Looking Back

 

11 September, 2013:

 

Outsourcing Of Labour Supply Restricted To Five Circumstances

Under Section 17(2) of Reg. 19, the type of work that can be delegated to the Labour Supplier must be “supporting services or activities that are not directly related to the main production process”. Section 17(3) states that “supporting services as intended by section (2) shall include (meliputi):

a. Cleaning services;

b. Catering services for employee/labour;
c. Security services;
d. Supporting services in mining and oil industry; and
e. Transportation services for employee/labour”.

The Ministry of Labour has recently issued a ruling letter to our firm confirming that these are the only circumstances in which outsourcing of labour supply is permitted.

The Ministry of Labour also confirms that any activities outside of these five circumstances can be outsourced through a services agreement arrangement (rather than outsourcing of labour supply) provided that the intended activities fall within the ancillary activities identified in the relevant industry association “Flowchart” and user company’s “Description” as being open to outsourcing by services agreement.

 

19 September:

 

Limitation Period On Employee Claims Struck Down

 

The two year limitation period for employees to file claims for wages and benefits under Article 96 of the Manpower Law has been struck down by Constitutional Court Decision No.100/PUU-X/2012. Given the resulting increased risk of old claims, employers are well advised to properly document and process employee terminations

 

Increased Protection For Outsourced Workers: Regulation 19

The Ministry of Labour recently issued Regulation 19 clarifying the restrictions and requirements applicable to the outsourcing of labour supply and subcontracting of work between companies. The focus of attention has been on outsourcing – labour supply. However, all subcontracts of services are also subject to various new restrictions (i.e., non-core activities only), registration requirements for the service contracts themselves, and various supporting documents.

Some industry associations have issued the necessary “Flowchart” describing the core activities in their respective industries in contrast with the ancillary activities that can be subcontracted to service providers. All companies wishing to enter into or continue services agreements after November 19, 2003, must file their own “Description” of core vs. ancillary activities at the Ministry of Labour which must be consistent with the industry Flowchart.

The Ministry of Labour has recently published SE.04/Men/VIII/2013 which was dated August 26, 2013 regarding Guidelines for Implementing Regulation of MOMT Reg. No.19 of 2012. This decree clarifies the procedures and forms to file outsourcing related documents with the Ministry of Labour.

 

30 December:

 

New Rules On Hiring Expatriates

Minister of Manpower and Transmigration (“MOMT”) issued MOMT Regulation No. 12 of 2013 regarding Procedures for Employing Foreign Manpower (“MOMT Reg 12”) which contemplates several changes to the previous 2008 regulation and introduces a new mechanism on the temporary hiring of foreign employees.

Requirements To Hire A Foreign Worker

A foreign candidate must meet provide: (i) suitable educational qualifications, (ii) suitable work experience of at least five years, (iii) an undertaking to transfer knowledge to Indonesians, and (iv) be able to communicate in the Indonesian language. The 2008 regulation merely required either point (i) or (ii), whereas the new regulation requires that both requirements be met. The language requirement is not new and there is no indication that there will be any change of policy in that regard.

 

Foreign Worker Utilization Plan

The supporting documents now include a written Indonesian Counterpart Mentoring Program Plan (Rencana Program Pendampingan) in addition to the appointment letter of the Indonesian counterpart trainee.

Hiring Foreign Worker For Temporary Work

The MOMT Reg 12 provides a new mechanism to obtain a six month work permit for temporary work which is described as (i) work on a project basis, (ii) work that is related to machinery installation, electricity, after-sales service, or products in its business trial stage.

 

24 October (Implementation Ongoing):

 

New Regulation Regarding Provisions And Procedures For The Utilization Of Foreign Workers And The Development Of Indonesian Workers In Oil And Natural Gas Business Activities

The Minister of Energy and Mineral Resources (“MEMR“) has issued MEMR Regulation No. 31 of 2013 regarding Provisions and Procedures for the Utilization of Foreign Workers and the Development of Indonesian Workers in Oil and Natural Gas Business Activity, which was enacted on 24 October 2013 (“MEMR Reg 31”).

MEMR Reg 31 requires that contractors, downstream business entities and service companies prioritize the use of Indonesian workers (Tenaga Kerja Indonesia or “TKI“). MEMR Reg 31 provides that in carrying out upstream oil and natural gas business activities, contractors, downstream business entities and service companies can only utilize foreign workers (Tenaga Kerja Asing or “TKA”) in certain circumstances and positions, namely: (i) to support investment in oil and natural gas business activities, for a position on the Board of Directors and/or Commissioners; (ii) to implement the transfer of technology related to the introduction of new technology for oil and natural gas business activities, for professional positions requiring the mastery of technology and certain skills in the oil and natural gas sector; and/or (iii) to fill certain positions that cannot yet be filled by Indonesian workers due to competency or availability factors.

Positions that may not be occupied by foreign workers are as follows:

a. Human resources;
b. Legal;
c. Health, Safety and Environment (HSE);
d. Supply chain management, which includes procurement and logistics;
e. Quality control, including Inspections;
f. Structural positions in exploration and exploitation activities below the superintendent level or the equivalent structural position.

Contractors, downstream business entities and service companies are prohibited to:

(i) Employ one TKA for more than one position.
(ii) Employ a TKA who is employed by another company, except for a TKA who has been appointed to the Board of Directors or Board of Commissioners of other company.

To employ foreign workers, contractors, downstream business entities and service companies must obtain approval from the Director General of Energy and Mineral Resources (“DGEMR”) in the form of a recommendation of Foreign Worker Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing or “RPTKA”) and Foreign Worker Employment Permit (Izin Mempekerjakan Tenaga Kerja Asing or “IMTA”) that is addressed to the Minister of Manpower and Transmigration.

MEMR Reg 31 also stipulates age limits for foreign workers employed in the oil and natural gas sector, which is a minimum of 30 years old and a maximum of 55 years old. This provision shall not apply to TKA holding the position of President Director, General Manager or Commissioner of a PSC contractor, downstream business entity or service company, as well as TKA in an international employee exchange program.

 

Based on MEMR Reg 31, the DGEMR will evaluate the application for a RPTKA or IMTA recommendation, taking into account the principles of efficiency, effectiveness and benefit. If necessary, the DGEMR may ask the contractor, downstream business entity or service company to clarify certain points. After the evaluation, the DGEMR will issue its decision either approving or rejecting the RPTKA or IMTA recommendation. The RPTKA or IMTA recommendation shall be the basis of the application to the MOMT.

MEMR Reg 31 further provides that contractors, downstream business entities and service companies must appoint at least one Partner TKI for each employed TKA. This provision does not apply for TKA who are members of the Board of Directors and/or Board of Commissioners.

Contractors, downstream business entities and service companies must conduct transfer of technology and knowledge from TKA to TKI and develop their TKI according to the plan approved by the DGEMR during the granting of the RPTKA recommendation. Contractors, downstream business entities and service companies are required to submit an annual report to the DGEMR regarding the implementation of such transfer of technology and knowledge from TKA to TKI and the development program for the TKI. Contractors, downstream business entities and service companies that fail to with these provisions shall be subject to administrative sanctions in the form of written warnings and/or the revocation of RPTKA and/or IMTA.

The provisions of MEMR 31 also apply to the Representative Offices of foreign companies engaged in oil and natural gas business activities in Indonesia.Lastly, the utilization of TKA for upstream oil and natural gas business activities without an approved RPTKA or IMTA recommendation from the DGEMR shall result in companies being unable to recover operating costs for such TKA.

 

Looking Forward