In May 2025, Indonesia's labour supervision system  experienced  the strongest "earthquake" in a decade.

From President Prabowo's Labour Day speech to the nationwide crackdown by the Ministry of Labour, the government is strengthening compliance requirements for foreign labour management and workers' rights protection with unprecedented intensity. This marks Indonesia's transition from "loose management" to "high-pressure regulation".

For Chinese companies with projects, factories or expatriate teams in Indonesia, this is not only a policy shock, but also a profound reshaping of their human resource management model.

President Prabowo's May 1 speech: Strengthen regulatory outsourcing and improve workers' welfare

On May 1, 2025, Indonesian President Jusuf Kalla emphasised in a public speech that he would significantly improve the welfare of workers and announced:

• The establishment of the Special Task Force on Layoffs (Satgas PHK) and the National Labour Welfare Commission (DKN);

• To study ways to restrict or even phase out outsourcing in some industries.

• Push for changes in regulations that are bad for workers and strengthen oversight of outsourcing companies and human agencies.

Prabowo pointed out that enterprises must protect the welfare of workers while taking into account the interests of investors to achieve a win-win development of the economy and society.

The Labour Department launched a surprise crackdown on the abuse of tourist visas to hire foreign workers.

Meanwhile, Indonesia's Ministry of Labour (Kemnaker) announced that it would launch a nationwide crackdown on the abuse of tourist visas in the process of companies hiring foreign workers (TKA).

Policy focus:

• Tourist visas do not have the effect of work permits and are only applicable to non-profit short-term visits.

• If the foreign employee engages in paid labour without a legal work permit, he/she will be regarded as illegal employment;

• Violating companies will face heavy fines, the revocation of their business licenses and even immigration authorities.

For Chinese companies already operating in Indonesia, we have identified four high-risk areas and the "forced transformation" signals behind them based on recent policy trends:

Risk 1: Abuse of visas —— Compliance "minefields"

In order to facilitate, many enterprises arrange short-term visitors to carry out the duties that should be undertaken with work visas with tourist visas. Once investigated, the enterprise will constitute illegal employment:

Commonly used in technical guidance, installation and debugging, business representative positions;

Penalties include hefty fines, business suspensions and repatriation.

Suggestions: A double review mechanism for visa positions should be established to ensure that the type of visa for foreign employees is consistent with their actual work.

Risk 2: Imbalance of outsourcing labour structure— Upgraded pressure of "disintermediation"

In Chinese manufacturing, infrastructure, logistics parks and other projects, there is still a large number of human intermediaries or outsourcing companies to hire front-line workers. However:

The policy is evolving in the direction of "limiting outsourcing and strengthening direct employment";

If the intermediary enterprise does not have legal qualifications or does not sign a formal contract, it will be jointly punished with the employing enterprise.

The flexibility of employment is challenged, and the cost and compliance burden are rising simultaneously.

The recommendation is to reevaluate the employment structure and gradually shift from "intermediary outsourcing" to a combination of "EOR compliance direct hiring + temporary dispatch".

Risk 3: Unclear contract and ambiguous identity— Controversy is easy to explode

Due to unclear visas, contracts and dispatch methods, the identity of many foreign employees is ambiguous, which not only fails to receive formal labour protection, but also cannot form a legal firewall:

No formal contract, no insurance, no social security payment;

Once a labour dispute occurs, the enterprise will face a greater risk of losing the case.

Recommendations: Unified contract template, ensure bilingual version, synchronise social security registration and electronic filing.

Risk 4: Frequent regulation updates— Increased risk of lagging compliance

In the past two years, Indonesia's labour laws and regulations have changed frequently, especially the dynamic adjustment of minimum wage, tax policy and visa policy. Many enterprises cannot keep up with the pace, resulting in a compliance gap.

Recommendations: Regular compliance audits should be conducted, AI systems should be used to identify policy red lines, and strategies should be adjusted  promptly.

In the face of regulatory pressure, Chinese companies might as well refer to the following "three-step compliance strategy":

Step 1| Visa + contract "double compliance" review

All foreign employees must have an IMTA work permit.

The contract shall specify the position, term, salary, benefits, dispute resolution and other elements.

Step 2|Connect with compliant EOR service providers

Through the EOR employer service provider, achieve compliance with employment, salary payment, tax declaration and welfare registration;

Reduce the administrative and legal costs required by enterprises to directly establish legal entities.

Step 3|Deploy compliance risk control system + localisation consultant mechanism

Introduce an AI salary engine to automatically identify the minimum wage in the region, visa and contract matching;

Coordinate with local legal and tax advisers to anticipate regulatory changes in advance.

Indonesian labour policy is undergoing a transition from "loose" to "regulated". Only by facing up to the trend of regulatory upgrading and establishing a compliant, transparent and efficient employment system can multinational enterprises achieve sustainable growth in Indonesia, a strategic market.

As a global employment compliance solution provider, YeeGoo Global Tech has a local compliance team in Indonesia, combining platform technology with local policy experience to provide the following services:

✅ Indonesian EOR nominal employer services;

✅ Foreign employee visa processing + legal dispatch;

✅ Global salary compliance engine + intelligent exchange and salary payment;

✅ Customised policy monitoring mechanism.

Conclusion: Regulatory upgrading is not a threat, but an opportunity to reshape the sustainable employment system. Companies in Indonesia that are ready to enter the "first year of compliance" will be able to gain an advantage in the market turmoil.

If you need to know more about the dynamics of Indonesian labour compliance, please contact Yijiu Global Technology for customised advice.