Foreign Workers in Indonesia After the Job Creation Law: Implications for the M&A and Investment Sectors

Foreign workers have long been an essential part of Indonesia’s economy, bringing specialized expertise that is often not yet available domestically, particularly in the technology, energy, financial services, and professional sectors. However, prior to the enactment of Law No. 11 of 2020 on Job Creation, later reinforced by Law No. 6 of 2023, the regulatory framework for employing foreign workers was rather complex. Companies were required to obtain a Foreign Worker Utilization Plan (RPTKA) from the Ministry of Manpower under Law No. 13 of 2003 on Manpower, while immigration permits were handled separately by other agencies. Even for short-term or urgent projects, the RPTKA was still mandatory. As a result, the recruitment process often became lengthy and could delay investment activities or major business transactions such as mergers and acquisitions (M&A).

This changed with the Job Creation Law and its implementing regulations, particularly Government Regulation No. 34 of 2021 on the Use of Foreign Workers and Minister of Manpower Regulation No. 8 of 2021. The RPTKA process is now integrated into the Online Single Submission (OSS) system, streamlining manpower and immigration permits and eliminating duplication. Moreover, certain categories of foreign workers are exempted from the RPTKA requirement, such as directors or commissioners with specific share ownership, shareholders as regulated under prevailing laws (Ministerial Regulation No. 8/2021, Article 30), foreign consultants for start-ups, and short-term workers brought in for urgent needs.

For the M&A and investment sectors, these reforms are highly significant. For instance, when a foreign investor acquires a local company, executives or technical consultants can be deployed immediately to conduct due diligence, restructuring, or operational integration without being delayed by lengthy bureaucratic processes. This reduces the risk of transaction delays while strengthening legal certainty for investors.

However, compliance obligations remain critical. Ministerial Regulation No. 8 of 2021 emphasizes the requirement for documented training and knowledge transfer as a condition for employing foreign workers. In addition, sanctions for violations remain severe under the Job Creation Law and its implementing rules. This means that companies, particularly those involved in investment and M&A, must adopt strict compliance strategies.

For advisory firms, these changes open new avenues to support clients beyond corporate law, particularly in cross-border labor compliance. By integrating workforce considerations into deal structuring and post-merger integration, firms can help mitigate regulatory risks. With a more transparent and efficient framework, Indonesia is increasingly attractive for investment, though businesses must still balance the flexibility of hiring foreign expertise with strict compliance and commitments to local human capital development.

While the reforms have streamlined regulatory procedures, real world challenges remain. A striking example can be seen in the case of a nickel smelting company located in North Morowali, Central Sulawesi, which was designated as one of Indonesia’s National Strategic Projects (Proyek Strategis Nasional/PSN) in the downstream mineral sector and inaugurated by President Joko Widodo in December 2021. Yet, in January 2023, the company drew public attention after violent clashes erupted between Chinese foreign workers and local employees, resulting in the deaths of two Indonesian workers and one Chinese worker, dozens of injuries, and significant material losses.

The unrest was triggered by a strike organized by local workers on January 11, 2023. The main demands raised by the labor union were equal employment opportunities, compliance with occupational safety and health (OSH) standards, and the fulfillment of normative labor rights as mandated under the Job Creation Law and its implementing regulations. Instead of addressing these grievances through the legally prescribed bipartite negotiation mechanism, the management deployed Chinese workers to disperse the strike, which escalated into physical confrontation.

More critically, this case highlights serious violations in the employment of foreign workers. Field reports indicate that around 500 foreign workers were employed, including in non-specialist roles such as drivers, cooks, construction workers, and office boys. Such positions are expressly prohibited for foreign nationals under the current regulatory framework, which only allows expatriates to occupy roles requiring specific expertise, managerial responsibility, or technology transfer, as stipulated in Government Regulation No. 34 of 2021 and Minister of Manpower Regulation No. 8 of 2021. In contrast, the number of local workers employed was only around 240, with an average wage of approximately IDR 3 million per month far below the IDR 15 - 30 million paid to foreign workers for comparable roles.

Local workers also faced harsh working conditions, such as unilateral wage deductions, prolonged contract based employment, restrictions on union rights, insufficient provision of personal protective equipment (PPE) relative to workplace risks, and poor ventilation systems in the smelter that caused respiratory health issues. These practices indicate blatant non-compliance with labor protection standards under Law No. 13 of 2003 on Manpower (as amended by the Job Creation Law) and the Minister of Manpower Regulation No. 8 of 2021 on the Use of Foreign Workers.

The conflict further revealed discriminatory practices and the marginalization of local workers in their own country. Wage inequality and the dominance of foreign workers in roles that should have been reserved for Indonesians fueled social tensions and collective protest. This situation was exacerbated by weak government oversight, allowing such violations to persist despite clear legal prohibitions.

From a legal and investment perspective, this case underscores the failure to strike a balance between foreign investment interests and the protection of domestic workers’ rights. Non-compliance with labor regulations not only violates fundamental labor rights but also creates legal, reputational, and social stability risks that ultimately undermine the investment climate itself. Thus, this case should serve as a critical lesson for policymakers and business actors alike labor regulations concerning foreign workers must be consistently enforced, with national interests and industrial justice placed at the forefront.

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