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Friday, March 2, 2012

Employment (Working) in Indonesia as an Expatriate ("Expat")

Unless you are being sent over to Indonesia by your company, an employer, a NGO, your Government, or other official type of TDY or corporate assignment; finding suitable and sustainable employment in [Jakarta] Indonesia is next to impossible. Not impossible, but highly improbable.

The moment you come over here without a job, you will be considered a "local hire" and the employer will assume that you have a house, a car, savings, and arrived here with suitcases full of cash and will not pay you anywhere near what an "expat" with a higher professional (or trade) level with expertise and English language proficiency should be making. In other words, their assumption will be that you're all set-up and established here in Indonesian already; so they will:

  • A) not offer you what an expat could or should be making, and 
  • B) may not offer you typical remuneration package amenities or benefits as would be typically offered to another expat employee (or to another Indonesian countryman local hire) such as allowances for; housing; transportation (car and/or driver); gas, toll, & personal mobile or "hand-phone" billing reimbursement; health insurance, etc. 

If they do offer you a job (as a "local hire"), they'll expect the performance and capabilities of a Mercedes-Benz or BMW for the price of, or on the budget of, a public transportation bajaj !


To use a real property analogy, they'll expect the landed property estate for the price of a strata title (condo) apartment unit.  To use a culinary analogy, they'll expect a steak & lobster (surf-n-turf) dinner out of you (with drinks and dessert too) for the price of a bowl of soto (soup) or a plate of some nasi goreng (rice). 

When it come to salary "comps" or standards (and taxation), the Indonesian Government actually promulgates "Guidelines for Salary Standards for Foreign Workers" - (Decision of Director General of Taxation, No. KEP-173/PJ/2002).  You might be able to use this to your advantage in salary negotiations with a prospective employer.

If you do accept to be employed as a "local hire" or under the local compensation plan (LCP), make sure the income taxes that you are paying by way of employer deductions from your gross salary are NOT based on those of an expatriate worker.  They cannot have it both ways; pay you as a local Indonesian, then turn right around and tax you or take payroll withholdings based on much higher expat income tax rates.

  • Indonesian or "local hire" incomes taxes are governed by Article 21 (PPH-21) - taxable income = gross income - allowable deductions for family support X applicable tax rate.
  • Foreign expatriate or "expat" incomes taxes are governed by Article 26 (PPH-26) - taxable income = gross X 20% with no allowable or itemized deductions.
As you can clearly see above, being paid the much lower or incommensurate "local salary" wage or being employed as a "local hire"; then being taxed as an "expat" or foreign worker is simply not right or fair.  They cannot have it both ways!

Some employers will only tell you or disclose to you what your monthly net income is.  Make sure they disclose or express in the employment contract what your gross monthly remuneration is, as well as under what tax article they will be taking any withholdings from you.

If your salary was quoted net, and you trusted in good faith that your local employer had paid your taxes according to your agreement, you may find in fact that the taxes were not paid in full, or even at all, and you could find yourself being liable for back taxes, penalties, interest and big problem on your hands!! Filing and payment of income taxes is ultimately YOUR sole responsibility not the employers. For further information regarding income taxes of expatriate workers see my other article under this title.

Also, if you are married to an Indonesian this will not help you either as the new immigration law that was just recently passed (UU 6 / 2011), which is supposed to afford foreign nationals in "mixed marriages" the right to work, still requires the Regional Manpower Office or Labor Dept ("DEPNAKER") to issue you a working permit.

When I first heard the acronym or buzz word of "DEPNAKER", I thought people were saying, "debt knocker" (they're going to come knocking on your door because you owe them money?! - WTF?) - LOL

I Dunno  Empty Pockets
 
When the new immigration law was passed, they [conveniently] omitted enabling legislation, law, or an Executive Order or directive concurrently that mandates that the Regional Manpower Office or "DEPNAKER" follow or be consistent with the provisions of UU 6/2011.  Consequently, "DEPNAKER" takes the position or has the cavalier attitude of, "hey, we don't know anything about that or what you're talking about" and will still require an expat who is married to an Indonesian, or who is a PR, to obtain a working permit and company sponsorship; even though the applicable sections of the new immigration law stipulate:


Article 61 -  The holder of a Permanent Resident Permit issued pursuant to Article 54 1(b) above may work and/or do business to provide a living for him/herself and/or for his or her family.

Article 63 (4) – the provisions concerning a foreigner having a Guarantor or sponsor DO NOT APPLY to foreign nationals who are legally married to Indonesian citizens.

Unless you are in oil, gas and mining (which is a big industry here in Indonesia), or you are a very high level executive, coming here first then trying to find work is going to be one very daunting and perhaps insurmountable mission for you.

I have also heard companies say, "we don't hire expats" - then you find out that they're a foreign company with expats or "bule" [pronounced: boo-lay] Directors, CEO's or other foreigners on their roster.   Colliers International this one is for you!  - LOL

Pinocchio

As the American Express advertising campaign or marketing slogan goes, "Don't Leave Home Without It" - don't leave your country without FIRST having a working permit or company sponsorship, as well as a fair and equitable compensation package that is on par with what another expat in your position, field or industry would be making in Indonesia.  If you do accept to be employed as a "local hire" make sure your salary and benefits package is AT LEAST what a local Indonesian would be making, but definitely not less. 

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