Foreign workers in Indonesia after the job creation law: Implications for the M&A and investment sectors

Companies had to obtain a Foreign Worker Utilisation Plan (RPTKA) from the Ministry of Manpower, while immigration permits were handled separately. Even for urgent projects, the RPTKA was mandatory, often delaying major business deals such as mergers and acquisitions (M&A).

The Job Creation Law and its implementing regulations, notably Government Regulation No. 34/2021 and Minister of Manpower Regulation No. 8/2021, introduced major reforms. The process is now integrated into the Online Single Submission (OSS) system, combining manpower and immigration permits and reducing duplication. Certain categories of expatriates, including directors with shareholding, shareholders, foreign consultants for startups, and urgent short-term workers, are exempted from the RPTKA requirement.

For M&A and investment, this is highly significant. Foreign executives or consultants can be deployed more quickly for due diligence, restructuring, or integration after acquisitions. This reduces transaction delays and provides greater legal certainty. Still, compliance obligations remain strict. Employers must document training and knowledge transfer to local workers, while violations carry severe sanctions. Companies involved in investment and M&A must therefore adopt robust compliance strategies.

Advisory firms also benefit from these changes by expanding their role into cross-border labour compliance, integrating workforce issues into deal structuring and post-merger planning. With greater efficiency and transparency, Indonesia has become more attractive to investors, though the balance between hiring foreign expertise and strengthening domestic human capital remains essential.

Despite reforms, real-world challenges persist. A nickel smelter project in Central Sulawesi, designated a National Strategic Project, became a cautionary example. In early 2023, violent clashes broke out between foreign and local workers during a strike over employment conditions, resulting in fatalities, injuries, and losses. Reports showed that foreign workers were filling non-specialist roles, wage gaps were significant, and occupational safety and union rights were neglected.

This incident demonstrates that risks in employing foreign workers extend beyond licensing. Social tensions, discrimination, and poor labour practices can escalate into conflict, undermining both stability and investor confidence. From a legal and investment perspective, failing to protect domestic labour rights creates reputational, social, and regulatory risks that weaken the investment climate.

The lesson is clear: while procedures are now simpler, legal compliance alone is not enough. Investors and companies engaged in M&A must also manage social risks, commit to workforce integration, and uphold labour rights. Stronger oversight and responsible corporate practices are crucial to ensure Indonesia’s investment growth aligns with fair and sustainable labour practices.

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Aurel Azzahra Akbar is a part of the corporate legal team at Protemus Capital, where she contributes her expertise in legal matters to support the company's operations and compliance efforts.

Dea Shakila is a part of the corporate legal team at Protemus Capital, where she contributes her expertise in legal matters to support the company's operations and compliance efforts.