iGlobal Law

Core Facts

• Population:  263 million
• GDP:  USD 862 billion
• GDP per head:  USD 3,834
• Workforce:  121M
• Unemployment (2017):  5.33%
• Average monthly wages (2017):  USD 300

Regulatory

• Government debt:  27.9% of GDP
• Personal income tax:  30%
• Corporation tax:  25%
• World corruption ranking 2016:  90th Transparency International
• Ease of doing business ranking:  91st Business Freedom Index
• Labour law:  ILO Conventions ratified
• Data protection:  Not recognised by EU as having adequate protection

Indonesia has a complex and quite inflexible labour law structure which requires care to navigate. In the formal labour sector the main distinction is between employment contracts of indefinite length and those for a fixed term. Different rules apply to each.  Contracts of indefinite length have some of the highest employee protection rules in the world. For instance, the basic principle in Indonesia is that dismissal of an employee should be prevented and in some cases prohibited. To this end most dismissals require the approval of the relevant court. In addition compensation in the event of termination can reach the equivalent of 32 months wages.

In contrast to employees on indefinite contracts, employees on fixed term contracts have less protection. However, the Government has been trying to address this imbalance and, in a 2012 ruling, the Constitutional Court has declared that many of these contracts (sometimes referred to as outsourcing contracts) are unlawful as they offend against the principle that a person has a right to a decent job and a decent life.