Until recently, the Indonesian government had appeared quite relaxed about foreigners conducting business in Indonesia. However, on 29 June 2015, the Ministry of Manpower (MOM) issued Regulation No. 16 of 2015 regarding Procedures to Employ Expatriates (2015 Regulation) to replace MOM Regulation No. 12 of 2013 (2013 Regulation).
The 2015 Regulation imposes stricter requirements on all Indonesian companies – including insurers and reinsurers – intending to hire expatriates to work in Indonesia. The key changes follow.
Ratio of expatriates to local employees
The 2013 Regulation did not include a specific ratio of Indonesian employees for each expatriate hired. Common practice at the MOM was to require a ratio of between three and five Indonesian employees per expatriate. However, the 2015 Regulation specifies that there must now be 10 Indonesian employees for each expatriate.
This new ratio may create challenges for smaller insurance businesses wishing to hire expatriates. However, it does not apply to the hiring of expatriate directors and commissioners, who are treated separately.
Non-resident directors and commissioners now require work permits
In 2014, Indonesia’s Financial Services Authority issued Rule Number 2/POJK.05/2014 requiring all members of the Board of Directors (BOD) and at least half of the members of the Board of Commissioners (BOC) of insurance businesses – which include loss insurance, life insurance and reinsurance companies, insurance and reinsurance brokers, agents, loss appraisers, and actuaries – to reside in Indonesia. So companies were not required to obtain a Permit to Employ Foreign Worker (Izin Mempekerjakan Tenaga Kerja Asing/IMTA) for BOC members residing overseas.
However, under the 2015 Regulation, an insurance business must now obtain IMTA for all BOC members, including those who reside overseas.
Permits for temporary work
Perhaps the most surprising change introduced by the 2015 Regulation is an expansion to the types of work that require a temporary Expatriate Manpower Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing/RPTKA) and IMTA.
Under the new regulation, a temporary IMTA can be granted for the following activities:
• providing guidance, counselling, and training in implementation of and innovations in industrial technology to enhance the quality and design of industrial products, and in international marketing cooperation;
• producing commercial films (with a permit from the competent authority);
• giving lectures/seminars;
• participating in meetings with the head office or representative office in Indonesia;
• conducting audits, quality control on production, and inspections of Indonesian branches;
• taking a work competency test;
• performing one-off work; and
• performing work related to machinery and electrical installation, after-sales service, and product testing in the market.
The interpretation and application of this new regulation is currently unclear.
Indonesian language skills no longer required
In the relaxation of a requirement under the 2013 Regulation that was never enforced, expatriates are no longer required to demonstrate Indonesian language communication skills in order to obtain a work permit.
Conclusion
The more burdensome requirements imposed by the new regulation – especially the new foreign-local employee ratio and the new rules for non-resident commissioners – mean that Indonesian insurance businesses now need to take additional steps when planning to utilise expatriates.