Failing to Comply to HR Regulations in Indonesia Can Negatively Impact Your Investment in Indonesia

Being one of the most renowned tourist destinations in Asia, Indonesia can attract 15 million tourists yearly. But, apart from the breathtaking beaches and soaring mountains, little did people know, Indonesia is also a great destination for investors.

In fact, there are a lot of companies and startups that are competing to setting up a company in Indonesia. As the 4th most populated country with more than 250 million people, Indonesia has a huge potential market where companies can easily market their products. Penetrating Indonesia’s market means opening up a whole new opportunity for potential clients. Yet, despite of all these potentials, Indonesia’s government has strict HR regulations that protect employees. These regulations, a lot of times, can bring issues toward the companies and you should know this regulation before you start your investment in Indonesia.

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According to Indonesian Labor Law No. 13 2003, companies who want to terminate their employees must pay a certain amount of money to compensate them. This might be an issue because it is hard to calculate the compensation money, as it includes severance money, long service payment, compensation of right, and separate money. There are also other laws bonded to this one that make the processing of terminating an employee complicated. For example, there are different laws that govern money for employees terminated before a year, or for employees who decided to resign, their health insurance, and so many other laws. The law further explains that the maximum probation period for a trainee is 3 months. Sometimes, we need more than the given period of time to be able to fully assess if someone is capable, and so the law becomes an obstacle for the company to examine a future employee.

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From the issues stated above, you might have thought of signing a contract employee to terminate those laws. However, it is not the right solution. There is another law stating that a contract employee can only work for the maximum of three years. After this period, you have to make them a permanent employee, and this is where we come back to the previous issue. A bigger issue may arise from the payment of compensation money, especially when the terminated employee feels dissatisfied with the amount of money. It is possible that this legal matter is brought up to court, where the company will eventually spend much more money and time. Having so many complications with the law, especially the law abiding the compensation money, it is quite hard for new companies to invest in Indonesia.

Fortunately, we are here to help you solve this problem! Our company, providing Human Resource services, is able to automatically calculate this compensation money. Using our latest cloud computing technology, Gadjian enables your company to deal with your HR administrative issues. No more haste in calculating payrolls or taxes, just leave it to our payroll software. There is also no need to bother about your employees’ attendance, since our HRIS software will just be the quick solution for your problems. Further information can be found on our websites.

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