Indonesia: Operating a Business

Legal Forms of Companies

Types of Companies and Capital (Max/Min)	Number of Partners/Shareholders and Liability
A Perseroan Terbatas is a Private Limited Company. Minimum IDR 50 million	Minimum 2 shareholders. Liability is limited to the amount contributed.
Public Corporation Minimum IDR 50 million	Minimum 2 shareholders. Liability is limited to the amount contributed.
A Partnership No minimum	Minimum 2 shareholders. Unlimited Liability

Enterprises Federation: A list of Indonesian associations is available on the website of the Bureau for coordination of investments (BKPM).

Source: Doing Business.

For Further Information: Consult Doing Business Website, to know about procedures to start a Business in Indonesia.
ICL Directory
The Competent Organization: To create a Perseroan Terbatas (PT), the competent organization is the Bureau for the coordination of investments ((BKPM). To create a Representative Office, the competent organization may be, according to the sector of activity, the Ministry of Commerce, the Ministry of Finance, the Ministry of Public Works, or the Bureau for the coordination of investments.

Principle: The request for discharge must be made to the tribunal which declared the bankruptcy, as set out in Law n°37 of 2004 on bankruptcy and suspension of payments.
Minimum Debt-to-Capital Ratio Triggering Liquidation: None
Bankruptcy Laws: It is Law n°37 of 2004 on bankruptcy and suspension of payments which is applicable.
Reorganization and Rehabilitation Laws: Law n°37 of 2004 on bankruptcy and suspension of payments sets out the formalities for discharge.

	2010
Labor Force	116,500,000

Source: CIA - The world factbook

Source: UN - United Nations

Employed Persons, by Occupation (% of Total Labor Force)	2007
Agriculture	43.3%
Industry	18.0%
Services	38.7%

For Further Statistics: The Indonesian Labor Market
For Further Information About the Labor Market: Portal for official information about Indonesia

Opening Hours
Legal Weekly Duration: The legal duration of work is 7 hours a day and 40 hours a week for 6 working days in a week, or 8 hours a day and 40 hours a week for 5 working days in a week.
Maximum Duration: After 4 successive hours of work, the employee must be given a rest period of half an hour.
Night Hours: If work must be done at night, or if it is dangerous for the health or safety of the workers, the work must not exceed 6 hours a day or 35 hours a week.

Working Rest Day: After a week's work, the employee must be given a day of rest.
Paid Annual Vacation: After a year's work, the worker has 12 days vacation. After six consecutive years' work, the employee has 2 months' long term vacation (to be taken during the 7th and 8th years).
Retirement Age: 55
Child Labor and Minimum Age For Employment: Employing children (under 14) is prohibited.
Employing young workers (aged 14 to 18) is only authorized for daytime work. They are not allowed to work in mines or quarries, or to carry out tasks harmful to their health or safety.
Informal Labor Market: Work in the non-agricultural informal sector represents 78% of non-agricultural jobs (UNDP 2007/2008 Report)

Minimum Wage: The minimum wage is fixed by decree by the different provincial governors. It varies according to the provinces and the districts, and according to the sector concerned. The average minimum wage is 673,300 Rp/month.
Average Wage: Average monthly gross earnings in Indonesia is IDR 1,199,187 (USD 118).
Other Forms of Pay
Pay For Overtime: 1.5 times the normal hourly rate for one hour's overtime, then twice the rate for the following hours.

The Areas Covered: Insurance covers the following fields: insurance against industrial accidents (the rate of contributions, between 0.24 and 1.74%, is calculated on the basis of the employee's monthly salary, and is according to the sector of employment), health insurance (6% for a married employee, 3% for a single employee), life insurance (0.30%), pension scheme (5.70%, of which the employee pays 2% and the rest is paid by the employer).
Contributions concerning industrial accident insurance, health insurance and life insurance are paid for entirely by the employer. Unemployment insurance is unknown in Indonesia.
Contributions: Contributions Paid By the Employer: 7.24% to 11.74%.
Contributions Paid By the Employee: 2%
Competent Organization: PT JAMSOSTEK (Jaminan Sosial Tenaga kerja).

Method of Recruitment: Recruitment is taking place more and more using Internet. A hiring interview is most often planned, but relations, contacts or references are very important.
Recruitment Agencies: A list of recruitment agencies is available on the website Kelly search Asia
Recruitment Websites: JobDB, Asia-Pacific recruitment website

Type of Contract: The work contract is essentially governed by the law and to a lesser extent by individual negotiation and collective agreements. Hiring conditions are strict and the formality of the work contract is rather rigid.
There are two types of contracts: fixed term and open-ended.

Breach of Contracts
Retirement: There are different forms of retirement: early retirement, retirement, leaving after an extension.
Dismissals: The law lays down restrictions concerning the dismissal of an employee who has worked more than three months in a company. If there is no agreement between the partieson the financial compensation, the employer must obtain an authorization from the Ministry of Labor.
Other Possible Methods: Redundancy, disciplinary dismissal, resignation, the contract reaches its term.
Labor Laws: NATLEX, the ILO website

Cases of Dispute: Unfair dismissal, late or non payment of wages and violence are the most frequent work problems.
Legal Framework: Law n°22 of 2004 on agreements relative to industrial labor disputes.
Procedure: Before a dispute is taken to a special tribunal, two-party negotiation, mediation, conciliation or arbitration must be tried. If they come to an understanding, a written agreement must be drawn up by the parties in the form of a deed registered with a local tribunal.

Legal Framework: Law n°22 of 2004 on agreements relative to industrial labor disputes.
Competent Legal Body: Tribunal of Commerce

Social Dialogue and Involvement of Social Partners: We can mention the ASPEK Indonesia union.
Unionization Rate: Less than 4% of the active population (formal and informal sectors) and 14% of the active population (formal sector).
Unions: Trade union congress of Indonesian workers (KSPI)
National Front for the Indonesian workers' struggle (FNPBI)
Regulation Bodies: National Portal of Indonesia with information about work market and regulations

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