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Company Obligations to Institute Company Regulations and Sanctions

Company Obligations to Institute Company Regulations and Sanctions

Company Obligations to Institute Company Regulations and Sanctions

“Companies that have at least 10 employees are required to institute company regulations. These company regulations have binding legal force if they have been approved by the local Manpower Office. If the company does not institute company regulations, the company may be subject to criminal sanctions.”

The South Jakarta Regency Court (PN) judge imposed a fine of IDR 5 million or a sentence of one month in prison to the Director of PT DGI last March. The sanction was handed down because PT DGI was proven to not have Company Regulations. Obligations to have Company Regulations are regulated in Articles 108 through Article 115 of Law Number 13 of 2003 concerning Manpower (“Law 13/2003”) and Minister of Manpower Regulation Number 28 of 2014 concerning Procedures for Institution and Ratification of Company Regulations and the Institution and Registration of Collective Labor Agreements (“Permenaker 28/2014“).

Basically, companies need a guideline so that operational activities can run well. Especially companies that have developed and already have many employees, it is important to create internal regulations that govern various interests between the company and workers. Company regulations are also useful to reduce the potential of conflicts between companies and workers, with the existence of regulations that become guidelines then these regulations have legal consequences between companies and workers. So that if there is a violation, the company and workers have a legal basis for fulfilling the rights and obligations set out in the Company Regulations.

Company Obligations to Institute Company Regulations

According to Article 1 number (20) of Law 13/2003 company regulations are regulations made in writing by employers that contain the terms of work and the rules of the company. Based on Article 108 of Law 13/2003, Employers who employ at least 10 (ten) workers/laborers are required to institute Company Regulations. The obligation to institute company regulations does not apply if the company already has a collective work agreement.

Company regulations made by the Company must not conflict with applicable laws and regulations. These company regulations are compiled by and are the responsibility of the company. The provisions therein must not conflict with applicable laws and regulations, with at least the following:

  1. company’s rights and obligations;
  2. workers’ rights and obligations;
  3. working conditions;
  4. the code of conduct of the company; and
  5. the period of validity of company regulations.

According to the provisions of Article 3 paragraph 1 of the Minister of Manpower Regulation 28/2014 in one company, only one company regulation can be made that applies to all workers in the company concerned both PKWT and PKWTT. If the company has branches/work units/regulatory representatives, the company applies to all branches/work units/company representatives. The company regulation contains provisions generally accepted in all branches/work units/representatives.

A branch company/work unit/company representative office can also institute derivative company regulations that apply in each branch/work unit/company representative. The derivative company regulations contain special provisions that are adjusted to the conditions of the branch/work unit/representative of each company. In addition, if several companies are incorporated into one group of companies, the company rules are made by each company.

Company Regulations that Have Legal Binding Strength

Company regulations are not necessarily binding on companies and workers. There are separate provisions so that company regulations can apply and bind the company and workers. Pursuant to Article 108 paragraph (1) of Law 13/2003, the Company’s Regulations come into force after they are approved by the Minister of Manpower and Transmigration or appointed officials.

Ratification of said company regulation according to Article 7 of the Minister of Manpower Regulation 28/2014 is carried out by:

  1. Head of SKPD (local government offices) in the field of regency/city manpower, for companies that are only in 1 (one) regency/city area;
  2. Head of provincial labor SKPD, for companies that are in more than 1 (one) regency/city in 1 (one) province;
  3. Director General, for companies in more than 1 (one) province. The Director General can delegate the authority to ratify company regulations to the Director who carries out affairs in the field of work requirements

The subject worth noting is if the company has branches and subsidiaries. According to Article 3 paragraph (5) of the Minister of Manpower Regulation 28/2014 in the event that the regulations on derivative companies have not been ratified by the agency that organizes government affairs in the field of local manpower, the company regulations that apply in the branch/work unit/company representative are company regulations that apply to the parent company from a company in a branch/work unit/company representative. In addition, if several companies are incorporated in 1 (one) group, according to article 3 paragraph (6) of the Minister of Manpower 28/2014, company regulations are made by each company. That is, the parent company which houses the subsidiary, each must institute a company regulation that is approved by the Minister or an authorized official.

On the basis of the above, company regulations are considered valid and have binding legal force if they have been approved by the Minister or an authorized Officer, in accordance with Article 108 paragraph (1) of Law 13/2003 in conjunction with Article 7 of the Minister of Manpower Regulation 28/2014.

Criminal Sanctions If the Company does not institute Company Regulations

Institution of company regulations is an obligation for companies that already have at least 10 workers. If the company does not institute company regulations, the company may be subject to criminal sanctions. In Article 188 paragraph (1) of Law 13/2003 is regulated as follows:

“Whoever violates the provisions referred to in Article 14 paragraph (2), Article 38 paragraph (2), Article 63 paragraph (1), Article 78 paragraph (1), Article 108 paragraph (1), Article 111 paragraph (3), Article 114, and Article 148, are subject to a criminal sanction of a fine of at least IDR 5,000,000.00 (five million rupiah) and a maximum of IDR 50,000,000 (fifty million rupiah)”

Company regulation institution is a form of implementing company compliance with laws and regulations in force in Indonesia. By institution of company regulations, the company has avoided criminal acts, prevented mistakes, minimized conflicts or disputes, made corrective actions so that a problem did not recur and properly controlled the company’s production process.

If you want to consult and need legal services for your company, please contact BP Lawyers by telephone 082112341235 or email to ask@bplawyers.co.id.

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