity whether paid or unpaid is considered illegal employment under Indonesian law.

Appropriate Visa and Stay Permit for Working in Indonesia

Foreigners working in Indonesia must hold the correct immigration status, typically:

Limited Stay Visa (VITAS) for work purposes.
Limited Stay Permit (KITAS) after arrival.

It is important to note that:

Business visas do not allow employment.
Investor KITAS has different privileges but still requires compliance.
Remote work from Indonesia may still trigger employment and tax exposure.

Immigration authorities now apply strict monitoring, including site inspections and digital data integration between ministries.

Duration of Employment and Extensions

Foreign employment in Indonesia is not permanent by default. Employment duration:

Depends on the approved RPTKA.
Is typically granted for 6 months to 2 years.
Can be extended subject to compliance review.

Authorities will evaluate whether the foreign expertise is still necessary and whether local talent development has progressed.

Sanctions for Non-Compliance

Indonesia enforces strict penalties for violations, including:

Administrative fines.
Revocation of work permits.
Deportation of foreign employees.
Blacklisting from re-entry.
Criminal sanctions in severe cases.

For investors and directors, non-compliance may also affect shareholder credibility and future licensing approvals.

Get Expert Guidance from Indoned Consultancy

If you are planning to employ foreigners, relocate executives, or invest in Indonesia, professional legal guidance is not optional it is essential.

Indoned Consultancy specializes in:

Foreign employment compliance.
RPTKA and work permit processing.
Investor and director immigration solutions.
Business licensing and OSS-RBA advisory.

Contact Indoned Consultancy today for a free consultation and ensure your business operates legally, efficiently, and strategically in Indonesia.

Disclaimer

The information provided here is based on our long experience. The process or requirement may vary depending on the specific facts and conditions. Besides, the law and regulations in Indonesia subject to frequent changes. Please contact us as your consultant to get an up to date information and accurate advice. More Information click here and You can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.

Limited Offer

Let's Connect

FAQ

⮞ What is the difference between a PT PMDN and PT PMA in Indonesia?

In general, PMA stands for Foreign Direct Investment while PMDN stands for Domestic Direct Investment. From the perspective of the meaning, in short, PMA is an investment activity to conduct business in the territory of the Republic of Indonesia which carried out by foreign investors, both those who use foreign capital wholly or in joint ventures with domestic investors. Then, PMDN is an investment activity to conduct business in the territory of the Republic of Indonesia which carried out by domestic investors using domestic capital.

Basically, subjects in domestic investors are Indonesian citizens (WNI), Indonesian business entities, the Government of Indonesia, or regions that make investments in the territory of Indonesia. Meanwhile, foreign investors are foreign citizens, foreign business entities, and/or foreign governments making investments in the territory of the Republic of Indonesia.

⮞ How long does it take to establish a company such PT PMA or PMDN in Indonesia?

With the new regulations and system changes, the process of establishing a company, both PT PMDN or PT PMA, does not take a long time. It takes at least 10-15 working days after the complete document requirements are fulfilled.

⮞ Is there certain capital requirements that must be met for the establishment of a PT PMA?

Yes. To be able to carry out the establishment process of PT PMA, the authorized capital that must be written in the deed of establishment is Rp. 10 billion excluding the value of land and buildings. In making the deed of establishment, the Notary appointed by us will provide a statement letter to the shareholders who sign that they will deposit the said amount of capital. However, the statement will usually not include the fulfillment period. After the company is established, the company will carry out investment reporting on a regular basis which will later become one of the proofs for the company's activities with its capital.

⮞ Is the establishment of the company completed when I already have the deed of incorporation/establishment?

Generally, the set-up company process is divided into 2 stages. Where, the first stage is the establishment stage. Where at this stage, you will process your company's basic documents and permits, such as: deed of establishment, legalization document, Company NPWP (Taxpayer ID Card), Business Identification Number, Company Bank Account Opening and other documents according to your sector and business field. Furthermore, the second stage is the operational stage. At this stage, before and/or during your company's operations, you are required to fulfill the company's obligations. Such as, payment of related taxes, fulfilling operational permits, reporting LKPM (Investment Activity Report), BPJS Employment and Health Registration, and other obligations according to the sector and business field.

⮞ What is BPJS and LKPM?

BPJS stands for Social Security Administering Board, which is a special institution tasked with administering health and employment insurance for the public, civil servants, and private employees. BPJS has 2 types, namely: BPJS Healthcare and BPJS Employment. Where every registered company that has employees is required to register its employees in the BPJS program, both BPJS Healthcare and BPJS Employment.

LKPM stands for Investment Activity Report. It is a report on the progress of investment realization and problems faced by business actors that must be prepared and submitted periodically.

⮞ Do I need to have an office in order to start a company in Indonesia?

Yes, you do. When you do the establishment of a company, a correspondence address is fundamental. It is needed because later all correspondence documents from the government or related agencies will be sent to your company's office/correspondence address. In addition, a company is required to have a domicile which is one of the requirements for making a deed of establishment.

⮞ I don’t have any office address reference yet for my company. What should I do?

Do you have a location in mind where you plan to establish your company in general? For example, are you planning to do it in Bali, such as in Kuta, Ubud, Sanur or Jimbaran area? We have several specific place references that may help you determine the location of your company office. Just please let us know.

⮞ Do I have to visit Indonesia to start a company?

At the stage of the company establishment process, you are not required to come to Indonesia. Although it is no required to come, you may visit Indonesia with the visa which the service we can assist you to have it.

Some process in the establishment company can be carried out by giving your power of attorney to one of our team whom handles the process of establishing your company. Our team is experienced enough in their field therefore the necessary matters will be prepared and informed to you.

INDONED CONSULTANCY

The Indoned Team is committed to driving societal change and promoting environmental sustainability. Working in innovative ways with government, non-profit organizations, and civil society, we are designing and delivering solutions that contribute to a sustainable and prosperous future for all.

Join our newsletter

Useful Link

Contact Us

Istana Kuta Galeria, Central Parkir Patih Jelantik Street PM 1 No. 21 Kuta – Bali 80361(Indonesia)

Service