Expatriate Workers in Indonesia: New Regulation on Positions Open for Employment
On August 27, 2019, Indonesia’s Ministry of Labor issued Regulation No. 228 of 2019 (“Regulation 228, 2019”) to define the types of job positions foreign employees can hold in the country. The new regulation widens the number of positions open to expatriate workers, consolidates the list of positions into one, and simplifies the approval process for foreigners and their employers.
Regulation 228 lists more than 2,000 job titles across 18 sectors that can now be filled by expatriates. The job titles are taken directly from the International Standard Classification of Occupations (ISCO), issued by the International Labor Organization (ILO). The job positions and the requirements in Regulation 228, 2019 will be re-evaluated by the government in two years.
This regulation was issued as an implementing regulation for Ministry of Labor Regulation No. 10 of 2018 (“Regulation 10, 2018”), intended to attract highly-skilled foreign employees into Indonesia. Regulation 10 was also designed to provide greater convenience for local employers – previous regulations regarding foreign workers were scattered across individual sectors.
The full list of positions that can be filled by foreign employees can be found on page eight of Regulation 228, 2019. The sectors with the highest number of positions open to expatriates are construction, information technology, mining, and education.
What does the reform mean for expatriates and employers?
The Ministry of Labor can now directly approve work permits for foreigners who hold titles or positions that are not listed in Regulation 228, 2019. Previously, applicants needed a recommendation from a relevant technical ministry before being approved by the Ministry of Labor, if their job title was not specifically mentioned as open to foreign employees.
Regulation 228, 2019 also reiterates that expatriates are still able to hold positions as directors and commissioners (for non-HR roles) in Indonesian companies.Other aspects of Regulation 10, 2018 kept in Regulation 228, 2019 include the requirement of foreigners to have at least five years of work experience, more than eight for directors and commissioners, and the obligation to help transfer their expertise to their Indonesian colleagues or employees.
The government hopes that this latest regulation will attract highly-skilled and experienced foreign workers that can fill the skills gap in the Indonesian workforce. The country slid to 45th place in the 2018 Global Competitiveness ranking from 36th in 2016, predicated by the local business community’s preference to use informal labor.
Many large-scale projects – particularly in sectors involving construction, banking, engineering, and energy – are struggling to find the workers they need to succeed because of a skills gap. Moreover, the culture of poaching managers and professional technical staff between competing companies is on the rise, which can deter businesses from investing in employee development.
The country’s strict labor laws, which make termination of employees extremely difficult, is another challenge for employers, particularly foreign-invested employers who do not maintain a full human resource capacity within the country.