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In Indonesia, international secondments are often used for skill and knowledge transfer and training, market expansion, business development, and specific projects. However, they can be complex and require a thorough consideration of legal issues. This article considers key immigration, employment, and social security concerns in navigating the complexities of international secondments into Indonesia.
SECONDMENTS AND THEIR ALTERNATIVES
A secondment usually refers to an arrangement where employees are hired by one entity, but their scope of work is to provide services to another company, whether in the same country or abroad.
Common alternatives to secondments include (a) direct hiring and (b) fly-in fly-out (FIFO) arrangements on multiple-entry business visas (or business visas, for short). Each option has its own advantages and difficulties.
Direct hiring by the Indonesian entity is often the simplest method but may not be suitable for labour needs that are short-term, or project based. Employees of an overseas home entity may prefer to retain their home employment and may not want to have their employment terminated and transferred to the Indonesian entity (e.g., where the transfer has an impact on employment benefits, they enjoy during employment by the home entity).
For an employee who is a foreign national without the right to live and work in Indonesia, the same immigration considerations that apply to secondments also apply to direct hiring.
FIFO arrangements using business visas require employees to commute periodically between their home country and Indonesia for a specific period and purpose. This approach offers flexibility since employees can maintain their home employment while contributing to projects or operations in Indonesia. Applying for a business visa is generally much easier than applying for the right to live and work in Indonesia under a direct employment or secondment arrangement, since a business visa does not require a local sponsor or guarantor.
Nevertheless, certain immigration risks do arise with the use of business visas. A holder of a business visa is not allowed to carry out work in Indonesia, except for emergency and urgent work. A business visa allows the holder to carry out only a limited range of activities in Indonesia, which include:
- discussing, negotiating or signing a business contract, but not continuously supervising production activities;
- attending a meeting at the head office or representative office in Indonesia;
- purchasing goods; and
- attending a convention or exhibition in Indonesia.
The appropriate employment structure will depend on the specific labour needs. The decision to second employees is usually driven by the long-term intention behind the arrangement (e.g., whether the employee is expected to carry out revenue generating work for a substantial period which makes FIFO arrangement impractical and the duration of the project), and the employee’s desire to relocate or to transfer their employment into the jurisdiction.
Where a secondment is chosen, employers will have to consider immigration, employment and social security issues.
Foreign nationals, whether directly hired by or seconded to an Indonesian entity, will need to obtain the right to live (governed by immigration laws) and work (governed by employment laws) in Indonesia before the employment or secondment may commence.
To do so, the Indonesian entity intending to employ the foreigner must first apply for a Rencana Penggunaan Tenaga Kerja Asing (Foreign Manpower Utilisation Plan or RPTKA) to the Ministry of Manpower (MOM).
An RPTKA is a licence issued to an employer that specifies the number of foreign employees employed by the entity, their job titles, and the duration of their employment in Indonesia. This plan is used as the basis to apply for a foreign employee’s stay permit in Indonesia. The Indonesian entity will need to submit the employee’s personal information and pay the Dana Kompensasi Pengunaan Tenaga Kerja Asing (Expatriate Utilisation Compensation Fund or DKPTKA) to the MOM.
After the MOM issues the RPTKA, the Indonesian entity can use it to apply for a Visa Tinggal Terbatas (Limited Stay Visa or VITAS) for the employee. Upon the employee’s entry into Indonesia, the local immigration office will provide them with a Kartu Izin Tingal Terbatas (Limited Stay Permit Card or KITAS) at the designated immigration checkpoint.
Employing a foreign national without the appropriate right to live and work in Indonesia is a serious offence.
Indonesian employment laws generally apply to all individuals working in Indonesia, including foreign employees, whether directly hired by or are assigned or seconded to the Indonesian entity. This means that the employee must have terms and conditions of employment in Indonesia that are no less favorable than those required by Indonesian employment laws, including with respect to the termination of their employment/secondment.*
In a secondment, dual employment laws (i.e., Indonesian employment laws and the employment laws of the home jurisdiction) could apply. That would allow the employee to claim benefits and entitlements available under Indonesian law as well as under the laws of the home jurisdiction. Employers should be mindful of this risk.
Employers should also consider whether the Indonesian entity will be deemed the employer of the secondee and therefore responsible for providing all employment entitlements under Indonesian law to the secondee. Factors that might be considered include (i) who is obligated to pay the salary under the secondment arrangement, (ii) who is the employing entity under the relevant secondment agreement, and (iii) who controls, supervises, and manages the secondee (including in respect of terminating their employment or secondment).
SOCIAL SECURITY CONSIDERATIONS
The Indonesian entity and the secondee/employee must comply with their social security obligations under Indonesian law. This includes the obligation to enrol with and contribute to social security programmes administered by Badan Penyelenggara Jaminan Sosial (Indonesia’s National Social Security Agency or BPJS). This obligation applies to foreign employees and secondees if their secondment or employment in Indonesia exceeds six months.
If, however, the period of their employment or secondment is less than six months, the Indonesian entity must register them in a private insurance programme.
Failure to comply with social security obligations can result in administrative sanctions, including a fine, temporary suspension of the RPTKA application process, and/or revocation of RPTKA approval.
When considering secondment arrangements, employers should consider two key issues:
- immigration risks if the individual does not have the right to live and work in Indonesia (ie whether a business visa is appropriate, or whether the individual should apply for the right to live and work in Indonesia); and
- how employment entitlements, including salary and mandatory social security or other contributions, will be met, particularly where the employment laws of both Indonesia and the home jurisdiction continue to apply.
Navigating international secondments can be a complex task, raising legal and logistical challenges. With our extensive experience in guiding clients on these matters in Indonesia, we are well placed to assist you.
* That said, the Indonesian Supreme Court in Case No. 214K/Pdt.Sus-PHI/2020 found that, on the specific facts of that case, the secondees (who were Australian) were properly employed (and paid a salary) by the Australian home entity based on an international employment contract and were assigned to provide services through a secondment arrangement to the Indonesian entity. The court found that the employment relationship was governed by Australian law, and that the Indonesian Industrial Relations Court therefore had no jurisdiction over a claim brought by the secondees over their entitlements to termination pay upon termination of the secondment.