A PT PMA that has been operating in Indonesia for two years, hiring employees, running payroll, and managing the employment relationship, but has never ratified a Company Regulation (Peraturan Perusahaan or PP) with the Ministry of Manpower (Kemnaker) is operating outside its legal obligations. An unratified PP is not merely an administrative inconvenience. It is a document that cannot be enforced in any provision that goes beyond what the statutory minimum law already requires. In a labor dispute, the company loses the ability to point to its own internal policies as a binding reference for how the employment relationship was governed.
Most foreign-owned companies discover this gap at the worst possible time: during a termination dispute, a Kemnaker inspection, or an M&A due diligence process. The PP requirement is not new, it has been governed by Permenaker No. 28 of 2014 since that year and was not altered by the Job Creation Law, but it is consistently underestimated by PT PMA entities in their first two to three years of Indonesian operations.
What the Company Regulation Actually Is
The Peraturan Perusahaan is not a policy handbook or an HR manual in the sense that those terms are understood in most Western corporate contexts. It is a legally binding document that governs the employment relationship at a specific company, establishing the working conditions, rules of conduct, disciplinary procedures, leave entitlements, compensation structure, and termination framework that apply to all employees. Under Indonesian labor law, it carries legal force at the level of a contract between the employer and the entire workforce, subject to the overriding floor set by statutory minimum standards.
The operative definition comes from Pasal 1 of Permenaker No. 28 of 2014: the PP is a written regulation made by the employer containing the requirements for employment and company order and discipline. The specific content it must include goes beyond a general description. Pasal 2 of Permenaker 28/2014 specifies that the PP must cover at minimum:
- Working hours, including regular hours, overtime, and rest periods
- Wages, including base salary structure, allowances, and payment schedule
- Leave entitlements: annual leave, sick leave, maternity and paternity leave, and other statutory leave types
- Social security (BPJS) enrollment and benefits
- Work safety and health obligations
- Disciplinary procedures and the grounds for warnings, suspension, and termination
- Employment termination procedures, including the framework for calculating severance
These are not items the company can choose to address partially. A PP that omits statutory entitlements, or that sets them below the current legal minimum, is invalid in the provisions that fall below the statutory floor. The document is also required to be written entirely in Bahasa Indonesia. An English-language company policy document, however comprehensive, does not satisfy the PP obligation.
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Who Must Have One, and Who Is Exempt
The threshold under Pasal 2 ayat (1) of Permenaker 28/2014 is ten employees. A PT PMA that employs ten or more workers, whether on permanent (PKWTT) or fixed-term (PKWT) contracts, is required to have a ratified PP. The obligation applies to the company as a whole. A company with a Jakarta office of six employees and a Surabaya office of six employees has twelve employees in total and triggers the obligation, even though neither location alone reaches the threshold.
One PP covers the entire company across all locations and contract types. Permenaker 28/2014 is explicit: a company may only have one PP, applicable to all workers across all offices and facilities. A company that tries to create separate PPs for different departments, locations, or contract categories is not compliant with this framework.
The one statutory exemption applies when a company already has a Perjanjian Kerja Bersama (PKB), a Collective Labor Agreement negotiated with a recognized labor union. A PKB replaces the PP and satisfies the documentation obligation. Most PT PMA entities in their early years do not have a labor union present and therefore do not have a PKB. The PP obligation applies to them in full.
For companies managing a mixed workforce of permanent employees and contractors under the outsourcing framework established by Permenaker No. 7 of 2026, the PP obligation attaches to the employee relationship, not to the outsourced contractor relationship. However, the PP’s provisions on working conditions and safety must be consistent with what the PT PMA ensures its outsourced service providers deliver under the outsourcing agreement, since Permenaker 7/2026 places compliance responsibility partly on the Principal Company. The interaction between the Company Regulation and the new outsourcing framework under Permenaker 7/2026 is directly relevant for PT PMA entities that use outsourced labor alongside direct employment.
The Ratification Process: Why It Cannot Be Skipped
A PP that has been drafted but not ratified by Kemnaker does not legally take effect. The Disnakertrans official guidance is direct on this point: the PP takes effect only after it is ratified by the Minister of Manpower or the designated official. Before ratification, the document exists but carries no legal force beyond what the statutory law already provides independently.
The Drafting Process
The PP must be prepared by the employer. However, Permenaker 28/2014 requires the employer to consider the input and feedback of employee representatives during the drafting process. This is not a full negotiation in the way a PKB is negotiated with a union, but it is not a unilateral act either. The employer must demonstrate that employee representatives had the opportunity to provide input before the PP was finalized. In practice, this typically means a documented consultation process with elected employee representatives, with a record of the input received and how it was addressed.
The Submission and Review
Once drafted, the PP is submitted to the relevant Kemnaker office, either at the central level for large companies or at the local Dinas Ketenagakerjaan for regional submissions. The reviewing official checks whether the PP’s provisions comply with current labor law, meaning no provision falls below the statutory minimum and all mandatory content areas are addressed. If the review identifies deficiencies, the PP is returned for revision.
A PP that is ratified and then becomes outdated because the law changed, including because a new regulation introduced new mandatory employment provisions, must be updated and re-ratified before the next two-year renewal date to remain effective in those areas. This is the update obligation that Permenaker 28/2014 creates on a rolling basis, and it is the reason why several XPND client companies discover during an M&A due diligence engagement that their PP references statutory provisions that are no longer the current law, a finding that creates material uncertainty about the enforceability of their internal employment policies. What labor compliance assessors look for when reviewing a PP’s currency against current law is outlined in XPND’s due diligence framework for employment and HR compliance, which covers the contract structure, PP validity, and BPJS enrollment dimensions that assessors examine as a combined package.
What the 2026 Legal Environment Requires the PP to Reflect
The PP’s obligation to track current law creates a specific compliance pressure in 2026, because three regulatory changes since 2021 have materially changed what a legally compliant PP must contain. A PP that has not been updated since before any of these changes is understating statutory obligations in precisely the areas where labor disputes are most likely to arise.
PP No. 35 of 2021: Contract Types and Severance
Government Regulation No. 35 of 2021 implementing the Job Creation Law restructured the rules for fixed-term employment contracts (PKWT), including maximum duration, compensation at contract completion, and the new concept of PKWT compensation (uang kompensasi). Any PP that still references the pre-2021 PKWT framework is describing a legal reality that no longer applies. A company that relies on a pre-2021 PP to govern the termination of a fixed-term employee is defending a claim based on superseded provisions. The calculation framework and triggering conditions for severance and PKWT compensation under PP 35/2021 are examined in detail in the Indonesia severance pay calculation guide under the Omnibus Law, which covers the multi-component formula that the PP’s termination provisions must now reflect.
Law No. 4 of 2024 (UU KIA): Maternity, Paternity, and Lactation
Law No. 4 of 2024 on Mother and Child Welfare introduced a three-plus-three month maternity leave structure (six months conditional), a 40-day paternity leave entitlement, and a lactation room obligation. Any PP that references the previous three-month maternity leave structure or the previous two-day paternity leave standard is now non-compliant with current law. Because the PP cannot set terms below the statutory minimum, any provision in the PP that is lower than what UU KIA requires is effectively overridden by the law, but the PP remains on the record showing the discrepancy. A labor inspector who sees a PP describing a two-day paternity leave entitlement will note the non-compliance regardless of whether the company has been informally applying the 40-day standard.
Employment Under the 2026 Immigration and Work Permit Framework
For PT PMA entities with foreign employees, the PP’s provisions on employment terms must be consistent with the work permit classification and role descriptions in the RPTKA. A foreign employee whose PP describes a role that does not match the approved RPTKA position creates a compliance exposure that intersects both labor and immigration law. The 2026 enforcement environment, in which Kemnaker penalized twelve companies for foreign worker violations and conducted joint raids with immigration authorities, means this intersection is now actively monitored.
The Consequences of an Outdated or Missing PP
A PT PMA without a ratified PP, or with a PP that has expired beyond its two-year validity without renewal, is not automatically exposed to a specific statutory penalty in every situation. The more direct consequence is what the company loses.
Without a ratified PP, the company cannot rely on its internal disciplinary procedures, working rules, or employment conditions in any labor dispute before the industrial relations tribunal (Pengadilan Hubungan Industrial). The tribunal applies the statutory law. If the company’s PP has provisions that go beyond the statutory minimum in the employee’s favor, those provisions are also unenforceable without a ratified document. The company’s own internal policies become legally invisible.
In a Kemnaker inspection, an expired or missing PP is a finding that triggers a recommendation for remediation within a set period. Repeated or systematic non-compliance can escalate to formal administrative sanctions. In a termination dispute, an unenforceable disciplinary procedure means the company cannot demonstrate that the termination followed a compliant internal process, which strengthens the employee’s claim for higher compensation.
The due diligence dimension is increasingly significant as well. An acquiring company that finds a target with an expired or non-updated PP must factor in the risk that employment relationships at the target may not be governed in the way the seller represents, and that undisclosed labor liabilities may exist from the gap between what the PP says and what current law requires.
XPND’s HR administration and employment compliance team drafts and renews Peraturan Perusahaan for PT PMA clients across all sectors, covering the drafting of mandatory content areas, the employee consultation process, submission to the relevant Kemnaker or Disnakertrans office, and the update cycle to incorporate new statutory provisions as they take effect.
Reach out to XPND’s HR compliance team to assess whether your current Peraturan Perusahaan is ratified, current, and reflects the statutory changes that have taken effect since your last renewal.
