HR PRACTICES IN INDONESIA

Group members
Mariam Yaqoob 02093-033 Farzan Yahya 02093-006 Zarak Mir 02093-066 Muhammad Ali 02093-045

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Dedication
We dedicate this report to our parents and our honorable teacher Sir Faisal Akbar Awan. Without their patience, understanding, support and most of love, the completion of this work would not have been possible.

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Acknowledgment
First of all, I would like to say Alhamdulillah, for giving me the strength and health to do this project work until it done, not forgotten to my family for providing everything, such as money, to buy anything that are related to this project work and their advice, which is the most needed for this project, internet, books, computers and all that as my source to complete this project. They also supported us and encouraged us to complete this tasked so that I will not procrastinate in doing it.

Then I would like to thank my teacher, Sir Faisal Akbar Awan for guiding us throughout this project. We had some difficulties in doing this tasked, but he taught us patiently until we knew what to do. We are also thankful to Madam Huda Khan who helped us in making of this project.

Last but not least, my group members who were doing this project with me and sharing our ideas. They were helpful that when we combined and discussed together, we had this tasked done.

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Table of Contents
Dedication ...............................................................................................................................................1 Acknowledgment ....................................................................................................................................3 History of Indonesia: ...............................................................................................................................6 Prehistory: ...........................................................................................................................................7 Hindu-Buddhist civilizations................................................................................................................7 The age of Islamic states .....................................................................................................................8 Colonial era: ........................................................................................................................................8 Sukarno's presidency ........................................................................................................................10 Sukarno's revolution and nationalism ..........................................................................................12 The New Order..................................................................................................................................12 Annexation of West Irian ..............................................................................................................14 Forcing out Suharto ..........................................................................................................................15 Economic crisis and Suharto's resignation....................................................................................16 Politics since 2004-2010................................................................................................................17 Culture & Religion of Indonesia ............................................................................................................19 Language ...........................................................................................................................................20 Music .................................................................................................................................................20 Art .....................................................................................................................................................21 Games ...............................................................................................................................................21 Food ..................................................................................................................................................21 Diversity ............................................................................................................................................21 Hierarchy ...........................................................................................................................................21 Face ...................................................................................................................................................22 General Etiquette Guidelines ............................................................................................................22 Business Etiquette & Protocol ..........................................................................................................23 The Impact of Organizational Culture on the Human Resources Management Practices. ..................25 The Impact of HRM on Organizational Performance............................................................................26 Economy of ..........................................................................................................................................28 Indonesia ..............................................................................................................................................28 Information of the Economy .............................................................................................................29 Indonesian HR Professionals (IHRP) Society .........................................................................................35 VISION ...............................................................................................................................................35 MISSION ............................................................................................................................................35 BASIC OBJECTIVES .............................................................................................................................35

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THE HUMAN RESOURCE PRACTICES IN THE PUBLIC SECTOR IN INDONESIA........................................36 Recruitment and selection practices in the public sector in Indonesia ............................................37 Compensation in Indonesia ..............................................................................................................38 Old-age program ...........................................................................................................................38 Health insurance ...........................................................................................................................38 Retirement programs ....................................................................................................................38 Remuneration system practice in the public sector in Indonesia ....................................................39 TRAINING AND DEVELOPMENT PRACTICES OF THE PUBLIC SERVANTS IN INDONESIA ...................39 Performance appraisal practice for the public servants in Indonesia ..............................................40 Indonesian Labor Laws..........................................................................................................................43 Firing .................................................................................................................................................43 Safety ................................................................................................................................................43 Sick Leave ..........................................................................................................................................43 Annual Leave .....................................................................................................................................43 Injury Compensation.........................................................................................................................43 Dispute Resolution ............................................................................................................................44 Employment Relation: ..........................................................................................................................45 Equal Employment Opportunity .......................................................................................................45 Affirmative Action .............................................................................................................................45 Primary Responsibilities and Duties: ................................................................................................46 Disclosure Policy ...............................................................................................................................47 Employment law in Indonesia...........................................................................................................52 Sources of regulation .............................................................................................................52 Scope of legislation .................................................................................................................52 Contracts of employment .....................................................................................................53 Termination of employment .................................................................................................53 Dismissal ...................................................................................................................................54 Notice and prior procedural safeguards ..........................................................................55 Avenues for redress ................................................................................................................58 Total Increase ..............................................................................................................................59 Human Resources Development ..........................................................................................................60 Building Working Relationships with Indonesians ............................................................................61 Employees Wage Rate and Benefits .........................................................................................61 Regulations .....................................................................................................................................63 Talent challenges and strategies.......................................................................................................66 Tax and contributions ...........................................................................................................................67 Business context ...................................................................................................................................68 Conclusion .............................................................................................................................................84

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Introduction
This report includes all about Indonesia. Its history, economy, culture and all HR practices that undergone in Indonesia.

History of Indonesia:
Indonesia is an archipelagic country of 17,508 islands (6,000 inhabited) stretching along the equator in South East Asia. The country's strategic sea-lane position fostered inter-island and international trade; trade has since fundamentally shaped Indonesian history. The area of Indonesia is populated by peoples of various migrations, creating a diversity of cultures, ethnicities, and languages. The archipelago's landforms and climate significantly influenced agriculture and trade, and the formation of states. Fossilized remains of Homo erectus, popularly known as the "Java Man", suggest the Indonesian archipelago was inhabited two million to 500,000 years ago. Austronesian people, who form the majority of the modern population, were originally from Taiwan and arrived in Indonesia around 2000 BCE. The theories presented above could be refuted and in need of revision due to new scientific evidence presented by HUGO (Human Genome Organization) through genetic studies of the Asian races that points to a single Asian migration from South East Asia traveling northwards and slowly populating East Asia instead of the other way around which as popularly depicted above. From the scientific discovery which has been a silent evidence, it has pointed out that the South East Asian civilizations are a of much older civilization compared to the widely researched and well documented east Asians' ancient civilizations [1] From the 7th century CE, the powerful Srivijaya naval kingdom flourished bringing Hindu and Buddhist influences with it. The agricultural Buddhist Sailendra and Hindu Mataram dynasties subsequently thrived and declined in inland Java. The last significant non-Muslim kingdom, the Hindu Majapahit kingdom, flourished from the late 13th century, and its influence stretched over much of Indonesia. The earliest evidence of Islamised populations in Indonesia dates to the 13th century in northern Sumatra; other Indonesian areas gradually adopted Islam which became the dominant religion in Java and Sumatra by the end of the 16th century. For the most part, Islam overlaid and mixed with existing cultural and religious influences. Europeans arrived in Indonesia from the 16th century seeking to monopolize the sources of valuable nutmeg, cloves, and cubeb pepper in Maluku. In 1602 the Dutch established the Dutch East India

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Company (VOC) and became the dominant European power. Following bankruptcy, the VOC was formally dissolved in 1800, and the government of the Netherlands established the Dutch East Indies as a nationalized colony. By the early 20th century Dutch dominance extended to what was to become Indonesia's current boundaries. The Japanese invasion and subsequent occupation during WWII ended Dutch rule, and encouraged the previously suppressed Indonesian independence movement. Two days after the surrender of Japan in August 1945, nationalist leader, Sukarno, declared independence and was appointed president. The Netherlands tried to reestablish their rule, but a bitter armed and diplomatic struggle ended in December 1949, when in the face of international pressure, the Dutch formally recognized Indonesian independence. An attempted coup in 1965 led to a violent army-led anti-communist purge in which over half a million people were killed. General Suharto politically out-maneuvered President Sukarno, and was formally appointed president in March 1968. His New Order administration garnered the favor of the West whose investment in Indonesia was a major factor in the subsequent three decades of substantial economic growth. In the late 1990s, however, Indonesia was the country hardest hit by the East Asian Financial Crisis which led to popular protests and Suharto's resignation on 21 May 1998. The Reformasi era following Suharto's resignation, has led to a strengthening of democratic processes, including a regional autonomy program, the secession of East Timor, and the first direct presidential election in 2004. Political and economic instability, social unrest, corruption, natural disasters, and terrorism have slowed progress. Although relations among different religious and ethnic groups are largely harmonious, acute sectarian discontent and violence remain problems in some areas.

Prehistory:

Hindu-Buddhist civilizations
References to the Dvipantara or JawaDwipaHindu kingdom in Java and Sumatra appear in Sanskrit writings from 200 BCE. The earliest archeological relic discovered in Indonesia is from the Ujung Kulon National Park, West Java, where an early Hindu statue of Ganesha from the 1st century CE was found on the summit of Mount Raksa in Panaitan Island. There is also archeological evidence of a kingdom in Sunda territory in West Java dating from the 2nd century, and according to Dr Tony Djubiantono, the head of Bandung Archeology Agency, Jiwa Temple in Batujaya, Karawang, West Java was also built around this time.

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8th century Borobudurbuddhist monument, Sailendra dynasty

A number of Hindu and Buddhist states flourished and then declined across Indonesia. By the time of the EuropeanRenaissance, Java and Sumatra had already seen over a millennium of civilization and two major empires. One such early kingdom was Tarumanagara, which flourished between 358 and 669 CE. Located in West Java close to modern-day Jakarta, its fifth-century king, Purnawarman, established the earliest known inscriptions in Java, the Ciaruteun inscription located near Bogor. On this monument, King Purnavarman inscribed his name and made an imprint of his footprints, as well as his elephant's footprints. The accompanying inscription reads, "Here are the footprints of King Purnavarman, the heroic conqueror of the world". This inscription is in Sanskrit and is still clear after 1500 years. Purnawarman apparently built a canal that changed the course of the Cakung River, and drained a coastal area for agriculture and settlement. In his stone inscriptions, Purnawarman associated himself with Vishnu, and Brahmins ritually secured the hydraulic project.[8]

The age of Islamic states

Although Muslim traders first traveled through South East Asia early in the Islamic era, the earliest evidence of Islamized populations in Indonesia dates to the 13th century in northern Sumatra. Although it is known that the spread of Islam began in the west of the archipelago, the fragmentary evidence does not suggest a rolling wave of conversion through adjacent areas; rather, it suggests the process was complicated and slow.[18] The spread of Islam was driven by increasing trade links outside of the archipelago; in general, traders and the royalty of major kingdoms were the first to adopt the new religion. Other Indonesian areas gradually adopted Islam, making it the dominant religion in Java and Sumatra by the end of the 16th century. For the most part, Islam overlaid and mixed with existing cultural and religious influences, which shaped the predominant form of Islam in Indonesia, particularly in Java. Only Bali retained a Hindu majority. In the eastern archipelago, both Christian and Islamic missionaries were active in the 16th and 17th centuries, and, currently, there are large communities of both religions on these islands.

Colonial era:
Beginning in the 16th century, successive waves of Europeansthe Portuguese, Spanish, Dutch and Britishsought to dominate the spice trade at its sources in India and the 'Spice Islands' (Maluku) of Indonesia. This meant finding a way to Asia to cut out Muslim merchants who, with their Venetian outlet in the Mediterranean, monopolised spice imports to Europe. Astronomically priced at the time,

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spices were highly coveted not only to preserve and make poorly preserved meat palatable, but also as medicines and magic potions. The arrival of Europeans in South East Asia is often regarded as the watershed moment in its history. Other scholars consider this view untenable, arguing that European influence during the times of the early arrivals of the sixteenth and 17th centuries was limited in both area and depth. This is in part due to Europe not being the most advanced or dynamic area of the world in the early 15th century. Rather, the major expansionist force of this time was Islam; in 1453, for example, the Ottoman Turks conquered Constantinople, while Islam continued to spread through Indonesia and the Philippines. European influence, particularly that of the Dutch, would not have its greatest impact on Indonesia until the 18th and 19th centuries.

Indonesian National Awakening

In October 1908, the first nationalist movement was formed, Budi Utomo. On September 10, 1912, the first nationalist mass movement was formed--Sarekat Islam. By December 1912, Sarakat Islam had 93,000 members.[] The Dutch responded after the First World War with repressive measures. The nationalist leaders came from a small group of young professionals and students, some of whom had been educated in the Netherlands. In the postWorld War I era, the Indonesian communists who were associated with the Third International started to usurp the nationalist movement. The repression of the nationalist movement led to many arrests, including Indonesia's first president, Sukarno (1901 70), who was imprisoned for political activities on December 29, 1929. Also arrested was Mohammad Hatta, first Vice-President of Indonesia. Additionally, SutanSjahrir, who later became the first Prime Minister of Indonesia, was arrested on this date. In 1914 exiled Dutch socialist HenkSneevliet founded the Indies Social Democratic Association. Initially a small forum of Dutch socialists, it would later evolve into the Communist Party of Indonesia in 1924. In the postWorld War I era, the Dutch strongly repressed all attempts at change. This repression led to a growth of the P.K.I. By December 1924, the P.K.I had a membership of 1,140. One year later in 1925, the P.K.I. had grown to 3,000 members. In 1926 thru 1927, there was a P.K.I. led revolt against the Dutch colonialism and the harsh repression based on strikes of urban workers. However, the strikes and the revolt was put down by the Dutch with some 13,000 nationalists and communists leaders arrested. Some 4,500 were given prison sentences. Sukarno was released from prison in December 1931. However, Sukarno was re-arrested again on August 1, 1933. Under pressure from radical and politicisedpemuda ('youth') groups, Sukarno and Hatta proclaimed Indonesian independence, on 17 August 1945, two days after the Japanese Emperors surrender in the Pacific. The following day, the Central Indonesian National Committee

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(KNIP) declared Sukarno President, and HattaVice President. Word of the proclamation spread by shortwave and fliers while the Indonesian war-time military (PETA), youths, and others rallied in support of the new republic, often moving to take over government offices from the Japanese. The Netherlands, initially backed by the British tried to re-establish their rule, and a bitter armed and diplomatic struggle ended in December 1949, when in the face of international pressure, the Dutch formally recognisedIndonesian independence. Dutch efforts to re-establish complete control met resistance. At the end of World War II, a power vacuum arose, and the nationalists often succeeded in seizing the arms of the demoralised Japanese. A period of unrest with city guerrilla warfare called the Bersiap period ensued. Groups of Indonesian nationalists armed with improvised weapons (like bamboo spears) but also firearms attacked returning Allied troops. 3500 Europeans were killed and 20000 were missing, meaning more European deaths in Indonesia after the war than during the war. After returning to Java, Dutch forces quickly re-occupied the colonial capital of Batavia (now Jakarta), so the city of Yogyakarta in central Java became the capital of the nationalist forces. Negotiations with the nationalists led to two major truce agreements, but disputes about their implementation, and much mutual provocation, led each time to renewed conflict. Within four years the Dutch had recaptured almost the whole of Indonesia, but guerrilla resistance, led on Java by commander Nasution persisted. On 27 December 1949, after four years of sporadic warfare and fierce criticism of the Dutch by the United Nations, the Netherlands officially recognised Indonesian sovereignty under the federal structure of the United States of Indonesia (RUSI). On 17 August 1950, exactly five years after the proclamation of independence, the last of the federal states were dissolved and Sukarno proclaimed a single unitary Republic of Indonesia.

Sukarno's presidency

Campaign posters for the 1955 Indonesian election.

With the unifying struggle to secure Indonesia's independence over, divisions in Indonesian society began to appear. These included regional differences in customs, religion, the impact of Christianity and Marxism, and fears of Javanese political domination. Following colonial rule, Japanese occupation, and war against the Dutch, the new country suffered from severe poverty, a ruinous economy, low educational and skills levels, and authoritarian traditions. Challenges to the authority of the Republic included the militant Darul Islam who waged a guerrilla struggle against the Republic from 1948 to 1962; the declaration of an independent Republic of South Maluku by Ambonese

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formerly of the Royal Dutch Indies Army; and rebellions in Sumatra and Sulawesi between 1955 and 1961. In contrast to the 1945 Constitution, the 1950 constitution mandated a parliamentary system of government, an executive responsible to the parliament, and stipulated at length constitutional guarantees for human rights, drawing heavily on the 1948 United Nations Universal Declaration of Human Rights. A proliferation of political parties dealing for shares of cabinet seats resulted in a rapid turnover of coalition governments including 17 cabinets between 1945 and 1958. The longpostponed parliamentary elections were held in 1955; the Indonesian National Party (PNI) considered Sukarno's partytopped the poll, and the Communist Party of Indonesia (PKI) received strong support, but no party garnered more than a quarter of the votes, which resulted in short-lived coalitions.

Coat of Arms of the Republic of Indonesia, adopted 1950

By 1956, Sukarno was openly criticising parliamentary democracy, stating that it was "based upon inherent conflict" which ran counter to Indonesian notions of harmony as being the natural state human relationships. Instead, he sought a system based on the traditional village system of discussion and consensus, under the guidance of village elders. He proposed a threefold blend of nasionalisme ('nationalism'), agama ('religion'), and komunisme ('communism') into a co-operative 'Nas-A-Kom' government. This was intended to appease the three main factions in Indonesian politics the army, Islamic groups, and the communists. With the support of the military, he proclaimed in February 1957, 'Guided Democracy', and proposed a cabinet of representing all the political parties of importance (including the PKI).[44] The US tried and failed to secretly overthrow the President, while Secretary of State Dulles declared before Congress that "we are not interested in the internal affairs of this country." [45] Sukarno abrogated the 1950 Constitution on 9 July 1959 by a decree dissolving the Constitutional Assembly and restoring the 1945 Constitution.[44] The elected parliament was replaced by one

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appointed by, and subject to the will of, the President. Another non-elected body, the Supreme Advisory Council, was the main policy development body, while the National Front was set up in September 1960 and presided over by the president to "mobilise the revolutionary forces of the people". Western-style parliamentary democracy was thus finished in Indonesia until the 1999 elections of the Reformasi era.

Sukarno's revolution and nationalism

Charismatic Sukarno spoke as a romantic revolutionary, and under his increasingly authoritarian rule, Indonesia moved on a course of stormy nationalism. Sukarno was popularly referred to as bung ("older brother"), and he painted himself as a man of the people carrying the aspirations of Indonesia and one who dared take on the West. He instigated a number of large, ideologically driven infrastructure projects and monuments celebrating Indonesia's identity, which were criticised as substitutes for real development in a deteriorating economy. Western New Guinea had been part of the Dutch East Indies, and Indonesian nationalists had thus claimed it on this basis. Indonesia was able to instigate a diplomatic and military confrontation with the Dutch over the territory following an Indonesian-Soviet arms agreement in 1960. It was, however, United States pressure on the Netherlands that led to an Indonesian takeover in 1963. Also in 1963, Indonesia commenced Konfrontasi with the new state of Malaysia. The northern states of Borneo, formerly British Sarawak and Sabah, had wavered in joining Malaysia, whilst Indonesia saw itself as the rightful rulers of the Malay race and supported an unsuccessful revolution attempt in Brunei. Reviving the glories of the Indonesian National Revolution, Sukarno rallied against notions of British imperialism mounting military offensives along the Indonesia-Malaysia border in Borneo. As the PKI rallied in Jakarta streets in support, the West became increasingly alarmed at Indonesian foreign policy and the United States withdrew its aid to Indonesia. Indonesia's economic position continued to deteriorate; by the mid-1960s, the cash-strapped government had to scrap critical public sector subsidies, inflation was at 1,000%, export revenues were shrinking, infrastructure crumbling, and factories were operating at minimal capacity with negligible investment. Severe poverty and hunger were widespread.

The New Order

Described as the great dalang ("puppet master"), Sukarno's position depended on balancing the opposing and increasingly hostile forces of the army and PKI. Sukarno's anti-imperial ideology saw Indonesia increasingly dependent on Soviet and then communist China. By 1965, the PKI was the

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largest communist party in the world outside the Soviet Union or China. Penetrating all levels of government, the party increasingly gained influence at the expense of the army. On September 30, 1965, six of the most senior generals within the military and other officers were executed in an attempted coup. The insurgents, known later as the 30 September Movement, backed a rival faction of the army and took up positions in the capital, later seizing control of the national radio station. They claimed they were acting against a plot organised by the generals to overthrow Sukarno. Within a few hours, Major General Suharto, commander of the Army Strategic Reserve (Kostrad), mobilised counteraction, and by the evening of 1 October, it was clear the coup, which had little coordination and was largely limited to Jakarta, had failed. Complicated and partisan theories continue to this day over the identity of the attempted coup's organisers and their aims. According to the Indonesian army, the PKI were behind the coup and used disgruntled army officers to carry it out, and this became the official account of Suharto's subsequent New Order administration. Most historians agree that the coup and the surrounding events were not led by a single mastermind controlling all events, and that the full truth will never likely be known. While the PKI's role in the events of the debated, the effects on it were coup, and anti-communists, initially encouraged by Western embassies, went much of the country. The PKI was widely accepted estimates are that night of 30 September-1 October remains devastating. The PKI was blamed for the following the army's lead, and on a violent anti-communist purge across effectively destroyed, and the most between 500,000 and one million people

were killed. The violence was especially brutal in Java and Bali. The PKI was outlawed and possibly more than 1 million of its leaders and affiliates were imprisoned. Throughout the 1965-66 period, President Sukarno attempted to restore his political position and shift the country back to its pre-October 1965 position but his Guided Democracy balancing act was destroyed with the PKIs destruction. Although he remained president, the weakened Sukarno was forced to transfer key political and military powers to General Suharto, who by that time had become head of the armed forces. In March 1967, the Provisional People's Consultative Assembly (MPRS) named General Suharto acting president. Suharto was formally appointed president in March 1968. Sukarno lived under virtual house arrest until his death in 1970.
Suharto was the military president of Indonesia from 1967 to 1998

In the aftermath of Suharto's rise, hundreds of thousands of people were killed or imprisoned by the military and religious groups in a backlash against alleged communist supporters.[53] Suharto's administration is commonly called the New Order era. Suharto invited major foreign investment,

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which produced substantial, if uneven, economic growth. However, Suharto enriched himself and his family through business dealings and widespread corruption.[55]

Annexation of West Irian

At the time of independence, the Dutch retained control over the western half of New Guinea, and permitted steps toward self-government and a declaration of independence on December 1, 1961. After negotiations with the Dutch on the incorporation of the territory into Indonesia failed, an Indonesian paratroop invasion December 18 preceded armed clashes between Indonesian and Dutch troops in 1961 and 1962. In 1962 the United States pressured the Netherlands into secret talks with Indonesia which in August 1962 produced the New York Agreement, and Indonesia assumed administrative responsibility for West Irian on May 1, 1963. Rejecting United Nations supervision, the Indonesian government under Suharto decided to settle the question of West Irian, the former Dutch New Guinea, in their favor. Rather than a referendum of all residents of West Irian as had been agreed under Sukarno, an "Act of Free Choice" was conducted 1969 in which 1,025 Papuan representatives of local councils were selected by the Indonesians. After training in Indonesian language they were warned to vote in favor of Indonesian integration with the group unanimously voting for integration with Indonesia. A subsequent UN General Assembly resolution confirmed the transfer of sovereignty to Indonesia.WestIrian was renamed Irian Jaya ('glorious Irian') in 1973. Opposition to Indonesian administration of Irian Jaya (later known as Papua) gave rise to small-scale guerrilla activity in the years following Jakarta's assumption of control.

History of East Timor

In 1975, the Carnation Revolution in Portugal caused authorities there to announce plans for decolonisation of Portuguese Timor, the eastern half of the island of Timor whose western half was a part of the Indonesian province of East Nusa Tenggara. In the elections held in 1975, Fretilin, a leftleaning party and UDT, aligned with the local elite, emerged as the largest parties, having previously formed an alliance to campaign for independence from Portugal. Apodeti, a party advocating integration with Indonesia, enjoyed little popular support. Indonesia alleged that Fretilin was communist, and feared that an independent East Timor would influence separatism in the archipelago. Indonesian military intelligence influenced the break-up of the alliance between Fretilin and UDT, which led to a coup by the UDT on August 11, 1975, and a month-long civil war. During this time, the Portuguese government effectively abandoned the territory, and did not resume the decolonisation process. On November 28, Fretilinunilaterally

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declared independence, and proclaimed the 'Democratic Republic of East Timor'. Nine days later, on December 7, Indonesia invaded East Timor, eventually annexing the tiny country of (then) 680,000 people. Indonesia was supported materially and diplomatically by the United States, Australia and the United Kingdom who regarded Indonesia as an anti-communist ally. Following the 1998 resignation of Suharto, on August 30, 1999, the people of East Timor voted overwhelmingly for independence in a UN-sponsored referendum. About 99% of the eligible population participated; more than three quarters chose independence despite months of attacks by the Indonesian military and its militia. After the result was announced, elements of the Indonesian military and its militia retaliated by killing approximately 2,000 East Timorese, displacing two-thirds of the population, raping hundreds of women and girls, and destroying much of the country's infrastructure. In October 1999, the Indonesian parliament (MPR) revoked the decree that annexed East Timor, and the United Nations Transitional Administration in East Timor (UNTAET) assumed responsibility for governing East Timor until it officially became an independent state in May 2002.

Forcing out Suharto

Indonesian Revolution of 1998

University students and police forces clash in May 1998.

In 1996 Suharto undertook efforts to pre-empt a challenge to the New Order government. The Indonesian Democratic Party (PDI), a legal party that had traditionally propped up the regime had changed direction, and began to assert its independence. Suharto fostered a split over the leadership of PDI, backing a co-opted faction loyal to deputy speaker of the People's Representative CouncilSuryadi against a faction loyal to Megawati Sukarnoputri, the daughter of Sukarno and the PDI's chairperson. After the Suryadi faction announced a party congress to sack Megawati would be held in Medan on June 2022, Megawati proclaimed that her supporters would hold demonstrations in protest. The Suryadi faction went through with its sacking of Megawati, and the demonstrations manifested

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themselves throughout Indonesia. This led to several confrontations on the streets between protesters and security forces, and recriminations over the violence. The protests culminated in the military allowing Megawati's supporters to take over PDI headquarters in Jakarta, with a pledge of no further demonstrations. Suharto allowed the occupation of PDI headquarters to go on for almost a month, as attentions were also on Jakarta due to a set of high-profile ASEAN meetings scheduled to take place there. Capitalizing on this, Megawati supporters organized "democracy forums" with several speakers at the site. On July 26, officers of the military, Suryadi, and Suharto openly aired their disgust with the forums.[ On July 27, police, soldiers, and persons claiming to be Suryadi supporters stormed the headquarters. Several Megawati supporters were killed, and over two-hundred arrested and tried under the AntiSubversion and Hate-Spreading laws. The day would become known as "Black Saturday" and mark the beginning of a renewed crackdown by the New Order government against supporters of democracy, now called the "Reformasi" or Reformation.

Economic crisis and Suharto's resignation

In 1997 and 1998, Indonesia was the country hardest hit by the East Asian Financial Crisis,[58] which had dire consequences for the Indonesian economy and society, and Suharto's presidency. At the same time, the country suffered a severe drought and some of the largest forest fires in history burned in Kalimantan and Sumatra. The rupiah, the Indonesian currency, took a sharp dive in value. Suharto came under scrutiny from international lending institutions, chiefly the World Bank, International Monetary Fund (IMF) and the United States, over longtime embezzlement of funds and some protectionist policies. In December, Suharto's government signed a letter of intent to the IMF, pledging to enact austerity measures, including cuts to public services and removal of subsidies, in return for receiving the aid of the IMF and other donors. Prices for goods such as kerosene and rice, and fees for public services including education rose dramatically. The effects were exacerbated by widespread corruption. The austerity measures approved by Suharto had started to erode domestic confidence with the New Order and led to popular protests. Suharto stood for re-election by parliament for the seventh time in March 1998, justifying it on the grounds of the necessity of his leadership during the crisis. The parliament approved a new term. This sparked protests and riots throughout the country, now termed the Indonesian 1998 Revolution. Dissent within the ranks of his ownGolkar party and the military finally weakened Suharto, and on May 21 he stood down from power. He was replaced by his deputy JusufHabibie.

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President Habibie quickly assembled a cabinet. One of its main tasks was to re-establish International Monetary Fund and donor community support for an economic stabilization program. He moved quickly to release political prisoners and lift some controls on freedom of speech and association. Elections for the national, provincial, and sub-provincial parliaments were held on June 7, 1999. For the national parliament, Indonesian Democratic Party-Struggle (PDI-P, led by Sukarno's daughter Megawati Sukarnoputri) won 34% of the vote; Golkar (Suharto's party; formerly the only legal party of government) 22%; United Development Party (PPP, led by HamzahHaz) 12%; and National Awakening Party (PKB, led by Abdurrahman Wahid) 10%.

Politics since 2004-2010

Indonesian 2009 election ballot, since 2004 Indonesian vote their president directly.In October 1999, the People's Consultative Assembly (MPR), which consists of the 500-member Parliament plus 200 appointed members, elected Abdurrahman Wahid, commonly referred to as "Gus Dur" as President, and Megawati Sukarnoputri as Vice President, for 5-year terms. Wahid named his first Cabinet in early November 1999 and a reshuffled, second Cabinet in August 2000. President Wahid's government continued to pursue democratization and to encourage renewed economic growth under challenging conditions. In addition to continuing economic malaise, his government faced regional, interethnic, and interreligious conflict, particularly in Aceh, the Maluku Islands, and Irian Jaya. In West Timor, the problems of displaced East Timorese and violence by pro-Indonesian East Timorese militias caused considerable humanitarian and social problems. An increasingly assertive Parliament frequently challenged President Wahid's policies and prerogatives, contributing to a lively and sometimes rancorous national political debate. During the People's Consultative Assembly's first annual session in August 2000, President Wahid gave an account of his government's performance. On January 29, 2001 thousands of student protesters stormed parliament grounds and demanded that President Abdurrahman Wahid resign due to alleged involvement in corruption scandals. Under pressure from the Assembly to improve

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management and coordination within the government, he issued a presidential decree giving Vice President Megawati control over the day-to-day administration of government. Soon after, Megawati Sukarnoputri assumed the presidency on July 23. In 2004, SusiloBambangYudhoyono won Indonesia's first direct Presidential election and in 2009 he was elected to a second

President:SusiloBambangYudhoyono (2004) Land area: 699,548 sq mi (1,811,831 sq km); total area: 741,096 sq mi (1,919,440 sq km) Population (2010 est.):242,968,342 (growth rate: 1.1%); birth rate: 18.4/1000; infant mortality rate:
28.9/1000; life expectancy: 71.0; density per sq km: 130

Capital and largest city (2003 est.):Jakarta, 13,194,000 (metro. area), 8,389,443 (city proper) Other large cities: Surabaya, 3,038,800; Bandung, 2,733,500; Medan, 2,204,300; Semarang, 1,267,100 Monetary unit: Rupiah

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Culture & Religion of Indonesia

The present day culture of Indonesia is an outcome of the interplay of age-old- traditions from the time of early migrants and the Western thought brought by Portuguese traders and Dutch colonists. The basic principles, which guide life, include the concepts of mutual assistance or "gotongroyong" and consultations or "musyawarah" to arrive at a consensus or "mufakat". Derived from rural life, this system is still very much in use in community life throughout the country. Though the legal system is based on the Old Dutch penal code, social life as well as the rites of passage is founded on customary or "adat" law, which differs from area to area. ''Adat'' law has been instrumental in maintaining gender equality in Indonesia.

The culture of Indonesia has took its current shape molded by several influences that have been prevalent in the land, as a result of the long process of interaction and acculturation between original indigenous customs and a multitude of foreign influences.

Indonesian art forms are greatly influenced by religion. The famous dance dramas of Java and Bali are derived from Hindu mythology and often feature fragments from the Hindu epics such as Ramayana and Mahabharata.

The crafts of Indonesia vary in both medium and art form. As a whole the people are artistic by nature and express themselves on canvas, wood, metals, clay and stone. The batik process of waxing and dyeing originated in Java centuries ago and classic designs have been modified with modern trends in both pattern and technology. There are several centers of Batik in Java, the major ones being Yogyakarta, Surakarta, Pekalongan and Cirebon.

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Indonesia is rich in handicrafts. Various forms of handicrafts practiced are: woodcarvings for ornamentation and furniture, silverwork and engraving from Yogyakarta and Sumatra; filgree from South Sulawesi and Bali with different styles of clay, sandstone and wood sculptures. These are but a few of the handicrafts found in Indonesia.

Ethnic Groups: Javanese 45%, Sundanese 14%, Madurese 7.5%, coastal Malays 7.5%, other 26%

Religions: Muslim 88%, Protestant 5%, Roman Catholic 3%, Hindu 2%, Buddhist 1%, other 1% Language
The official language of Indonesia is known as Indonesian or 'Bahasa Indonesian'. Indonesian is a standardized dialect of the Malay language and was formulated at the time of the declaration of Indonesian independence in 1945. Malay and Indonesian remain very similar. Although the official language, in reality it is most of the population's second language. Due to the sheer size and fractured, island make-up of the country most people speak regional dialects such as Minangkabau or Javanese. These will usually be spoken at home and in the local community but at work or at school Indonesian is used.

Music
With respect to music, Kroncong is a musical style that applies guitars and ukuleles as the primary musical instruments. This style is originated in Portugal and brought in by Portuguese traders in 15th century. Sasando music comes from the province of East Nusa Tenggara. It is accompanied by an instrument made up of split leaf of the Lontar palm, which contains some likenesses to a harp.

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Art
Kenyah mural painting in Long Nawang, East Kalimantan is usually found among Austronesian cultures, indigenous natural motives such as dogs, ferns, hornbills, trees and human figures.

Games
There are several varieties of traditional games like bull races in Madura, cockfighting in Bali and stone jumping in Nias. Another kind of national sport is sepaktakraw, which is started in Melaka. The patterns are alike to volleyball: to maintain the rattan ball in the air by using the players' feet.

Food
Rice is served as the main dish for most native Indonesians, with side dishes such as meat and vegetables. Indonesian dishes are commonly spicy by using chili peppers and spices. Some of the most popular dishes are Satay, nasigoreng, Nasi Padang, tofu and tempe.

Diversity
. Indonesia is a hugely diverse nation. . It is made up of over 17,500 islands (6,000 of which are inhabited) which are home to over 300 ethnic groups. . Each province has its own language, ethnic make-up, religions and history. . Most people will define themselves locally before nationally. . In addition there are many cultural influences stemming back from difference in heritage. Indonesians are a mix of Chinese, European, Indian, and Malay. . Although Indonesia has the largest Muslim population in the world it also has a large number of Christian Protestants, Catholics, Hindus and Buddhists. . This great diversity has needed a great deal of attention from the government to maintain a cohesion. . As a result the national motto is "Unity in Diversity", the language has been standardised and a national philisophy has been devised know as "Pancasila" which stresses universal justice for all Indonesians. Group Thinking . Due to the diverse nature of Indonesian society there exists a strong pull towards the group, whether family, village or island. . People will define themselves according to their ethnic gourp, family and place of birth. . The family is still very traditional in structure. . Family members have clearly defined roles and a great sense of interdependence.

Hierarchy . As with most group orientated cultures, hierarchy plays a great role in Indonesian culture.
. Hierarchical relationships are respected, emphaised and maintained. . Respect is usually shown to those with status, power, position, and age. . This can be seen in both the village and the office where the most senior is expected to make group

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decisions. . Superiors are often called "bapak" or "ibu", which means the equivalent of father or mother, sir or madam. . Although those higher up the hierarchy make decisions Indonesians are advocates of group discussion and consensus. This ties back to the idea of maintaing strong group cohesiveness and harmonious relationships.

Face
. Due to the need to maintain group harmony the concept of 'face' is important to understand. . In Indonesia the concept is about avoiding the cause of shame ("malu"). . Consequently, people are very careful how they interact and speak. . Although a foreigner can not be expected to understand the nuances of the concept it is crucial to keep an eye on ones behavior. . One should never ridicule, shout at or offend anyone. Imperfections should always be hidden and addresses privately. Similarly blame should never be aimed at any individual/group publicly. . One manifestation of the concept of face/shame is that Indonesians communite quite indirectly, i.e. they would never wish to cause anyone shame by giving them a negative answer so would phrase it a way where you would be expected to realize what they truly want to say. . Bahasa Indonesian actually has 12 ways of saying "No" and several other ways of saying "Yes" when the actual meaning is "No!!

General Etiquette Guidelines Meeting and Greeting

. Greetings can be rather formal as they are meant to show respect. . A handshake is the most common greeting accompanied with the word "Selamat". . Many Indonesians may give a slight bow or place their hands on their heart after shaking your hand. . If you are being introduced to several people, always start with the eldest or most senior person first. . Titles are important in Indonesia as they signify status. If you know of any titles ensure you use them in conjunction with the name. . Some Indonesians only have one name, although it is becoming more common for people to have a first name and a surname, especially in the middle class. . Many Indonesians, especially those from Java, may have had an extremely long name, which was shortened into a sort of nickname for everyday conversation. . There are several ethnic groups in Indonesia. Most have adopted Indonesian names over the years, while some retain the naming conventions of their ethnicity.

Gift Giving Etiquette

Gift giving etiquette in Indonesia heavily depends on the ethnicity of the receiver.. Here is some general gift giving guidelines:

Gift giving etiquette for the Chinese:

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. It is considered polite to verbally refuse a gift before accepting it. This shows that the recipient is not greedy. . Items to avoid include scissors, knives or other cutting utensils as they indicate that you want to sever the relationship. . Elaborate wrapping is expected - gold and red and considered auspicious. . Gifts are not opened when received.

Gift giving etiquette for ethnic Malays / Muslims: . In Islam alcohol is forbidden. Only give alcohol if you know the recipient will appreciate it.
. Any food substance should be "halal" - things that are not halal include anything with alcoholic ingredients or anything with pork derivatives such as gelatine. Halal meat means the animal has been slaughtered according to Islamic principles. . Offer gifts with the right hand only. . Gifts are not opened when received.

Gift giving etiquette for ethnic Indians:

. Offer gifts with the right hand only. . Wrap gifts in red, yellow or green paper or other bright colors as these bring good fortune. . Do not give leather products to a Hindu. . Do not give alcohol unless you are certain the recipient imbibes. . Gifts are not opened when received.

Dining Etiquette
Dining etiquette is generally relaxed but depends on the setting and context. The more formal the occasion, the more formal is the behavior. Below are some basic dining etiquette tips. . Wait to be shown to your place - as a guest you will have a specific position. . Food is often taken from a shared dish in the middle. You will be served the food and it would not be considered rude if you helped yourself after that. . If food is served buffet style then the guest is generally asked to help themselves first. It is considered polite that the guest insist others go before him/her but this would never happen. . In formal situations, men are served before women. . Wait to be invited to eat before you start. . A fork and spoon are often the only utensils at the place setting. Depending on the situation some people may use their hands. . Eat or pass food with your right hand only.

Business Etiquette & Protocol Business Cards . Business cards are normally exchanged after the initial handshake and greeting.
. Business cards should display your title. This helps enhance your image and credibility. . Although not required, having one side of your card printed in Bahasa shows respect. . Give/accept cards using two hands or the right hand. . Examine a business card you receive before putting it on the table next to you or in a business card case. . It is important to treat business cards with respect.

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What to Wear?
. Business attire is generally conservative. . Women should dress conservatively ensuring that they are well covered from ankle to neck. Tight fitting clothes are best avoided. . Remember it is hot, so cotton or at least light clothing is best.

Communication Styles
. Indonesians are indirect communicators. This means they do not always say what they mean. It is up to the listener to read between the lines or pay attention to gestures and body language to get the real message. . Generally speaking Indonesians speak quietly and with a subdued tone. Loud people would come across as slightly aggressive. Business is personal in Indonesia so spend time through communication to build a strong relationship. Dealing with someone face-to-face is the only effective way of doing business. . Indonesians abhor confrontation due to the potential loss of face. To be polite, they may tell you what they think you want to hear. If you offend them, they will mask their feelings and maintain a veil of civility. If an Indonesian begins to avoid you or acts coldly towards you, there is a serious problem.

Business Meetings
. Initial meetings may be more about getting-to-know-you rather than business. Do not be surprised if business is not even discussed. . It is common for Indonesians to enter the meeting room according to rank. Although you do not have to do this, doing so would give a good impression. . Indonesians do not make hasty decisions because they might be viewed as not having given the matter sufficient consideration. Be prepared to exercise patience. . "Jam Karet" (rubber time) describes the Indonesian approach to time. Things are not rushed as the attitude is that everything has its time and place. Time does not bring money, good relations and harmony do. . If negotiating, avoid pressure tactics as they are likely to backfire.

Impact of National Culture on Human Resource Practices

The notion that human resource pratice is universal has been questioned. A number of human resources policy that successfully practiced in a certain country, may not successfully applied in another country. For example, pay for performance schemes which is very popular and effective in the United States and United Kingdom, it cannot successfully be a practiced in another country. The same goes for quality circle program, it has practice widely and successfully in Japan, however quality circlehas not successfully been implemented in the United States (Newman &Nollen, 1996:759). National culture also influenced on the strategic decision making and leadership style (Schneider &DeMeyer, 1991:308), and human resoure management practices such as performance appraisal (Luthans, Welsh &Rosenkrantz, 1993:743). In culture with high power distance,loyalty and obedience to superior is required. Therefore, management usually used performance appraisal based on the behavioural criteriarather than results criteria. Employees or subordinates have a minimal risk when they follow the established procedure rather than make a new breakthrough which may cause failure. Basically, performance appraisal can

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be differentiated based on its orientation i.e.behaviour orientationorresults orientation (Schuler & Jackson, 1990:125). A number of human resource practices have specific characteristic related to specific country. For example, life-time employment policy is very popular in Japan, however, it is uncommon practice in USA.On general, Japanese companies spend more money for social activites and recreational facilities than that of American companies (Pascale & Maguire, 1980:433). A cross cultural research involved 277 respodents in American companies, 291 Japanese companies, dan 50 European companies byolehKagonoet al., (1985) in Smith (1992:39) concluded that Japaness companies have shorther hierarchical structure, flexiblejob description, control systems upon selfdicipline and more promotion from within. Laurent (1983:75) found that in Germany, decision making is more centralized than in United Kingdom. Besides, it is common for top positions in organization occupied by outsider. Meanwhile, companies in UK tended to have promotion form within policy, and spend more money for emoloyee well-being and middle management development program. Jaeger (1986:186) conducted reserach on the applicability of human resource parctiuces in developing countries asserted that although there is strong will to replicate western human resource policies, those policies cannot be implemented successfully. Besides, it is required that to be successfully practiced, those policies must fit with the assumptions of local cultural context.For example, planning activities does not work well in the countries with low uncertainty avoidance such as in Indonesia and most African countries.

The Impact of Organizational Culture on the Human Resources Management Practices.

Organizational culture and its environment factors in which organization exist determines the way of managing the organization (Saffold, 1988:547).The relationship between organizational culture and human resources practices can be explained as follows. When the member of organization i.e. employees, understand and internalized the organzationanl culture which can be said as the way things are done around here, it will enable for employee to choose strategy, and behavior that fit with their personality as well as with the main routines of organization activities. Since Indonesia is belong to country with high power distance and low uncertainty avoidance, it is likely that organizational culture that fit with this condition is parochial type. Parochial culture is characterized by the tendecy to give much attention to some factor such as family relationship, social relation, and personal backgroud, and less attention to capability and competency needed to perform the task.

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Basically, parochial culture is just like a family culture, where the superior-subordinates relation is imbalance. In this culture, hierarchy is not just division of responsibility and duty, but it symbolized power and authority. The main power is on the one hand, a powerful person such as the owner or the founder of the company, where the destiny of an employee depends on the hand of the most powerfull person (the boss). There is a division of work, the boss is the planner, the other are the doer. In the high power distance society, good leader or good manager in the eye of the employees,is someone who can act like a good father (Hofstede, 1997). This type of relationship will lead to less participative management in decision making.

The Impact of HRM on Organizational Performance

Research by Newman & Nollen (1996:753) indicated that organization performance is better in the companies where there is congruency between national culture and human resources practice.In the unit business level, where its manager consciously practice human resource policies in accordance with countrys value, the performance of business unit i.e. return on assets (ROA), return on sales is better and employee bonus is bigger. According to Earley (1994:685) if the human resource management practices is not suitable with basic values shared by employees will cause employee are dissatisfied, uncomfortable and uncommitted. Employee will feel distractedor alienated, because their values are diference from company expectation, and therefore, theori organizational commitment and their job satisfaction will be low, and in turn they may want to quit from the job. When this condition happen for a long time, organization performance will decrease. Conversly, when human resource practice fit with the values shared by employees, organizational performance will be high.

National culture positively influence on HRM practices. Therefore, it is important for practicing managers to take cultural factor into account in formulating and adopting HRM concept from other country (espesially from Western countries). The reason is that HRM concepts always contains unspoken assumption that is underlying values in the certain society.

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Beside, it is important that an attempt should be done to find an alternative management science that is based on Indonesian values. Therefore, there is an opportunity for Indonesian management scholars to search and developed management practice which is consistent with Indonesian cultural values. As it is often mentioned in another study, some Indonesian organization such as Astra International Company Ltd has been successfully adopted management practices consistent with its environment so that it results an outstanding organizational performance.

For the foreign companies operate in Indonesia, this research recommendates that host country culture should be taken into account in implemeting management policies. Companies must adjust their management practice in accordance with their environment so that the companies may generate successful performance.

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Economy of Indonesia

Overview
Indonesia, a vast polyglot nation, has weathered the global financial crisis relatively smoothly because of its heavy reliance on domestic consumption as the driver of economic growth. Increasing investment by both local and foreign investors is also supporting solid growth. Although the economy slowed to 4.5% growth in 2009 from the 6%-plus growth rate recorded in 2007 and 2008, by 2010 growth returned to a 6% rate. During the recession, Indonesia outperformed most of its regional neighbors. The government made economic advances under the first administration of President YUDHOYONO, introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision. Indonesia's debtto-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship, leading two of the three leading credit agencies to upgrade credit ratings for Indonesia's sovereign debt to one notch below investment grade. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. YUDHOYONO and his vice president, respected economist BOEDIONO, have maintained broad continuity of economic policy, although the economic reform agendat has been slowed during the first year of their term by corruption scandals and the departure of an internationally respected finance minister. In late 2010, increasing inflation, driven by higher and volatile food prices, posed an increasing challenge to economic policymakers and threatened to push millions of the near-poor below the poverty line. The government in 2011 faces the ongoing challenge of improving Indonesia's infrastructure to remove impediments to growth, while addressing climate change concerns, particularly with regard to conserving Indonesia's forests and peatlands, the focus of a potentially trailblazing $1 billion REDD+ pilot project.

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Information of the Economy GDP (purchasing power parity) $1.033 trillion (2010 est.) $974.6 billion (2009 est.) $932.6 billion (2008 est.) Note: data are in 2010 US dollars GDP (official exchange rate) $695.1 billion (2010 est.) GDP - real growth rate 6% (2010 est.) 4.5% (2009 est.) 6% (2008 est.) GDP - per capita (PPP) $4,300 (2010 est.) $4,100 (2009 est.) $3,900 (2008 est.) note: data are in 2010 US dollars GDP - composition by sector agriculture: 16.5% industry: 46.4% services: 37.1% (3rd quarter, 2010 est.)

Population below poverty line 13.33% (2010) Labor force 116.5 million (2010 est.) Labor force - by occupation agriculture: 38.3% industry: 12.8% services: 48.9% (2010 est.)

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Unemployment rate

7.1% (2010 est.) 7.9% (2009 est.)

Central bank discount rate 6.37% (31 December 2010) 6.46% (31 December 2009) Note: this figure repesents the 3-month SBI rate; BI has not employed the one-month SBI since September 2010

Commercial bank prime lending rate 13.29% (30 November 2010 est.) 14.5% (31 December 2009 est.) Note: these figures represent the average annualized rate on working capital loans

Stock of domestic credit $253.1 billion (31 December 2010 est.) $192.3 billion (31 December 2009 est.)

Budget revenues: $119.5 billion expenditures: $132.9 billion (2011 est.) Public debt 26.4% of GDP (2010 est.) 27.4% of GDP (2009 est.)

Household income or consumption by percentage share

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lowest 10%: 3% highest 10%: 32.3% (2006)

Distribution of family income - Gini index 37 (2009) 39.4 (2005)

Inflation rate (consumer prices) 5.1% (2010 est.) 4.8% (2009 est.)

Investment (gross fixed) 32.5% of GDP (2010 est.)

Industries petroleum and natural gas, textiles, apparel, footwear, mining, cement, chemical fertilizers, plywood, rubber, food, tourism

Industrial production growth rate 3.6% (2010 est.)

Electricity - production 129 billion kWh (2008 est.)

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Electricity - consumption 119.3 billion kWh (2007 est.) Electricity - exports 0 kWh (2009 est.) Electricity - imports 0 kWh (2009 est.)

Oil - production 1.023 million bbl/day (2009 est.) Oil - consumption 1.115 million bbl/day (2009 est.) Oil - imports 456,700 bbl/day (2009 est.) Oil - exports 322,000 bbl/day (2009 est.) Oil - proved reserves 4.05 billion bbl (1 January 2010 est.)

Natural gas - production 85.7 billion cu m (2009 est.) Natural gas - consumption 45.2 billion cu m (2008) Natural gas - exports 33.5 billion cu m (2008 est.)

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Natural gas - imports 0 cu m (2008 est.) Natural gas - proved reserves 3.001 trillion cu m (1 January 2010 est.)

Agriculture - products rice, cassava (tapioca), peanuts, rubber, cocoa, coffee, palm oil, copra; poultry, beef, pork, eggs

Current Account Balance $8.532 billion (2010 est.) $10.75 billion (2009 est.)

Exports $146.3 billion (2010 est.) $119.5 billion (2009 est.)

Exports - commodities oil and gas, electrical appliances, plywood, textiles, rubber Exports - partners Japan 17.28%, Singapore 11.29%, US 10.81%, China 7.62%, South Korea 5.53%, India 4.35%, Taiwan 4.11%, Malaysia 4.07% (2009)

Imports $111.1 billion (2010 est.) $84.35 billion (2009 est.)

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Imports - commodities machinery and equipment, chemicals, fuels, foodstuffs Imports - partners Singapore 24.96%, China 12.52%, Japan 8.92%, Malaysia 5.88%, South Korea 5.64%, US 4.88%, Thailand 4.45% (2009)

Debt - external $196.1 billion (31 December 2010 est.) $172.9 billion (31 December 2009 est.)

Reserves of foreign exchange and gold $96.21 billion (31 December 2010 est.) $66.12 billion (31 December 2009 est.)

Stock of direct foreign investment - at home $81.21 billion (31 December 2010 est.) $72.84 billion (31 December 2009 est.) Stock of direct foreign investment - abroad $33.71 billion (31 December 2010 est.) $30.18 billion (31 December 2009 est.)

Market value of publicly traded shares $361.2 billion (31 December 2010) $178.2 billion (31 December 2009) $98.76 billion (31 December 2008)

Exchange rates

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Indonesian rupiah (IDR) per US dollar - 9,169.5 (2010), 10,389.9 (2009), 9,698.9 (2008), 9,143 (2007), 9,159.3 (2006)

Indonesian HR Professionals (IHRP) Society

ABOUT US

Indonesian HR Professionals Society, abbreviated as IHRP, is a not for profit organization of human resource professionals in Indonesia, founded in October 1999. It is a further development of the IHRP e-forum hosted at eGroups.com

VISION
To be an organization that: is a catalyst in the enhancement of the HR management competencies of its members, the Indonesian business community and the government sectors, has chapters in all provinces, has the proper strategy, plans and programs that foster the professionalism, knowledge, competency & image of its members and the Indonesian HR Professionals in general, has mutually beneficial strategic partnerships with related organizations, is professionally managed and financially sound.

MISSION
To provide strategic leadership in HR related areas, To provide an effective and efficient communication forum for the exchange of information and ideas on HR related topics, To provide information and recommendations to the Indonesian business communities and government on HR management and related strategies, plans, programs, policies, systems and procedures To provide world class HR management related education & training.

BASIC OBJECTIVES
To have the majority of Indonesian Senior HR Practitioners and a significant portion of non HR Managers and Directors as its member, To establish and operate an effective and efficient Indonesian HR Management Research Center To establish and operate an effective and efficient HR Management training, education & development center To have chapters in all Indonesian provinces

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THE HUMAN RESOURCE PRACTICES IN THE PUBLIC SECTOR IN INDONESIA

March 2, 2010 by NajwaZuhur

When Indonesia entered the reformation era in 1998, there were several main reformation agendas which aimed to solve major problems in political, social and economic fields arising from the financial crisis. One of the key agendas is the reformation of the bureaucracy. However, the reformation of the bureaucracy has not progressed well. As stated by Gie (2003), the former minister of The National Development Planning Agency, there was lack of significant improvement in the public sector although the reformation era was introduced for five years. Corruption, collusion and nepotism, inefficiency in the central and regional public sector, low public service quality, and low supervisory board function still occur. Based on the report of The National Development Planning Agency (2006), it was found that Given the reality in the public sector in Indonesia, this report will examine the Human Resource (HR) practices in the public sector and discuss the effectiveness of these practices in supporting organizational performance. The HR practices examined are recruitment and selection, remuneration system, training and development and performance appraisal. The HR practices will be examined in general as those HR practices are implemented in all public sectors based on the government regulation. Then, the public sector performance of all departments and ministries will be identified. The finding of the public sector performance, thus, will be related to the HR practices implemented in the public sector and theories about HR practices in order to examine factors that influence the public sector performance. This report argues that organizational performance is influenced by HR practices. As affirmed in several publications that organizations implemented HR practices tend to have higher organizational performance (Ghebregiorgis and Karsten, 2007: Tzafrir, 2006; Lavigna, 2002: Boyne et.al., 1999: Hiltrop, 1996). Finally, minimum requirement for educational background, specific examination tests, appropriate remuneration system, decentralized training and development, selection of trainees and tangible characteristics for performance appraisal are offered as recommendations to give give beneficial inputs to the public sector in Indonesia.

SITUATION OF THE PUBLIC SECTOR IN INDONESIA: A BRIEF INTRODUCTION

The public sector in Indonesia requires people who have capabilities and skills of analysis, decision making, and policy design which is hard to accomplish if the educational background is senior high

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school or less. Based on data from The National Civil Service Agency (The National Civil Service Agency website, 2007), the total number of the public servants in Indonesians 3,662,336 in 2005 According to the educational background, 37 percent of public servants completed senior high school. Meanwhile, 28 percent finished undergraduate and only 0.2 percent had doctoral degrees. In addition, public servants with master degrees were only 2.5 percent. Surprisingly, there were still 2.9 percent of public servants who had elementary school background and 3.1 percent had junior high school background (for further-information refer to Appendix A). In 2006, the total number of the public servants decreases to 3.633.261 public servants (Sulistyo, 2006). The educational background of the public servants, thus, is still not adequate to meet the quality requirements of human resources in the public sector. In high school or less level, the skills of analysis, critical thinking and problem solving are less taught compare to university level because in those levels, students are taught to develop their understanding about theories. The total number of public servants works for the central government and the regional government. After decentralization was introduced at the end of 2000, the regional government was divided into two; provincial government and regency/municipality (Tjiptoherijanto, 2006). However, problems such as corruption, bribery and nepotism increased when decentralization was implemented. Therefore, to kttowAvhy those practices still appear although the government already tried to reform the bureaucracy, understanding of the HR practices in the public sector in Indonesia is needed. The HR practices in the public sector in Indonesia are under authority of the government.

Recruitment and selection practices in the public sector in Indonesia

Since decentralization, recruitment and selection is not arranged by the central government. Each regional government can arrange recruitment and selection for the public servants. However, the recruitment and selection process must adhere to the general and technical guidelines of the recruitment and selection process (Yuwono, 2001). One of the steps for the recruitment and selection process that need to be highlighted is the third step, the examinations because this step will determine whether the applicants are fit with the jobs or not. Yuwono (2001:59-60) explained that there are four steps in the recruitment and selection process in the public sector. The first step is announcement which includes description of qualifications required. Selection of applicants who meet the requirement is the next step. The third is examinations which consist of an administration test and a screening test. The administration test, basically, consists of Indonesians common knowledge such as Indonesia language, state philosophy, and state structure of Indonesia, Indonesian history, and government policy. An interview mostly about ideology is a part of the screening test. Despite the fact that these tests are important, however there is no test to measure the quality and ability of specific skills of applicants essential in order to accomplish the jobs as the public servants. Finally, the announcement of applicants accepted as public servant candidates. The public servant candidates will have a probationary period for one until two years. The regional government is involved from the first until third step. But, the central government, namely Ministry of Home Affairs and Ministry of Administrative Reform have authority for the final step. Although the recruitment and selection process of the public servants seems ideal, the reality is different. Due to the decentralization of the recruitment and selection process, many problems occur. Bribery, nepotism, question tests leakage, demonstration of results manipulation will likely occur during the recruitment and selection process (Trihusodo, 2006; Darmawan, 2005; Haris, 2005). Given these problems, the government is considering the centralization of the recruitment and selection process of public servants (Ministry of Home Affairs website, 2007; Kustiani, 2006).

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Compensation in Indonesia
Indonesia's comprehensive compensation and benefits package is designed to attract, retain, and reward the people necessary to create Indonesia's longer-term growth and profitability. Wherever possible, we provide the ability for employees to participate in a range of compensation programs, which allow employees to share in Indonesia's financial success through profit-sharing and stock programs; and innovative benefits that help employees and their families achieve improved quality of life and financial security. One of the things that best highlight the Indonesian economy is its sound and rational compensation and benefits policies. Basic salary is given on a monthly basis, and an annual incentive is legally required. Some companies resort to deferred compensation while others include various allowances. Funded pension plans, which provide retirement benefits in the form of monthly pensions, are keenly eyed by the government through the Department of Manpower and Ministry of Finance. The retirement process, along with its specifications, is governed by the Pension Law and the legal entity of Dana Pensiun is created in the absence of a trust law. Most of the cost of the new social program is to be funded by contributions nominally placed on employees (3.7 percent Cur health, plus 0.3 percent for death benefits, and a contribution toward workers' compensation insurance that ranges from 0.24 to 174 percent), with a small contribution (2 percent for the old age provident fund program) nominally placed on workers. These are fully funded programs without any provision for government subsidy. The regulation requires the entire program to be administered by Astek, a state-owned enterprise, which had the mandate or administering workers compensation programs in the past. (Nayar, 1994) Old-age program The Indonesian old-age program is a fully funded, contribution-defined program Benefits are received at age 55 and arc equal to contributions plus accrued interest. In 1991, Astek reported a gross rate return, (without subtracting administration costs) of 14.4 percent on its investment fund, while the average return from the State Bank's time deposits ranged from 20-22 percent depending on maturity (McLeod, 1993) Health insurance The health insurance program provides comprehensive medical benefits for the worker, spouse. and three children. Services are provided by a list of approved doctors, clinics, hospitals, pharmacies, and opticians throughout Indonesia. Each of these providers enters into a contractual arrangement with .4stek that specifies the scope of services offered, the billing and payment procedures, and the fee or price for each kind of service. Disability pensions are a proportion of earnings that varies with the degree of disability. Retirement programs The retirement program appears to be well-defined nr paper but lacks the discipline of competition on the fund-management side. The health and workers' compensation programs have an inherent problem, which is the fact that they do not sum to rely on co-payments from beneficiaries. So far, contributions are being paid info a fund, and Astek reimburses expenses to those enterprises that make use of the program However, who is deciding on the type of services that are covered?: How is that decision reached?; and how is the question of "normal fees" resolved'' In essence. this system has to be build up to make sure it does not become a source of financial deficits for the government through Astek's budget deficits.

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Remuneration system practice in the public sector in Indonesia

The remuneration received by public servants is lower compared to employees in the private sector and even to employees in state-owned enterprises. Employees in the private sector can earn three to four times more than employees in the public sector (Rohdewohld, 1995 as cited in Bennington and Habir, 2003, Tjiptoherijanto, 1995 as cited in Rohdewohld, 1995, p. 103). Because of many complaints regarding the low of the salary of public servants, the government is trying to increase the salary. In 2006 and 2007, respectively, the government increased basic salary of public servants around 15% (Sulistyo, 2006, Basuki, 2006). The income of the public servants is based on three components which are basic salary, allowances and other salary supplements (Rohdewohld, 1995). Basic salary for the public servants in Indonesia is based on a Combination Scale System which refers to a combination of single scale system and double scale system. Under the combination scale system, some public servants will receive higher salary than those who are in the same rank or level (Tjiptoherijanto, 2006). Allowances received by the public servants include rice and family allowances, structural allowances, functional allowances and special allowances for the civil servants working in remote areas (Rohdcwohld, 1995; Yuwono, 2001). In addition, other salary supplements will be received when special or certain events take place such as IdulFitribonuses (the moslem holy day, but all public servants regardless their religion will have this bonuses), project bonuses, official travel, and health care (Rohdewohld, 1995). However, the low rate of remuneration cannot be seen as an exception to have less performance in doing tasks. The public servants have to be responsible in doing tasks with their best efforts. The low salary is the reality that they have to accept since they already know when they apply to become public servants.

TRAINING AND DEVELOPMENT PRACTICES OF THE PUBLIC SERVANTS IN INDONESIA

The government realizes that to improve the skills and abilities of public servants, training and development should be done as the government knows that many public servants arc high school graduates. The government has appointed The National Institute of Administration to arrange training for all public servants. Each ministry also has its own training; however, the training held by The National Institute of Administration is seen as more important especially when a public servant wants to be promoted in the future. As a result, the public servants who have higher education will obtain more training than those who have less education (Report A, 1997, as cited in Bennington and Habir, 2003). Structural and functional training are types of the training in the public sector (Yuwono, 2001). Rohdewohld (1995) explained that structural training is held for public servants career development that is in a structural position. The functional training is held for the public servants in functional positions such as medical doctors, librarians and lecturers. However, the substance of the training which is to increase professionalism and capabilities of the public servants in doing the tasks are disappearing. Training is more likely to be means for additional income, to be promoted, and moonlighting (Report A, 1997 as cited in Bennington and Habir,

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2003). Therefore, the skills of the public servants do not improve and cause inefficiency and tardiness in servicing the public.

Performance appraisal practice for the public servants in Indonesia

The performance appraisal of the public servants called as DP3 (DqftarPenilaianPelaksanaanPekerjaari) (Rohdewohld, 1995) is difficult to use because its intangible characteristic in some of the elements. The principal elements to be measured are loyalty, work achievement, responsibility, fidelity, honesty, cooperation, initiative and leadership in which the criteria for each element consist of five grades: very good (91-100), good (76-90), average (61-75), below average (51-60) and fair (under 50) (The National Civil Service Agency website, 2007). The elements such as loyalty, honesty, and fidelity have an intangible characteristic. For these elements, it is hard to set certain standards to determine the score to be given. As a result, subjectivity appears in the performance appraisal (Putranto, 2001). The performance appraisal is confidential. The appraiser must be a person who already supervises the public servant at least for six months (The National Civil Service Agency website, 2007). The result of the evaluation will be given to the public servant and the evaluators supervisor (Rohdewohld, 1995:105). The public servant can appeal if he/she objects to the result in fourteen day after the result accepted (The National Civil Service Agency website, 2007b). However, it is difficult to propose an appeal if the public servant still want to work because an appeal is seen as a rude act of challenging to supervisor.

Public sector performance in Indonesia

To know whether an organisation has performed well or not, an organization must measure its performance, including the public sector. There are no genera Guidelines from the government in order to measure the public sector performance in Indonesia (Mintorahardjo, 2006). Thus, public sector performance is usually measured by independent organizations. One of them is The Indonesian Survey Institute. This institute held a national survey to measure government performance from November 2004 to October 2006 (The Indonesian Survey Institute, 2006). There were 1,239 respondents who were above 17 years old or married by the time the survey was done. The respondents were selected by using multistage random sampling. The respondents were asked to rate 37 departments and ministries based on the score: very bad (1-1.50), bad (1.51-2.50), average (2.513.50), good (3.51-4.50) and very good (4.51-5.0). The result showed that all departments and ministries had a score ranging from good to average. None of them had very good, very bad or bad scores. The highest score, 3.86, went to The Indonesian National Army, meanwhile the lowest score, 3.27 was gained by Department of Forestry. The Coordinating Ministry of Economy, Finance and Investment had the second lowest score, 3.32 In addition; Department of Man Power was in the third lowest score, 3.34. Meanwhile, Department of Religion and Department of Health had the second and third highest score, respectively, 3.79 and 3.76 (for further information refers to Appendix B). Although every department or ministry had a score above average, when the public were asked about public servants performance the result was different. Based on the survey of research and development division of Kompason April 2005 and March 2007, the performance of the public sectors had shown fewer improvements according to the community. In 2005 (Triardianto, 2005), 47 percent respondents said that the public servants image was low because of the weaknesses in servicing the public. For corruption problems, 75,4 percent respondents admitted that corruption practices existed. Moreover, 53.8 percent respondents confessed that the discipline of the public servants was low. In 2007 (Sultani, 2007), 62.9 percent of respondents admitted that it needed much time when they were dealing with the public servants. In addition, 58

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percent respondents considered that the public servants were easy to bribe. For work effectiveness, 65.3 percent respondents felt dissatisfied. These surveys showed that public servants performance still had not met the expectation of the community they served. The result of the public sector and public servants performance indicates the implementation of HR practices in the public sector. Inappropriate implementation of HR practices causes fewer performances in the public sector. Thus, the evaluation of IIR practices will be beneficial in order to improve the performances.

EVALUATION OF HR PRACTICES IN RELATION TO THE PUBLIC SECTOR PERFORMANCE

HR practices implemented in the organization will influence the organizational performance. There many publications that give evident about those relations such as Ghebregiorgis and Karsten, 2007, Tzafrir, 2006; Lavigna, 2002, Boyne 1999: Hiltrop, 1996. Furthermore, the concepts of HR practices applied in the private sector are alike with the concepts applied in the public sector (Tilden and Kleiner, 2005. p. 44). HR practices such as recruitment and selection, remuneration system, training and development and performance appraisal influence organizational performance. The public sector performance in Indonesia is also influenced by the HR practices implemented. According to the survey done by the Indonesian Survey Institute from 2004 to 2006 it was found that the performance of all 37 departments and ministries were good. However, the result cannot clearly show the influence of HR practices. The influence of HR practices is shown when the performance is measured to the public servants such as done by Kompas. Most of the result of the survey shows that the performance of public servants is not adequate yet. The recruitment and selection process in the public sector results in less work effectiveness and less services to the community. This is because the selection process is not designed to search out the best candidates. As stated by Koch and McGrath (1996, as cited in Ghebregiorgis and Karsten, 2007), a recruitment and selection process which is complicated will result in higher employee productivity. The complicated selection will enable organizations find people with the appropriate skills and abilities for the job. On the other hand, the examination tests for public servant applicants only looks at the general knowledge and more likely to know the loyalty and the ideology of the applicants as Indonesian. The specific abilities and qualities of applicants required by the job cannot be shown through those kinds of tests. As a result, the public servants cannot create innovation that will support the jobs efficiently and effectively (Gie, 2003).

The low rate of the salary for the public servants makes the public sector hard to find the best people because this kind of salary will not attract the best people to apply as public servants. As defines by Ghebregiorgis and Karsten (2007), high compensation enables organizations to employ the best people. The best people will search for organizations which will give them attractive benefits in exchange of their best skills. As a result, the public sector employs so many people from less educational background with less skills and abilities to accomplish the tasks. Besides that, the low salary will make the performance of the public sector not optimal, because the salary which can be included as the physiological needs in the Maslows hierarchy of needs (Robbins et.al. 2005:525) cannot be a motivator for the public servants to work. Although sometimes job security offered to the public servants can be an exchange for motivation, public servants still need money to meet their needs. Therefore, bribes, corruptions and moonlighting (Gie, 2003Rohdewohld, 1995) often occur in the public sector as practices to cover up the lack of salary.

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The training and development for the public sectors do not emphasis specific skills needed to be improved because most of the training is only about genera! Skills and abilities needed by the public servants to do the tasks or to have promotion. Tilden and Kleiner (2005) explain that competency should underpin the training programs. By using competency-based training, the public servants who have a lack in skills will improve, thus, this also will allow less educated people to receive training. If the training and development programs in the public sector are designed to meet the need of the specific skills from the jobs, ineffective, tardiness and time consuming which are always found in the job practices of the public servants (Gie, 2003) will be overcome. Good performance appraisal should more emphasized on tangible characteristics such as employees knowledge of his/her job duties, attitude toward his/her work, ability to work independently (Gambardella, 2003), employees productivity, employees initiatives or ideas because these characteristics are more easily to be measured and can show the real achievements done by the employees. For example, employees knowledge of his/her job can be measured from how many tasks done by the employee without asking his/her supervisor or colleague and how long the employee accomplishes one task. Another example is for employees initiatives or ideas, the measurement can be such as how frequent does the employee share his/her ideas, does the employee find a solution with his/her own thoughts when facing a problem, does the employee finish his/her tasks by following procedure or create a new way which is also legal. Given these characteristics, the public servants will be treated fairly because those characteristics will minimize subjectivity.

RECOMMENDATIONS
The HR practices in the public sector in Indonesia still have weaknesses in order to solve problems that always occur in the public sector. The recruitment and selection processes which only test common knowledge will make it difficult to find appropriate people for the jobs. The low remuneration will demotivate the public servants in giving their best attempt to accomplish tasks. In addition, training and development are not emphasized as skills needing improvements. Moreover, the performance appraisal consists of elements which are highly subjective. Given those realities above, the design of the HR practices need to be renewed. The HR practices will solve the problems if the design meets the need required by the public sector. It is recommended that to select appropriate public servants, the recruitment and selection need to be more specific. The minimum educational background should be a university degree. The examination test need to consist of specific tests based on the skills needed by the jobs such as cognitive abilities tests, personality tests, assessment centers (Dessler et.al. 2004) which can measure the quality and capabilities of applicants. For the remuneration system, it is recommended that salary earned can fulfill the public servants average basic needs. Besides that, to enhance individual performance, incentives or bonuses that depend on the result of their jobs or their performance appraisal can be given. It will encourage each public servant to give their best efforts for the jobs. In addition, it is recommended that training and development are arranged more by each department and ministry because they know specific skills need to be developed. Before training is held, public servants need to be assessed in order to select people who really need to be trained. Public servants that already trained need to receive an advance training to improve their skills. Finally, it is recommended that elements such as honesty, and loyalty need to be changed to other elements such as work productivity, creativity, innovation, and work knowledge. There needs to be certain standard for each element in order to give fair result for all public servants. Restructuring the HR practices in the public sector in Indonesia is necessary because the reformation of the bureaucracy can only progress if there is an attention to renew the HR practices. Although it may take periods of time, renewing the HR practices will assist the government to solve many problems that occur in the public sector such as corruption, nepotism, bribery and low performances.

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The HR practices recommended can be an introduction to have more development of the public sector HR practices in the future.

Indonesian Labor Laws

For many years, the Indonesian government kept a strict regulation of labor relations in the country. Labor rules were enacted by the government and employers had to obey them--failure to do so could garner jail terms and fines. In 1998, however, the country began to reform the labor sector. Labor law reforms that were implemented gave the employer and the employee more leeway to negotiate employment terms.

Firing
o

An employer can fire an employee at any time provided he gives the employee a one month notice. The employer can also fire a staff member without any notice as long as he pays that staff member compensation for the notice. This must be clearly stated in the employment contract at the time of employment offer.

Safety
o

All employers in Indonesia are required by law to provide safety equipment to employees if they are performing tasks that require them. These include goggles if the employee is doing welding work, boots if the employee is working on a wet floor and helmets if they are working on construction sites. An employer who is found not to be providing such equipment is liable for prosecution.

Sick Leave
o

Under Indonesian law, an employer is required to pay an employee for days that he has failed to turn up for work if he failed to turn up due to circumstances beyond his control. These circumstances include falling sick. An employer is required to retain a sick employee on condition that he pays him a decreasing salary over a period of 12 months. The employee should be paid 100% of his salary for the first three months. This will decrease by 25% for every other three months afterward. The employer is allowed by law to fire the sick employee after 12 months.

Annual Leave
o

All employees in Indonesia must be given a minimum of 12 days of working leave annually. Employees and employers can have a contract stipulating more days of annual leave. If any employer gives an employee less than 12 days in the contract, the contract is null and void as per Indonesian law.

Injury Compensation
o

An employer is required to pay compensation to an employee who gets injured while at work. The employer is also required to report all workplace accidents to the Department of Labor within 24 hours of the accident happening. The requirement of the employer compensating the employee is automatic and does not matter whether the employee was at fault when the accident happened.

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Dispute Resolution
o

The law allows the employer and employee to try and resolve their disputes amicably. If this fails, the law says the parties can seek the services of an accredited mediator to resolve the dispute. If there is still no solution, the parties can ask the Labor Dispute Settlement Committee at the regional level to resolve the dispute.

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Employment Relation:
Following the 1991 Santa Cruz massacre of East Timor protesters by occupying Indonesian forces, the Indonesian government retained Burson-Marsteller "to help improve the country's human rights and environmental image," according to the Far Eastern Economic Review. Another contract was signed in 1996. The company was retained in total from 1992 to 1998. Over the six years that the company worked for the country's government, Burson-Marsteller promoted Indonesia's trade opportunities in order to encourage foreign investment and aided the country in attempts to improve its human rights .
ETHICAL AND FAIR TREATMENT IN INDONESIA

we believe that diversity is a business imperative. It is ingrained in our ethical and social responsibility and grounded in our core values of team spirit, service spirit, and spirit of progress. In our continuing effort to attain an inclusive organization and to better serve our clients, we are committed to embracing, leveraging, and respecting the diversity of our workforce, our clientele, and the communities in which we live, work, and serve.

Equal Employment Opportunity

* Our policy is to ensure equal opportunity in all aspects of employment regardless of race, color, religion, sex, pregnancy, national origin, ancestry, citizenship, age, marital status, disability, veteran status, sexual orientation, gender identity, or any other basis protected by law. * We strive to employ and promote the best-qualified person for each position while valuing and promoting diversity within our workforce. * We comply with all federal and state laws regulating employment decisions. These include, but are not limited to: advertising, recruiting, hiring, placement, promotion, transfer, demotion, compensation, training, layoff or termination, participation in social and recreational functions, and use of employee facilities. * We prohibit harassment of employees based on race, color, religion, sex, pregnancy, national origin, ancestry, citizenship, age, marital status, disability, veteran status, sexual orientation, gender identity, or any other basis protected by law.

Affirmative Action
* Sodexo is committed to a policy of affirmative action, which will facilitate the placement of qualified women and minorities at all levels of the organization.

* Affirmative action plans identify the good faith efforts the company will take to increase representation of women and minorities in its workforce, particularly in management positions * All Affirmative Action plans include targeted outreach, recruitment, upward mobility initiatives, annual goals, and timetables for women and minorities required by Executive Order other federal, state, and local affirmative action laws and regulations.

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Primary Responsibilities and Duties:

Research federal statutes and associated regulations on animal welfare Conduct undercover investigations of companies and industries that abuse animals Prepare complaints to local prosecutors and state and federal agencies with regard to PETA Asia-Pacific's investigations and campaigns in Indonesia Conduct research on a variety of animal protection and animal rights issues Assist with the development of legal action to further the organization's objectives Review news releases, and give input regarding their effectiveness in Asia Work with others to create ad campaigns and other materials that further animal rights or push companies to change Conduct media interviews and/or direct media calls to the appropriate person Travel for meetings, events, or other activities, as needed Perform any other duties assigned by the director

Ethical behavior and issues in Indonesia: Who can practice as a psychologist psychologist? Before 1994: all graduates of psychology (5year program)* 1994 1994-2004 : bachelor degree in psychology+ professional program* After 2004 : magister in professional Ethical Issues 1. The use of psychological tests 2. Confidentiality of psychological report 3. Protection of client 4. Psychologist client relationship 5. Informed consent

Organizational factor of Indonesia:

Institutions are still viewed as a continued life of solidarity organization, so the atmosphere was formed organization (organization climate) and organizational culture (organization culture) which more or less typical of Indonesia is still characterized by traditional cultural properties such as organic solidarity, hierarchical, harmonious and deliberation. This can be seen in a relaxed atmosphere, friendly and homelike atmosphere, which was brought into the workplace. Habits chat (term time

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sekarangnya called girl talk) and it works a relaxing time at work showed the value of social intimacy that is still considered more important than the straightforward attitude (zakelijk) work time. Where possible, all the joys and sorrows (especially sadness) personal life is expected to be resolved by supervisors. However, according to Danandjaja (1986: 85) picture like that is no longer the complete picture. Grassroots "including employees at lower levels, has begun to penetrate the Indonesian human values. The impact is not just young professionals and managers who grew pragmatic and akusentris, but has grown too "autokratik managers and short-term thinking." Danandjaja in his research found that Indonesian managers more concerned with short-term gains; even understand its benefits, does not consider realistic long-term investment, although resulting in free tugaskannya group of employees, tend to sell only one of the old factory, for the procurement of funds to build a factory bari; limit the provision of funds for training programs only to those who are still to be developed further, and just want to spend limited funds, as small as possible indigo need for facilities in the workplace such as a cafeteria and rest rooms. Manager as mentioned above, said Danandjaja (1986: 104) prefer the atmosphere of fun, more like people who are very popular but less creative than a creative but less popular, not like the conflict even though it meant progress, and provide more authority on child fruit that is only limited to the performance of duties. It almost matching raised also by Budi Paramita (1992: 10) who said Indonesia's managerial style is, among others, paternalistic and self-criticism. A type of control that is direct and personal with authority centralized at the helm. This is consistent with the pretext that emerged from the picture above, which shows that a strict hierarchical control in an organization is the most effective way in societies that are authoritarian.

Disclosure Policy

The disclosure policy was developed in 2008 and subsequently a disclosure team was formed, comprising of senior level managers from Investor Relations, Corporate Secretary, Legal, Operations and Marketing. Although the policy was recently formalized at end of 2009 after undergoing a thorough review by the BOD and legal counsel, it has been put to use by Adaro Energy since its listing in mid 2008 and has provided clear guidance on the disclosure of material information and regular disclosure activities. The launching of the disclosure policy reaffirmed Adaro Energys commitment to provide timely, orderly, consistent and credible information in line with prevailing regulatory requirements to enable orderly behaviour in the market. Adaro Energy believes its disclosure activities in support of corporate governance went beyond what is required by the market regulations in 2009. Examples of progress made include a regular Adaro Energy Quarterly Activities Report, presentations and meetings during non-deal roadshows and investor forums, and the disclosure of fair and balanced information in a symmetrical way to the capital market.

Adaro Energy IR Code of Ethics

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As a member of Adaro Energys Investor Relations department, either directly or in a supporting role, I will: 1. Honor my obligation to serve the interest of shareholders and other stakeholders. 2. Maintain my integrity and credibility by practicing investor relations in accordance with the highest legal and ethical standards. 3. Avoid even the appearance of professional impropriety in the conduct of my investor relations responsibilities. 4. Recognize that the integrity of the capital markets is based on transparency of credible financial and non-financial corporate information, and that being and appearing transparent, by disseminating timely and balanced materia information in such a way as to avoid asymmetry, will lower the cost of capital, improve the companys credibility and reputation and so improve corporate performance and the chances of achieving Adaro Energys goals. 5. In light of point three (3) above, I will to the best of my ability and knowledge work to ensure that Adaro Energy fully and fairly discloses this important information. 6. Provide analysts, institutional and individual investors and the media fair access to corporate information. 7. Discharge my responsibilities completely and competently by keeping myself abreast of the affairs of Adaro Energy as well as the laws and regulations affecting the practice of investor relations 8. Maintain the confidentiality of information acquired in the course of my work for Adaro Energy. 9. Not use confidential information acquired in the course of my work for my personal advantage nor for the advantage of related parties. 10. Exercise independent professional judgment in the conduct of my duties and responsibilities on behalf of Adaro Energy. 11. Avoid any professional/business relationships that might affect, or be perceived to potentially affect, my ethical practice of A Disclosure Team was formed in 2008, made up of senior level managers from Investor Relations, the Corporate Secretary, Legal, Operations and Marketing. The team is tasked with the responsibility of helping Adaro Energy maintain high levels of transparency without jeopardizing the commercial or legal interests of the firm.
employee discipline and privacy:

Discipline and privacy of employees often gives rise to employment litigation. The following general guidelines for dealing with employees with disciplinary problems may help employers avoid litigation. Employers should have clear disciplinary standards and evidence that employees were given notice of such policies and procedures. These standards must be applied uniformly. The company should retain the right to determine what discipline will be imposed in each individual situation. The disciplinary procedure should follow four rules: The employee must know the nature of the problem. The employee must know what he or she must do to fix the problem. The employee must have a reasonable period of time in which to fix the problem.

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The employee must understand the consequences of inaction.

Employers must create a discipline policy that will not limit their right to enforce appropriate disciplinary measures. The law requires employers to match the discipline to the seriousness of the offense. The challenge for employers is how to reconcile being consistent in the application of discipline, but still take into consideration the specific facts which tend to make each disciplinary incident unique. Evaluate these 4 criteria when determining the most effective level of disciplinary action: The severity of the offense. The employees past performance record. The employees length of service with the organization. The organizations past practice when dealing with this situation.

Progressive Discipline

Progressive Discipline is defined as a series of disciplinary actions or steps that are progressively more severe leading to improvement of performance or termination from employment. It is usually a set of circumstances or warnings three strikes and youre out. The primary purpose of progressive discipline is to assist your employees to understand that:

An opportunity exists for improvement or, A severe performance problem may exist

Companies should consider using the progressive discipline system. The progressive discipline system normally begins with the recruitment process and continues through orientation, training, performance evaluations and daily supervision. A progressive discipline system consists of the following: A verbal warning A written warning Suspension Termination

Misconceptions about progressive discipline!

There are many misconceptions concerning progressive discipline. Many employees feel they are entitled to disciplinary measures prior to being terminated. In most cases where at-will employment is the rule, progressive discipline is not a RIGHT; but an opportunity, offered by the employer, to correct performance on the job. It is not a RIGHT unless promised in an employee handbook, collective bargaining agreement or a public, municipal employer.
At-Will is the law

At-will is the law in every indonesia (excluding Montana). Employment is at-will unless the employer has taken some type of action to introduce a different policy in the workplace of for a particular employee.

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An employment relationship for no specific duration may generally be terminated at any time, for any reason or for no reason at all, at the will of either the employer or the employee. The phrase "at-will" is just another way of saying "at the will of either party." In other words, at-will employment means, "the job will last as long as both parties wish it to continue and it will end when either party wants it to end." Accordingly, under at-will employment, the employee is not guaranteed a job for any specific period of time. The employment contract between the employer and the employee (any agreement regarding the job, pay, benefits, duties, etc.) can end at any time. Simply put, the employer may terminate the employee at any time, and the employee may quit at any time. When employees are "at-will" employees, an employer does not need a reason to justify termination. These employees may be fired for any reason or for no reason. However, employees cannot be fired for an illegal reason, such as unlawful discrimination, refusing a supervisor's sexual advances. While to following may differ from state, the below activities may be applicable: Disclosure or refusal to disclose wages Voluntary participation in alcohol or drug rehabilitation programs Refusal to authorize disclosure of medical history or records Jury duty Political activity Military service Volunteer firefighting Refusal to patronize employer Refusal to commit illegal activity Absenteeism caused by attendance at child's school regarding a suspension Absenteeism for a child's school or daycare activities Domestic violence victim taking time off to obtain a restraining order, receive care or counseling, or to relocate Refusal to disclose arrest records that do not lead to convictions Refusal to take polygraph test Enrollment in adult literacy program Refusal to participate in abortions Consideration for employment without regard to results of blood tests for AIDS Serving as election officer on election day

Healthcare workers' exercise of statutory duty to report apparent victims of abuse or neglect, without suffering discharge or discipline Some employees are not at-will and are promised some type of job security. If employees have been promised that they will not be fired unless certain conditions are met, the employer must comply with these promises or face a claim for wrongful discharge. Similarly, a discharge may be "wrongful" when an employer violates an employee's procedural rights. For instance, some employers promise employees a formal hearing, a certain number of written warnings, or some other process before they are finally terminated. If an employer fails to carry out these preliminary procedures before firing an employee, the firing may be considered a wrongful discharge. The courts also limit employers' rights to terminate employees at-will. There are several instances where employers are not able to terminate an employee at will: Discharges in violation of public policy. Discharges that violate the good faith and fair dealing principle. Page | 50

Discharges that involve breach of contract. Discharges for employee seeking rights under applicable law. Discharges for cooperation with any investigation. Discharges for testifying or future testimony in any action brought under appropriate law.

Termination under these circumstances is wrongful and often results in a wrongful discharge suit. Each Employee Is Unique Each employee is unique and progressive discipline should not be used in a cookie cutter type approach. Progressive discipline should be used in a case-by-case basis, designed to fit each unique situation. Typical steps in a progressive discipline doctrine may include the following: Counseling employees about performance issues and obtaining feedback on the employees understanding of the requirements Verbal warnings or reprimands Documenting verbal warnings in an effort to improve performance Provisions for suspensions, etc. After the above offers no resolutions to the problem - terminate employment of an individual who refuses to improve. Be fair in all employment practices. Terminate with confidence by preserving the at-will employment status of employees.
Termination

Terminating an employee can be one of the greatest risks an organization faces. The vast majority of lawsuits filed against organizations are employment related, and the majority of these stem from improper discharge actions. Employment-related litigation is becoming more common, and employees are recovering larger and larger verdicts. Employers should regularly review all of their personnel policies and procedures, as well as employee handbooks and other written personnel documents, to ensure that no promises or statements are being made that could be construed as a binding employment contract. All employers should publish written disclaimers that preserve the employment-at-will relationship. Finally, when terminating employees, an employer should confirm that its action is uniform, consistent and fair. Whenever possible an employee should be given advance warning that particular behavior or continued misconduct could result in termination. Fairness, honesty, and candor with employees are the keys to defending against or successfully avoiding employment-related lawsuits.
Conclusion

The above is but a brief synopsis of the complex issues and potential risks that might arise when organizations decide to discipline and / or terminate employees. Obtain all the facts, plan before you act and be careful! Strong At-Will policies and careful pre-termination analysis go a long way in reducing the potential for privacy-based employment claims. Philadelphia Insurance Companies has created an alliance with yourHRdepartment (HRD).

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YourHRdepartment, Inc provides HR training programs and other materials to all EPL Policyholders to assist the policyholders in reducing their exposure to employment practices liability.

Right place of employee privacy:

The nation's largest employer, the federal government, is still pretty good at keeping secrets, even after the WikiLeaks scandal.which held that government searches of e-mail in-boxes require a search warrant, the federal government is wading into uncharted waters in the area of workplace privacy. To keep up, one needs to understand from where a federal employee's expectations of workplace privacy originate and the extent to which those sources are evolving with the common workplace use of electronic media. Finally, as the federal government serves as the nation's model employer, the status of government-employee privacy has a significant impact on the overall status of workplace privacy in the Indonesia

Employment law in Indonesia

Sources of regulation

Several pieces of legislation and regulations comprise the law on termination of employment in Indonesia. Act No. 13 of 2003 concerning Manpower (the 2003 Act) consolidated the existing termination law and most of the rest of the current labour law. While the 2003 Act did not explicitly repeal the Termination of Employment in Private Undertakings Act, 1964 (TEPU), it covers much of the same ground and reflects relatively recent changes in Indonesian labour administration. The second major piece of Indonesian labour legislation is Act No. 2 of 2004 concerning the Industrial Relations Dispute Settlement (the 2004 Act), which declares the TEPU as no longer suitable with the needs of the society, but still applicable, as long as its provisions are not contradicting the new legislation.
Scope of legislation

The 2003 Act, Chapter XII Termination of Employment, stipulates in Art. 150 that the provisions concerning termination of employment under this act cover termination of employment that happens in a business undertaking which is a legal entity or not, a business undertaking owned by an individual, by a partnership or by a legal entity, either owned by the private sector or by the State, as

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well as social undertakings and other undertakings which have administrators/officials and employ people by paying them wages or other forms of remuneration.
Contracts of employment

An employment contract may be made for a specified time or for an unspecified time (Art. 56, the 2003 Act). A fixed term contract is based on a term or the completion of a certain job. A work agreement for a specified time which is not made in writing is deemed concluded for an indefinite duration (Art. 57 (2), the 2003 Act). A work agreement for a specified time cannot be made for jobs that are permanent by nature. In addition, this kind of employment contracts may be made for a period of no longer that two years and can only be extended one time that is not longer that one year (Art. 59, the 2003 Act). Fixed-term contracts cannot stipulate a probation period (Art. 58 (1), the 2003 Act). Contracts for an unspecified period of time can stipulate a probation period, but for no longer than three months (Art. 60, the 2003 Act).
Termination of employment

Contracts of employment can terminate (Art. 61, the 2003 Act), not at the initiative of the employer, by: the workers death (see also Art. 166, the 2003 Act), or the expiry of a fixed-term contract; a court decision; in certain situations prescribed in the work agreement, the company regulations or the collective labour agreement (Art. 61, the 2003 Act).

If either party in a fixed-term contract terminates the employment relationship prior to the expiration of the agreement, the party who terminates the contract is obliged to pay compensation to the other party on the amount of the workers wages until the expiration of the agreement (Art. 62, the 2003 Act). Art. 169 of the 2003 Act specifies the conditions under which a worker can submit an application for termination of employment and still receive severance pay. According to this provision, a worker can submit such an application if the employer is:
physically or verbally abusing the worker; ordering or persuading the worker to commit illegal acts; not paying wages promptly for three consecutive months or more; remiss in his or her obligations to the worker; instructing the worker to perform duties outside of his or her contractually assigned job; or assigning jobs that endanger life, safety, health and morality of the worker, if such a job has not been specified in the work contract.

The termination of employment in case of the workers retirement is dealt with by Arts. 154 (c) and 167 of the 2003 Act.

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Workers who participate in an illegal strike are to be considered absent. If, after two notifications from the employer to come back to work, they continue to strike, these workers will be considered to have resigned (Decision No. 232/MEN/2003 of the Minister of Manpower and Transmigration of Indonesia concerning The Legal Consequences of Illegal Strikes, Art. 6).
Dismissal

Art. 151(1) of the 2003 Act states that employers, as well as workers and trade unions, must make all efforts to prevent the termination of employment. The 2003 Act also stipulates that the employer must negotiate his/her intention to terminate with the employees trade union, or with the employee him/herself, if he/she does not belong to a trade union. If the negotiation does not result in an agreement, then the employer must receive permission to terminate the employment contract of the worker from the institution for the settlement of industrial relation disputes (ISIRD). The 2004 Act provides for various dispute settlement procedures (see below). The 2003 Act specifies the conditions under which a worker may not be terminated. Art. 153(1) prohibits a termination if:
the worker is ill, which must be validated in writing by a physician, as long as the worker is not absent for a period greater than twelve consecutive months; the worker is fulfilling State obligations, as prescribed in valid legislation; the worker is fulfilling religious obligations; the worker is getting married; the worker is pregnant, giving birth, having a miscarriage, or breast-feeding a baby; the worker is related to another worker, unless such a termination is required by collective bargaining agreement; the worker is involved with a trade union; the worker has reported a crime committed by the employer; it is due to discrimination on any basis; or the worker is disabled or ill because of a work-related incident, and the period of recovery cannot be determined.

The 2003 Act also specifies the conditions under which permission is not needed (Art. 154). An employer does not need permission to dismiss his/her worker when:
terminating the employment of probationary employees; the employee has offered a written resignation; a contract for a specified period of time expires; a worker retires according to company regulations or collective agreements; or the worker has died.

Under the 2003 Act (Art. 158), an employer may terminate the employment of a worker for grave wrongdoings, such as:
theft; fraud; intoxication, or consumption of other addictive substances; indecency or gambling at work; harassment of fellow co-workers; abuse of the employer or his or her family; persuading others at work to break the work rules; reckless or deliberate damage to life or property;

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divulging trade secrets; or committing other wrongdoings that warrant a five-year or greater prison sentence.

Accusations of the grave mistakes must be supported by:

apprehending the worker red-handed; an admission of guilt by the worker; or evidence to the act, and a confirmation of the evidence by at least two people.

In case the worker violates the provisions specified in the employment contract, the company regulations, or the collective agreement, the employer may terminate the worker, after the issuance of the first, second and third warning letters consecutively (Art. 161, the 2003 Act). Article 160(3) of the 2003 Act permits the employer to terminate the worker if the employee has been unable to work for over six months because of the legal proceedings brought against him or her. However, if the court decides that the worker is not guilty, the employer must reemploy the worker. Article 168 of the 2003 Act permits the employer to terminate the worker if the labourer has been absent from work for five or more consecutive workdays, and has not explained to the employer the reason for the absence and provided evidence. Section 3 of the TEPU regulates mass dismissals, which are defined as dismissals in an undertaking where the employer has terminated the employment of ten or more workers within a period of one month, or has affected a series of terminations indicative of an intention to achieve mass dismissal. Although the TEPU has not been explicitly repealed, the 2003 Act does not refer to mass dismissals. Should the nature of the employer change, either through a merger, a fusion, or a change in ownership, the employer is given considerable leeway to terminate his/her workers. Under such circumstances, the employer may terminate his/her workers if:
the workers are not willing to continue their employment (Art. 163(1), the 2003 Act); the employer is not willing to accept the workers to work in the new enterprise (Art. 163(2), the 2003 Act); the enterprise closes down because of losses for two consecutive years, or because of force majeure ( Art. 164, the 2003 Act); or the enterprise goes bankrupt (Art. 165, the 2003 Act).

Notice and prior procedural safeguards

The rather unusual system of termination of employment under Indonesian law means that the employer may not terminate employment merely by giving notice. Indonesian law requires no notice provisions because the employer does not have the right to dismiss workers without the authorisation given by the ISIRD. Where the employer believes that termination of employment cannot be avoided, the employer must discuss his or her intention to terminate with the workers organization concerned, or with the nonunionised worker directly (Art. 151, the 2003 Act), with a view to reaching agreement. If no consensus is reached, the employer has to make a request for cessation (termination) of employment to the ISIRD, giving written reasons for the request (Art. 152, the 2003 Act). Thereafter, the employer

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may only dismiss the worker after having obtained a permit from the ISIRD. A permit may be granted if it is clear that the discussion required by the law has taken place and failed to produce agreement. The 2004 Act provides for five dispute settlement procedures: bipartite settlement, mediation, conciliation, arbitration and an Industrial Relations Court. Further elucidation on the nature of the discussion expected between employer and worker appears in a 2005 Circular of the Minister of Manpower, which advises that termination can be avoided by increasing efficiency of production cost, reducing wage or worker-labour in the managerial level, reducing overtime, offering earlier retirement to workers/labour already fulfilling the requirements, or by temporary laying off workers/labour by turns.[1] Art. 161(1) of the 2003 Act further requires that employers issue three warnings within six months of each other for violations of the work rules, of the bargaining agreement, or of the individual contract. After the third warning, Art. 161(1) states that an employer may apply for a dismissal permit. Article 168 of the 2003 act permits the employer to terminate the worker if the labourer has been absent from work for five or more consecutive workdays, and has not explained to the employer the reason for the absence and provided evidence. The dismissal is possible provided that employer has properly summoned the worker twice in writing, and by qualifying the worker as resigning. Severance pay Art. 156 (1) of the 2003 Act states that the employer has to pay the dismissed worker severance pay and/or a sum of money as a reward for service rendered during his/her employment, and compensation pay for rights and entitlements. Severance pay is calculated at a base rate of one months wages for each year of service, up to a maximum of nine months pay. The payment for reward of service consists in adding one months pay for every three years of employment, starting with two months pay for 3 years, up to a maximum of 10-months wages for 24 years of service. Art. 156(3) of the 2003 Act also requires compensation pay, which must include:
entitlements to paid annual leaves that have neither been expired nor been used; costs of transporting the worker and his/her family to the place where they resided before the worker was recruited and accepted the job; compensation for housing allowance, medical and health care, at a rate of 15% of the severance pay and reward pay, for those who are eligible for such compensation; and other compensations that are required by employment contract or by collective agreement.

Art. 157(1) of the 2003 Act specifies how wages should be used to calculate severance, reward for service, and compensation pay. The calculation is based on a workers basic wage and all forms of fixed allowances provided to him/her. For workers whose wage is based on a daily calculation, the one-month wage equals 30-times the daily wage (Art. 157(2)). When calculating severance and reward pay for employees whose wage is based on piece-rates or commission, the wage rate used is the average daily wage for the past twelve months, as long as the resulting wage is not less than the

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provincial or districts minimum wage (Art. 157(3)). When the wage depends on the weather and is calculated as a piece-rate, the rate used is equal the employees average wage for the past twelve months (Art. 157(4)). In addition, workers are entitled to get different severance pay packages based on the characteristics surrounding the termination of their employment. Should an employer terminate a worker because that worker is involved with legal proceedings lasting over six months, than the employer must pay that worker reward pay and compensation pay (Art. 160, the 2003 Act). Should a worker be terminated for violating the terms of his or her employment, he or she is nevertheless compensated with severance pay, reward pay, and compensation pay. (Art. 161(3), the 2003 Act), If a worker resigns, he or she is entitled to compensation pay under some conditions (Art. 162, the 2003 Act). The 2003 Act stipulates that workers receive the standard severance, compensation, and reward pay:
if the business changes and the workers do not wish to remain employed (Art. 163(1)); if the business closes because of losses for two years or force majeure (Art. 164); or if the business goes bankrupt (Art. 165).

The 2003 Act also provides that workers are entitled to get twice the standard severance pay, the standard reward pay, and compensation pay for unused entitlements:
the business changes and the owner does not wish to keep the current workers employed (Art. 163(2)); the worker dies (in this case, the severance, compensation, and reward pay go to the workers heirs) (Art. 166); the worker enters pensionable age, but the employer does not include him or her in a pension program (Art. 167(5)); or the worker requests for the settlement of a dispute involving employers malice or negligence, as specified in Art. 169(1), which results in termination of employment (Art. 169(2)).

A worker who enters pensionable age will receive different severance packages depending upon the retirement benefits the employer offers. According to Art. 167(1) of the 2003 Act, if the employer terminates a worker because the worker has entered pensionable age, and if the employer has entered the worker in a retirement program, then the worker is not entitled to severance pay, reward pay, or compensation pay. Art. 167(2) specifies that if the retirement benefit that they get as a single lumpsum payment at retirement as a result of their participation in a pension program is less than twice the amount of standard severance pay, reward pay, and compensation pay. If the employer has included the worker in pension program whose premiums are paid in part by the worker and in part by the worker, then Art 167(3) provides that the severance pay shall count towards the employers contribution.

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Under Art. 168(3) of the 2003 Act, if a worker is terminated because he/she has been absent five consecutive workdays without explanation, then the worker will receive compensation for unused entitlements and detachment money, which is regulated by work agreements, collective bargaining agreements, and employer rules and regulations. If a worker commits a grave wrongdoing as defined in Art. 158(1) of the 2003 Act, he or she may only be entitled to compensation pay for unused entitlements.
Avenues for redress

Any dismissal for the reasons prohibited by Art. 153 of the 2003 Act, is declared null and void by law. The worker must be reinstated by his/her employer. The 2003 Act refers to the institution for the settlement of industrial relation disputes (ISIRD) for terminating workers employment contracts. The 2004 Act provides for various dispute settlement bodies and procedures, namely: bipartite settlement, mediation, conciliation, arbitration and an Industrial Relations Court. Article 3 of the 2004 Act elaborates on the procedures to be taken in the event of a dispute over termination of employment. This provision requires that industrial disputes first be resolved through bipartite bargaining within 30 days of commencement of negotiations. If the negotiations fail, at least one or both of the parties can file the dispute to the local manpower office, which will offer both parties the opportunity to settle the dispute through conciliation (Article 4). If the worker does not accept the dismissal for grave wrongdoings, he/she may file a suit to the ISIRD (Art. 159, the 2003 Act). Article 5 of the 2004 Act states that, should conciliation not yield a result, one of the parties can file a legal petition to the Industrial Relations Court. Article 100 specifies that the Council of Judges will make a verdict regarding the dispute, and base their decisions of the laws, existing agreements, customs, and justice in passing the agreement. If the employee wishes to appeal the decision of the Industrial Relations Court, he or she must file an appeal within seven working days to the Supreme Court (Art. 110, the 2004 Act).
Overview

Over the past several years, Indonesias economy has experienced rapid growth. Indonesia increased its per capita GNP 1000% between 1967 and 1993 from $70 to $700. (1) Indonesia s robust economic growth was initially stimulated by its government policies. In 1986, following a sharp decline in oil prices, the government initiated a structured deregulation package. The package allowed the government to stabilize and adjust the Indonesian economic structure through the use of strict fiscal policy, deregulation and institutional reform. As a result, Indonesia experienced a boom in both domestic and foreign investments that propelled the economy on a path of rapid export-oriented labor-intensive growth.(2)
Employment Trend

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Rapid economic development has fundamentally altered the structure of Indonesias labor force over the past two decades. In 1971, less than 40% of Indonesian labor worked in the industrial and service sectors, while over 60% worked in the agricultural sector. However, as members of the Indonesian workforce moved away from agriculture and towards trade and manufacturing, this distribution changed dramatically. By 1990, only 54.8% were employed in the agricultural sector, showing a progressive decrease in agricultural workers. Of the remaining workers: 14.7% were working in trade, 13.1% were engaged in service industries, 11.4% were involved in manufacturing, and the remaining individuals were distributed in other industries.(3) The dramatic economic growth also altered the gender composition of the workforce, as the need to improve family economic conditions induced an increasing number of women to enter the workforce. The following table illustrates this trend:
Table 1. Number of Workers Employed in Manufacturing in Indonesia by Gender, 1982-1990

Total Increase

Number of Employees

1982 (000)

1986 (000)

1990 (000) 1982-1986

Total Increase 1986-1990

Male

1,852

2,113

2,779

14%

32%

Female

879

992

1,517

13%

53%

Source: Indonesia Labor Market Policies and International Competitiveness, The World Bank, Sept. 1995. Another impact of the foreign and domestic investment boom was an increase in working opportunities, which in turn led to an elevation of the employment rate.(4) Between 1971 and 1990, employment increased from 37.6 million to 71.6 million, while unemployment decreased by 1.3 million within the same period of time. (5) The size of the Indonesian labor force increased from 41.3 million in 1971 to 82.2 million in 1993.(6) In 1995, the US Commercial and Information Center in Jakarta estimated that 75% of the 83 million people in the labor force are between the ages of 15 and 34.(7) Furthermore, the center noted that the labor force is thought to be growing at about 2.8% per year despite the fact that population growth has declined to 1.7%.(8) At the current labor force growth rate, developing and creating adequate employment opportunities has become one of the most pressing priorities facing the Indonesian government. In addition, Indonesia is experiencing shortages of valuable managerial and professional personnel.
Acquiring the Best Employees

The existing skilled management personnel in Indonesia are well aware of the demand for their services and tend to charge accordingly. A number of companies cope with the shortage by importing staff, although the process can often be significantly more expensive. When a company hires an expatriate, it must consider a variety of costs housing, schooling for dependent children

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and health insurance as well as other benefits, such as a car with driver. In addition, the Indonesian government limits the number of work permits granted to expatriate staff. (9) Another tactic used by many multinational companies in order to overcome the shortage of skilled managerial employees is the development of qualified local staff through in-house or on-the-job training. However, this process can be expensive and there is always a possibility that competitors will lure away the trained employees. For growing local companies, pirating staff from multinational companies offers a quick and easy solution to the need for management and professional staff. Pirating has helped local companies to get the level of education they need from their candidates, as many multinational companies maintain a strong reputation for good in-house training. In addition, pirating may also occur among multinational companies themselves. Many of these cases arise when a professional asks for a higher salary than the initial company can afford to pay. Recruiting Indonesian students who study overseas is another option for companies to cope with the shortage of skilled personnel. In the United States, the recruitment is usually done through Home Country Placement a program conducted by Northeastern University in Boston as part of its Cooperative and Education Service. This center receives requests from more than 400 major Indonesian and US companies daily; the inquiries are then matched with student profiles. The center also assists the US Indonesian Student Association (PERMIAS) by hosting an Indonesian Job Fair each year. Recruiting recent Indonesian graduates from overseas universities has provided employers the opportunity to recruit the best employees straight from university. The Indonesian government readily acknowledges that training a sufficient number of skilled workers to meet the growing demands of the rapidly moving economy is one of the greatest challenges facing Indonesia. The government further understands that the failure to develop the essential manpower skills to maintain economic growth could result in the loss of economic opportunities and an inability to compete internationally.(10)

Human Resources Development

Aware of the need for human resources development, the Indonesian government has made a concerted effort to make development a high priority and to improve the quality of human resources. In its Repelita VI five-year development plan, the primary goal of human resource development in Indonesia is to increase the capabilities of each individual and thus all of Indonesian society as a whole. Furthermore, This will be reflected in religious beliefs, improvements in physical and mental health, development of knowledge and skills, increased adherence to a productive work ethic, a sense of national responsibility, and increased awareness and understanding of the importance of preserving natural resources and the ecosystem. Other goals include the development of a sense of self-reliance, development of leadership and entrepreneurial skills, and an increased number of national development cadres who have patriotism, perseverance, initiative, discipline, social awareness and awareness of their rights and duties. (11) Indonesias policymakers are now redefining the role of the government, from being the sole provider of education to the catalyst for stimulating private-sector training programs, including employer-sponsored schools, vocational centers, and polytechnic schools. (12) According to the World Bank, the higher education system in Indonesia has grown rapidly during the past 20 years. General education gains, investment in a wide range of training facilities and various forms of on-the-job training has improved the skill level of Indonesias labor force. Skills training is provided either through senior vocational high schools, which account for 27% of upper secondary enrollments, or through public training centers that offer short specialized courses in targeted disciplines. (13)

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As part of the governments effort to improve the quality of human resources, it implemented the Nine Years Compulsory Education Program in 1994. The program is an extension of the previous six-year compulsory education program that the government originally launched in 1984. In the new program, children between seven and 15 years of age are required to attend school for nine years, including six years of primary education and three years of intermediate education. Despite the existence of this program, 76% of the total workforce in 1994 only possessed a primary educational background. Beginning in January 1997, the Indonesian government will impose a US $100 levy on every expatriate in order to establish a skills development fund to help local professionals. In addition, companies in the financial and manufacturing sectors must pay compulsory training levies to equip Indonesians with the skills necessary to do the work currently performed by expatriates. In 1996, a US $20 million loan from the World Bank was used to finance a US $25 million Social Sectors Strategy and Capacity Building Project. The main objective of this project is to strengthen Indonesias efforts to sustain high income growth rates and poverty alleviation, improve the quality of social sector services, assist with the transition towards decentralization, and enhance the development impact of investment.(14) In the same year, the Asian Development Bank also gave a US $80 million loan to Indonesia to upgrade technology capabilities of Indonesian industries. (15)

Building Working Relationships with Indonesians

According to Bruce Gillespie, chief consultant of Wings of Eagles, a program that has conducted many in-house training programs in Indonesia, building positive relationships with Indonesians is easy as long as you are honest, open and sincerely interested in each person as an individual. Furthermore, Gillespie commented that consultants, experts and mentors must be adept at building relationships in the same way that Indonesians build relationships - with sincerity, warmth and commitment.(16) Indonesians love to learn. The company can stimulate its employees by giving sources of information for those employees who wish to further develop their expertise. Another useful technique is to provide numerous learning challenges in actual daily work. Follow-up action is important, since it demonstrates that the management staff cares about the ability level of their staff and lets the employees know that their work is important. (17) Indonesia is a country ingrained with strong cultural traditions. Therefore, it is crucial for a company to consider cultural values in order to be successful in Indonesia. For example, religion is an important part of Indonesians everyday life. Muslims need time for their everyday prayer, while Hindus (especially in Bali) have a specific daily schedule for religious rituals. In addition, when a company is planning to provide a cafeteria at employees facility, the company should be aware that meals must be prepared in a accordance with Islamic traditions.(18) Another cultural tradition that Indonesians value is harmony and consultation leading to consensus. Lastly, Indonesians tend to confront issues in an indirect manner as an adherence to Indonesian concepts of politeness and aversion to embarrassment. (19)

Employees Wage Rate and Benefits

Citibank advises foreign investors it is unwise to see Indonesia as a nation which can provide profit merely by virtue of its cheap labor. However, Citibank also noted that major foreign companies report that Indonesian workers quality and productivity can be as high as elsewhere as Page | 61

long as the company provides the workers with reasonable wages, a good working environment and a positive channel of communication between management and workers.(20) In Indonesia, the Ministry of Manpower regulates the minimum wage rate, or the lowest basic wage including permanent allowances. The minimum wages are fixed by calculating the level of minimum physical need (KPM), costs of living and labor market conditions. The minimum wage level is calculated for each region, and differs according to location. (21) Indonesia first introduced its minimum wage legislation in 1989. Since then, the government has continuously increased the minimum wage level to meet the changes in KPM figures. As a result, the minimum wage rate in several regions is now equal to the KPM.(22) In April 1996, the government increased the minimum wages by an average of 10.63% per region. The daily minimum wage for the Jakarta area was increased from Rp 4,600 to Rp 5,200 per day or Rp 156,000 per month.(23) The minimum wage rate does not include the overtime wage rate, which is 1.5 times the hourly wage rate for the first day and two times wages per hour for the following days. The overtime rates on public holidays differ from the overtime rate on regular days. Pregnant and young workers may not participate in overtime. In September 1994, the Ministry of Manpower issued a decree that requires all companies to pay a 13th month of salary basic salary and fixed allowances timed with major religious holidays. As of 1993, the monthly wage rate was Rp5 million (US$2,430) for managers, Rp2 million (US$971) for executive staff, Rp500,000 (US$243) for clerical staff, Rp400,000 (US$194) for skilled labor and Rp200,000 (US$97) for unskilled labor.(24) Nevertheless, The World Executive Digest reported that Indonesias executive salaries in 1995 were still lower than those in most other ASEAN countries. The aforementioned reported salaries do not account for various benefits paid by the company which may include taxes, car with driver, credit cards, executive club membership, transfer fees, etc. Overall, the difference in the total salary package might not be as great as it appears.(25)
Table 2. Indonesian Executive Salaries (in millions of Rupiah per month after tax) by Industry

Industry

CEO/Director

Vice President

Senior Manager

Banking

27.0 - 41.0

7.5 - 11.2

6.9 - 7.8

Security

10.0 - 19.0

6.0 - 9.0

4.5 - 5.75

Trade & Distribution

12.5 - 20.0

7.0 - 9.5

3.5 - 5.5

Multilevel Marketing

6.8 - 9.2

5.5 - 7.5

3.5 - 5.0

Telecommunication

18.0 - 35.0

9.0 - 11.0

6.5 - 9.0

Source: Executive Salaries, Indonesia Business Center Online, www.indobiz.com.

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In 1978, the government established the Manpower Insurance Program (ASTEK) for civil servant employees. The government broadened the scope of the program in 1992 so that it would also cover employees in private sectors.(26) The new program was enacted through Law Number 3 of 1992 that is known as JAMSOSTEK. Initially, companies that employ more than 10 persons or have a payroll of at least Rp1 million per month are obligated to participate. However, companies that already offer superior benefits may choose not to participate in the program. The law covers life insurance benefits, retirement funds, free health care for workers (including spouses and up to three children), and compensation for work-related accidents and illnesses. The employers contribution and 2 percent of employees wages provide funds for the program for the retirement fund. PT ASTEK, a state owned enterprise, is responsible for administering the program.(27)

Regulations(28)

Besides regulating the minimum wage and detailing the employees insurance program, the Indonesian labor law delineates the regulations for standards of working conditions, the formation and rights of unions, and rules in employing expatriate staff. The minimum age for employment in Indonesia is 15 years old, while the maximum workday is 7 working hours per day or 40 hours a week. Working hours may be extended to 9 hours a day, 54 hours a week with overtime pay. The regulation further stipulates that employees will receive at least a half-hour rest after 4 successive hours of work as well as 1 day of rest per week. The single rest day per week can be changed into 2 rest days per week given an agreement from workers regarding an 8-hour workday. Annual leave entitlement for all Indonesian workers is 12 days a year. After six years in the same organization, a worker is further entitled to three months leave. Female employees may not be obligated to work on the first and second days of their menstrual periods. Although the official length of maternity leave is 1.5-3 months before and 1.5 months after birth, the law allows for a maximum three-month extension before the expected date as long as a medical certificate accompanies the request. A trade union at any level must register with the Ministry of Manpower. Furthermore, unions must be registered in order to enter binding negotiation contracts at any level. Collective labor agreements by independent unions beyond the plant level are still effectively impossible. Although termination of employment on the basis of establishment of union membership is not permitted, the law allows a company to fire any worker who does not show up for work for 6 consecutive days without a valid explanation. The Ministry of Manpower may also require that an employer extend negotiated benefits to nonunion employees in an establishment. Furthermore, the ministry can decide whether part or all of a collective labor agreement can be applied to other employers/employees in the same field of activity. The settlement of industrial relations disputes must go through several stages, such as bipartite negotiations, mediation by a Ministry of Manpower official and settlement by regional and central committees. Central committee decisions are binding unless nullified by the Ministry of Manpower. Workers may strike only if negotiations with an official fail or if the employer refuses to negotiate. They must notify the employer and the Chair of the Regional Committee of their intention to strike, and may only strike after the Chair has acknowledged the receipt of notification (usually within 7 days). A strike must be suspended if there is an official inquiry.

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The unionization process has been slow, due to Indonesian societys lack of familiarity with trade union practices. Although approximately 40% of the labor force is unionized, the Hong Kong and Shanghai Bank estimates that active membership is only around 5-10%. Currently, Indonesia has only one recognized union, the All Indonesia Workers Union (SerikatPerburuhanSeluruh Indonesia - SPSI), an organization that is further differentiated into industry-based sections. The government has insisted that an SPSI branch should represent organizations with more than 25 employees. According to Citibank, the government took this action in response to outside pressure from overseas. Many critics question the effectiveness of SPSI as the employees representative, since factory managers often appoint branch union officials. In addition, since negotiations are typically based on Indonesias preferred consensus system, workers charge that the results are often biased against them. In the past, this has led to a large number of strikes occurring without prior notification to the Ministry of Manpower. Strikes usually relate to employers failure to pay the minimum wage, denial of benefits, poor working conditions, and the termination of employees without just cause. If a company elects to employ expatriate staff, it must conform to regulation number 4, which requires the company to submit a training plan for Indonesian nationals. The goal of this training plan is to educate and train Indonesian nationals to later take over positions currently performed by expatriates. In most manufacturing industries, blue collar and supervisory level positions are closed to foreign workers, while there is three-year limit for technical staff. In other sectors such as export marketing, tourism and consultancy, work permits are not difficult to obtain. For all positions, a sponsorship letter is required from the company or government agency. Foreign investors who are going to set up an office in Indonesia must submit a manpower plan to the Investment Coordinating Board. Foreign investors are allowed to fill director positions in capital investment companies in direct proportion to the foreign shareholding for such companies. Expatriate employees enter Indonesia on a business visa that can later be transferred to a one-year temporary residency visa (KIM-S). This visa must be renewed each year with a new letter of sponsorship. Dependents of the aforementioned expatriate employee may enter the country with a social and cultural visa. The process of obtaining the KIM-S (one-year temporary residence visa) is long and arduous. As a result, many companies prefer to employ an agency to handle the work permit application process. Currently, the Indonesian government is drafting a new labor law that will review the procedures relating to employment of expatriate staff. With unemployment at 7.24% in 1995 and as many as two-thirds of local graduates unable to find jobs, the new law will attempt to reduce the number of expatriates in the country. (29)

Conclusion The rapid growth of Indonesias economy is expected to continue well into the next century. The government has been stimulating economic growth by deregulating previous laws in order to entice investors. New investments will mean new working opportunities that are badly needed to accommodate the growth of Indonesias labor force. Simultaneously, Indonesia is experiencing a shortage in managerial and professional personnel. Therefore, further investment in human resources is still needed to allow Indonesia to retain its international competitiveness. In answer to this challenge, the government has continuously improved the Indonesian educational system and human resources development as well as the labor law.

http://www.pacificbridge.com/publication.asp?id=29

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The Indonesian economy has certainly been a rollercoaster of highs and lows over the past three decades, with continued political instability and the devastation of the East Asian financial crisis of 1997-98 being just two of the clouds over the country's development. The situation since the 1997 crash has improved, with a stabilised rupiah and a strong, sustained GDP growth rate. However, there are still significant problems in relation to slow economic reform, and corruption at all levels of government and business. The strong GDP growth rate has also not been enough to make a significant impact on unemployment, which hovers around the 10% mark. Stagnant wages growth, and increases in fuel and rice prices have worsened poverty levels. As of 2006, an estimated 17.8% of the population lives below the poverty line, and 49% of the population live on less than US$2 per day. One thing remains constant: Indonesia's labour force has shifted significantly over the past two decades. In 1971, less than 40% of Indonesian labour worked in the industrial and service sectors, while over 60% worked in the agricultural sector. However, as members of the Indonesian workforce moved away from agriculture and towards trade and manufacturing, this distribution changed dramatically. By 1990, only 54.8% were employed in the agricultural sector, showing a decrease in agricultural workers. The gender composition of the workforce has also changed, as the need to improve family economic conditions has induced an increasing number of women to enter the workforce. Government legislation is currently in catch-up mode to create a suitable legal framework for the new workforce. Developing and creating adequate employment opportunities has become one of the most pressing priorities facing the Indonesian government. In addition, Indonesia is experiencing shortages of valuable managerial and professional personnel. A number of companies cope with the shortage by importing staff, although the process can often be an expensive exercise. When a company hires an expatriate, it must consider a variety of costs housing, schooling for dependent children and health insurance - as well as other benefits, such as a car with driver. In addition, the Indonesian government limits the number of work permits granted to expatriate staff. Another tactic used by many multinational companies in order to overcome the shortage of skilled managerial employees is the development of qualified local staff through in-house or on-the-job training. However, this process can also be expensive and there is always a possibility that competitors will lure away the trained employees. For growing local companies, pirating staff from multinational companies offers an easy solution to the skills shortage. Pirating has helped local companies get the level of education they need from their candidates, as many multinational have strong in-house training programs. Never has the concept of the 'people economy' been so apparent than the Indonesia of 2007. The Indonesian government readily acknowledges that training a sufficient number of skilled workers to meet the growing demands of the rapidly moving economy is one of the greatest challenges facing the country. They also understand that the failure to develop the essential manpower skills to maintain economic growth could result in the loss of economic opportunities and an inability to compete internationally.

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Indonesia At A Glance Population Labour force 234.6 million 108.2 million Agriculture: 43.3% Labour force by sector Industry: 18% Services: 38.7% (2004 estimate)

Human resources development: Aware of the need for human resources development, the Indonesian government has made a concerted effort to improve the quality of human resources. In its Repelita VI five-year development plan, the primary goal of human resource development in Indonesia is "to increase the capabilities of each individual and thus all of Indonesian society as a whole". Furthermore: "This will be reflected in religious beliefs, improvements in physical and mental health, development of knowledge and skills, increased adherence to a productive work ethic, a sense of national responsibility, and increased awareness and understanding of the importance of preserving natural resources and the ecosystem." Other government initiatives include the development of leadership and entrepreneurial skills, and an increased number of national development proponents in key industries who have "patriotism, perseverance, initiative, discipline, social awareness, and awareness of their rights and duties". Education and skills development: Indonesia's policymakers are now redefining the role of the government from being the sole provider of education to the catalyst for stimulating private-sector training programs, including employer-sponsored schools, vocational centres and polytechnic schools. According to the World Bank, the higher education system in Indonesia has grown rapidly during the past 20 years. General education gains, investment in a wide range of training facilities and various forms of on-the-job training have improved the skill level of Indonesia's labour force. Skills training is provided either through senior vocational high schools, which account for 27% of upper secondary enrolments, or through public training centres that offer short specialised courses in targeted disciplines. As part of the government's effort to improve the quality of human resources, it implemented the Nine Years Compulsory Education Program in 1994. The program is an extension of the previous six-year compulsory education program that the government originally launched in 1984. In the new program, children aged between seven and 15 years of age are required to attend school for six years of primary education and three years of intermediate education. Despite the existence of this program, 76% of the total workforce in 1994 only possessed a primary education background. From 1997, the Indonesian government imposed a US$100 levy on every expatriate in order to establish a skills development fund to help local professionals. In addition, companies in the financial and manufacturing sectors must pay compulsory training levies to equip Indonesians with the skills necessary to do the work currently performed by expatriates. Hiring returnees: Indonesia has established a placement program at Northeastern University in Boston called Home Country Placement. More than 400 major US and Indonesian companies send their employment-related requests to this centre daily. Inquiries are then matched with student profiles. This program allows Indonesian students studying in the US to find employment in their home country and also permits firms with operations in Indonesia to choose recently qualified graduates. Employment laws Conditions of employment: Under Indonesian law, the minimum age for employment in Indonesia is 15 years, while the maximum work period is seven hours per day or 40 hours a week. Working hours may be extended to nine hours a day, 54 hours a week with overtime pay. Termination of employment: It is standard procedure for employers to have their new permanent employees undergo a three-month probationary period. During this time the employers can, at their discretion, dismiss these new employees. However, after this period, dismissal requires permission from the Committee for Settlement of Labor Disputes of the Department of Manpower. Should permission be granted, the company is required to provide severance payment, merit payment or service payment to the terminated employee. In 2003, the new Labour Law 13/2003 was implemented, which features a severance package that includes a severance payment, a service payment and other compensation. Its introduction has been hotly debated by the business community, due to additional costs for companies and the balance sheet liability associated with the severance package. Maternity leave: Three months on 100% of wages Paid leave and holidays: There are generally 13 paid public holidays each year. Based on Government Regulation No 21 Year 1954, employees are entitled to a maximum of 12 working days of paid annual leave. An employee is entitled to receive sick leave for a period of up to 12 months. Employees are also given paid leave for occasions such as the birth of a child (one day) and a death in the family (two days).

Talent challenges and strategies

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 Fringe benefits: Indonesian workers are generally entitled to fringe benefits from their employers. Some of these are: - payment of income tax due on salaries and wages - an annual bonus of one month's pay, usually paid at Lebaran (the annual Moslem festival) - medical expenses - travel and meal allowances.

Tax and contributions

The individual taxpayer is legally responsible for ensuring that they have registered with the tax office, and complying with the regulations and payment of the tax due. Employers have three choices for the personal income tax calculation: 1. 2. 3. Employees' salaries are classified as gross and tax is calculated on this, withheld from employee and paid via the banking system to the tax office. Employees' salaries are classified as net and then grossed up to establish a gross amount from which the tax is calculated to bring the remainder back to the net amount as expressed in the employment letter. The tax is calculated on the net and treated as a fringe benefit.

Tax rates
Taxable income Rp 1-25m Rp 25 to 50m Rp 50-100m Rp 100-200m over Rp 200m Rupiah rate 5% 10% 15% 25% 35%

Corporate tax The corporate tax rates are as follows: 10% for taxable income up to Rp 50m 15% for taxable income between Rp 50-100m 30% for taxable income in excess of Rp 100m Minimum wage Indonesia has competitive wage rates for unskilled workers in Asia but considerable differences exist between industries and geographic locations. For example, wages in the oil sector are higher than those in the agriculture sector, and wages in urban Jakarta are higher than in rural Java and other islands. Average minimum wage: Rp 710,000 per month (A$98.69); as low as Rp 340,000 per month (A$47.25) in certain areas; set by provincial and district authorities based on proposals by tripartite (workers, employers and government) provincial wage commissions.

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The Ministry of Manpower regulates the minimum wage for each province or city. Largest employers 1. Per. Listrik Negara (PLN) - 55,758 2. Astra International Tbk - 55, 600 3. P.T. GudangGaram (Perusahaan RokokTjap) - 39,142 4. Bank Rakyat Indonesia - 35, 514 5. Telekomunikasi Indonesia Tbk - 29,375 6. Bank Danamon - 26,185 7. Pertamina - 24,000 8. Bank Central Asia Tbk - 21,033 9. Bank Mandiri (Persero) Tbk - 19,693 10. Indah Kiat Pulp & Paper - 15,673 Case study: Pertamina Pertamina is a state-owned company that controls the oil and natural gas industry in Indonesia. The development of human resources at Pertamina focuses on the creation of proficient, professional, committed and business-oriented employees. To achieve this, Pertamina has determined the following corporate strategies for the development of its human resources: Implement an organised and consistent development of employees so that employees have the competency, skills, dedication and productivity to do their jobs. Establish and develop a broad and a secure industrial relationship in order to create a harmonious and comfortable atmosphere to support high productivity. Pertamina is convinced that human resource development is a long-term investment and has therefore committed to focusing on a continuous and systematic development program in anticipation of changing business needs. The company has implemented transparent selection and recruitment process in recruiting experts and fresh graduates for regeneration. The preliminary selection and recruitment processes are conducted through independent third parties such as University of Indonesia, University of GadjahMada, and University of Padjadjaran. Pertamina has developed a career management program and system based on ability and performance (merit system). The program and system are expected to improve effectiveness and transparency in developing the career of Pertamina's employees in the future. To create a corporate culture that supports the company's transformation process, it has also established and undertaken a socialisation program on corporate values known as the FIVE-M (Focus, Integrity, Visionary, Excellence and Mutual Respect). For performance measurements, the company uses KPIs and a productivity index. Source: www.pertamina.com Facts and trivia Theunionisation process has been slow due to Indonesian society's lack of familiarity with trade union practices. Although approximately 40% of the labour force is unionised, the Hong Kong and Shanghai Bank estimates that active membership is only around 5-10%. Statutory retirement age is 55 for both men and women. At statutory retirement age a person is eligible to receive a state pension. The 1997 Asian Currency Crisis devastated Indonesia's economy. The rupiah lost value, companies went bankrupt, prices soared and millions of people lost their jobs. The poverty rate jumped from 11% to 50% of the population.

Business context
Indonesia is a country with enormous diversity and general HRM challenges. The Asian economic crisis has had a profound political and economic impact on Indonesia. The business Page | 68

sector, most notably the large conglomerates and state enterprises, shared some of the blame for the crisis. Their excesses, in particular large unhedged foreign loans that could not be paid back as the rupiah, the Indonesian currency, plunged as international confidence in the country evaporated, has led to the near bankruptcy of the sector (Habir, 1999). The period since thefinancial crisis began in August 1997 has presented one of the biggest political, social, and economic challenges Indonesia has faced for 30 years. During the crisis, Indonesia has moved from a corrupt authoritarian regime dominated by a powerful presidency to a fledgling democracy struggling to recover from the excesses of the Soeharto government (Emmerson, 1999). Since the fall of Soeharto, the country has experienced two changes in presidents. But the transition was a relatively democratic one, and now Indonesia finds itself the third largest democracy bestriding a strategic area of the world. That democracy is still precariously placed as previously pent-up demands and aspirations find voice in a more democratic setting. These demands have resulted in continuing political instability as ethnic, regional, religious, and labor aspirations are expressed. Needed legal and judicial reform have been largely ignored in the economic turmoil and political maneuvering. The business world is still stagnant as the implementation of many important reforms mandated by the InternationalMonetary Fund in such areas as the financial sector and the state sector has been obstructed by nationalistic and patrimonial forces. There has also been a considerable exodus of mainly professional ethnic Chinese Indonesians and massive capital flight from the country. Domestically, the press, parliament, and NGOs, specifically organizations such as Indonesian Corruption Watch and the Indonesian Transparency Society, have become more active in overseeing business in Indonesia. However, as mentioned above, the weak legal structure in Indonesia remains an obstacle to the attempts for business reform. Despite a transition to a more democratic government, and perhaps because of it, the country finds itself possibly more divided along religious, ethnic, economic, social, and political lines than ever before. Thus, a challenging societal environment exists in which HRM needs to be practiced. The discussion on the demography begins to illustrate some of the challenges. 2.2. Demography Indonesia (or more correctly, The Republic of Indonesia) comprises over 13,000 islands and a land area of about two million square kilometers (Tambunan, 1995). The main language of the 207 million people is Bahasa Indonesia, although there are 250 other regional languages and dialects (Bishop &McNamara, 1997).While approximately 70%of the population lives in rural areas (Levinson, 1998), cities such as Jakarta, Surabaya, and Medan continue to grow as rural residents seek work in the urban areas. There are at least 200 ethnic groups (Ban ethnic Chinese, 1997) with only four considered to be significant numerically: Javanese (45%), Sundanese (14%), Madurese (7.5%), and Coastal Malays (7.5%) (Levinson, 1998). The ethnic Page | 69

Chinese represent less than 5% of the population yet are reported to control 6080% of Indonesias economic activity (Ban ethnic Chinese, 1997). Muslims constitute 87% of Indonesians, Protestants are represented by 6%, Roman Catholics by 3%, Hindus by 2%, and 1% by Buddhists (Levinson, 1998). The number of people living below the poverty line had soared to 95.8 million (or about 48% of the total population) by the end of 1998 (Harsono, 1999). Even prior to the contraction, there were estimates of over a third of the Indonesian labor force being eitherunderemployed or unemployed (Hadiz, 1997). High school and university graduates form the bulk of the unemployed in the cities and towns (Manning, 1999), part of which has been explained by selective job search behaviors (Manning &Junankar, 1998). Small enterprises account for about two thirds of all employment (van Diermen, 1997). The labor force may be divided into the following categories: agriculture45%; industry16% and services39% (CIA, 2003). However, as nearly 70% of the employed work in the informal sector (Firdausy, 1995), it will need to be remembered that much of the discussion here will be inapplicable to the majority of employed. In the formal sector, the proportion of women has increased to 39.2% (Triaswati, 1996), but much of this increase has been in the in the workforces of low-skilled labor-intensive industries where women are perceived to be more easily managed than men (Hadiz, 1997). For example, women dominate the workforce in industries such as tobacco, textiles, and food and beverages, and according to White (1990), employers prefer them not only due to their perceived dexterity and patience, but also for their unassertiveness and deference to authority. Women generally receive lower wages than men for certain basic, business, and technical skills. However, such income disparity between men and women diminishes significantly with greater educational achievement (Triaswati, 1996). Although some women have attained senior positions in both the public and private sectors (Habir&Larasati, 1999), women represent 37.4% of employees in the civil service but only 5.5% are in positions of authority (Bureau of Democracy, Human Rights and Labor Human Rights (BDHRLHR), 1999). Notwithstanding this, the Indonesian government claims that Indonesian women have attained equality as evidenced by their participation in limited roles in the military (Sunindyo, 1998). 2.3. Legal and industrial relations context Indonesias Human Rights Stipulation of the Peoples Consultative Assembly (No. XVII/ MPR/1998) sets out a Human Rights Charter that proclaims the right to life, personal development, justice, freedom of association, employment, and provides for protection from discrimination. However, as described below, the country is still a long way from achieving those ideals. The law in Indonesia arises from numerous sources, is extremely complicated and Page | 70

somewhat vague, and much discretion is left to government authorities (Bennington, 2001). The system has been described as either primitive or entirely co-opted by the militarybusiness elite or both, and the law is essentially the political culture of the time (Lindsey, 1999, p. 11). Many safeguards are provided in Indonesias legal code, but in many important respects that protection is not available in practice. The legal system (is) unresponsive, corrupt, politicized and ineffective, (and) offers little recourse to the individual in righting perceived wrongs (Schwartz, 1994, p. 245). The politically skewed labor relations system in Indonesia, which is weighted heavily against workers, was justified by using the national ideology of Pancasila to suggest that industrial relations should be conducted in the context of partnership and production; partnership and profit; partnership and responsibility towards God the almighty, nation and state, and the community; fellow employees and family; and the employee (Fehring, 1999). Hadiz (1997) suggests that industrial relations are reflected in the role of the benevolent father to both capital and labor, with no acceptance of the right of workers to strike as this would contravene the family-like principles which govern Pancasila. The tight control of the labor force has also been justified by the need to maximize the attractiveness of Indonesia to foreign investors (Islam, 1989). However, during the Soeharto era, a very heavy-handed labor policy was premised on the fear that labor unions were communist-inspired organizations (Hadiz, 1993). This led to one of the more disturbing features of the history of industrial relations in the Soeharto period in which many who protested about the prohibition of labor unions and demanded better conditions of employment were sentenced to jail, disappeared, or killed (Woodward, 1996). The government directed and controlled the labor movement by sanctioning the AllIndonesia Workers Union, initially FBSI and later the SerikatPekerjaSeluruh Indonesia (SPSI), as a government-supported organization and by making it difficult for independent unions to establish themselves. The government also controlled national and regional leadership positions in the SPSI and vetted enterprise union leaders by security authorities. Despite such pervasive control and repression, there was an increase in wildcat strikes in the latter part of the Soeharto period (Manning, 1993, p. 83). After Soehartos resignation in 1997, Indonesia, under the transitional government of President Habibie (19971999), finally ratified on June 1998 the International Labor Organizations 1948 convention on the freedom to organize. During the new government of Abdurrahman Wahid, who was elected as President in 1999, the combination of a more open and democratic government, the partial descendancy of the power of the military, an increasing militancy in unions, and the dire economic conditions brought about by the economic crisis Page | 71

have all led to an increase in labor disputes and strikes. Although many labor disputes are caused by specific grievances related to a particular area, company, or plant and are not necessarily union led, the more democratic climate has led to increasing union activity. As already mentioned in 1998, the government ratified ILO Convention 87 on freedom of association and issued a new regulation on the registration of workers organizations (President Habibie signs ILO convention on unions, 1998). Private sector workers can now legally form worker organizations without prior authorization, and unions may draw up their own constitutions and rules and elect their representatives. The new regulation does away with numerical and other requirements that were previously a barrier to union registration. Unions can now register at the factory, district, provincial, and national level and form federations and confederations. However, the regulation prohibits unions based on political orientation, religion, gender, or ethnic groups. The Law on Manpower Affairs enacted in October 1997 allows workers to form unions on the basis of democratic consultation with other workers in the same company and they may join with other unions to form sectoral and intersectoral federations. The law was scheduled to take effect on 1 October 1998, but to allow time for revision, consultation with concernedgroups, and preparation of implementing regulations, the Parliament amended it to postpone implementation until 1 October 2000 (Surowidjojo, 1999). Formerly employers faced 3 months imprisonment or a fine of up to 100,000 rupiah for noncompliance with labor legislation. The new labor bill provides for fines of 50 million rupiah and a maximum sentence of 6 months in jail (House passes labor bill, 1997). However, such penalties have seldom proven to be deterrents and appeals for employers to treat workers better still continue. For example, the governor of Jakarta has called for changes and has quoted research findings that six factors lead to disputes between employers and employees: the minimum wage, workers demands for pay increases, overtime fees, doing overtime, incompatible workeremployer relationships, and lack of freedom to pursue career or education (Employers told to treat workers better, 1997). With the new revisions to the law, workers can now go on strike without fear of losing their wages (A new labor law, 1997) provided that at least 72 hours notice is given to the government and the employer. However, strikes are confined to the factories or workplaces where the disputes occur while street rallies are banned. Other revisions include the requirement for trade unions to register themselves and the names of all of their members with the Ministry of Manpower. The legal changes have not stopped criticisms directed at the governments industrial relations policies. For example, the editor of the Jakarta Post has argued that the new Page | 72

legislation still does not guarantee the workers most basic rights but that it does provide some assurances to investors that their operations will not be continually disrupted by strikes (A new labor law, 1997). The Indonesian Prosperity Trade Union (SBSI) claims that companies are continuing to fire SBSI members because of their affiliation with the union or because they sought to organize SBSI units within their factories; and the SBSI has indicated difficulties in registering some of its workplace units (BDHRLHR, 1999). Even though the government has stated that the regulation requiring police approval for all meetings of five or more would be relaxed, in practice, it continues to apply to union meetings. The law still requires intensive mediation and prior notice (not approval) to strike before a strike can occur. However, in practice, dispute settlement procedures are rarely followed, and formal notice of the intent to strike is rarely given because Department of Manpower procedures are slow and have little credibility with workers (BDHRLHR, 1999). Reports still circulate on the involvement of the police and the military in labor matters, although their involvement is now less visible. One exception to this was when army troops, who were pelted with rocks and other missiles, fired rubber bullets on striking workers at a steel plant near Jakarta23 workers, as well as three soldiers, were injured (BDHRLHR, 1999). A common feature of the culture in Indonesian organizations is the keluargabesar concept, which means that staff are seen as part of one big family which shares common purposes, and friendly and familiar relationships (Rohdewohld, 1995, p. 115). One illustration is the practice of either paying married workers more than unmarried workers or by providing extra allowances for those with a spouse and children (e.g., a larger allocation of rice per month). Another example is compulsory membership of KORPRI for civil servants, a nonunion association, and Dharma Wanita, the organization of civil servants wives. However, such organizations are commonly held to be aspects of Soeharto era political control rather than culture, and questions are being raised on their suitability in the present climate in Indonesia. State enterprise employees, defined to include those working in enterprises in which the State has a 5% holding or greater, are usually required to join KORPRI, but a small number of state enterprises have SPSI (All-Indonesian Workers Unions) units. 2.4. General conditions of employment There are three types of employment regulated by the Employment Law: fixed period employment, which requires a written contract in Bahasa Indonesia; indefinite period or permanent employment for which a written contract is not mandatory; and traditional employment in the informal sector, which is essentially unregulated (Surowidjojo, 1999).A3month probationary period applies to permanent appointments, and once this period has expired, the termination of their employment is almost impossible; government approval is Page | 73

needed (Surowidjojo, 1999). The requirements on employers are onerous because the conditions of employment are highly regulated (Surowidjojo, 1999). However, it might also be said that sympathy should not be misplaced because workers are often required to work very long hours with little pay (White, 1990). In the very large informal sector, most workers are not registered or covered by employment regulations. Moreover, many employers only pay workers social security contribution fees (which cover old age, death, disability, permanent disability, occupational accidents, and diseases contracted from the workplace) in respect to permanent workers; not for those employed on a contract basis (Aworker killed every other day, 1997). However, as mentioned, notwithstanding the sheer size and importance of the informal sector, the discussion here focuses only on the formal sector. There is a minimum wage level that differs depending upon the region, although the discussion in Indonesia is now turning more to an appropriate wage rather than a minimum wage. For Jakarta, the minimum wage is IDR286,000/month or approximately US$36 (at May 2000 exchange rates) or about US$1.50/day. In the past, Hadiz (1997) and Manning (1993) have argued that the minimum wages have been set much lower than that which would cover the minimum physical needs of a single person. It is now believed to provide for about 95% of the minimum physical requirement of people (Military involvement, 1997), which is still significantly lower compared to other Asian countries such as Thailand, Philippines, South Korea, Taiwan, Hong Kong, and Singapore (Tjiptoherijanto, 1998). Theminimumwage rate does notmean that all employers actually pay to this standard;many pay less because they can seek compliance deferral for up to 12 months. By way of rationalization, some employers have complained that their businesses cannot afford increases in the minimum wage due to the very high prevalence of so-called invisible costs of doing business, which range from graft to money made available to ensure cooperation from themilitary. Lesmanaa (1999) and others (Corruption keeps money from wage earners, 2000) have reported that these fees paid by employers to various government agencies are seen as normal practice in bureaucratbusiness relationships. The fees help employers to obtain licenses and protect them from workers; it is this collusion that is attributed with the prevention of disputes at production facilities (Lesmanaa, 1999). This state of affairs does not come cheaply though as cost estimates vary from 2% to 30% or more of total operating costs (Hadiz, 1997). Employers are also required to provide other minimum conditions such as paid annual vacation leave of not less that 2 weeks per year, 12 paid public holidays per year, 7 hours per day or 40 hours work per week with 1 hour of rest for each 4 hours of work, incremental Page | 74

overtime rates, sick leave up to 12 months, not all fully paid, accident compensation that covers all medical costs, including death benefits, social insurance (the employer must contribute 5% of the employees salary, the employee contributes 1%, and the government contributes 2%), severance pay, service pay based on organizational performance, and wage protection with interest to be paid on unpaid wages (Bennington, 2001). Protection is also granted specifically to those who suffer from illness in that they cannot have their services terminated if they are absent for less than 12 months. Sick leave payments are perhaps more generous than that provided in many western countries, but the social security context makes this necessary, e.g., payments consist of 100% of salary for the first 3 months, 75% of salary for the second 3 months, 50% of salary for the third 3 months, and 25% of salary for the final 3 months (Geringer, Frayne, & IPMI, 1993). While the Ministry of Manpower continues publicly to urge employers to comply with the law, in reality, government enforcement and supervision of labor standards are generally weak. A shortage of labor inspectors, lack of effective sanctions, unwieldy procedures for conflict resolution, and possibly unrealistic standards for Indonesias level of development (Manning, 1993) have been blamed for breaches in labor laws. Conditions of employment in the civil service are somewhat different, complex, and opaque. Apart from the usual rights, civil servants participate in health and pension insurance schemes and at least until recently had lifetime security of employment. Because oftentimes the income of a civil servant may not reach the minimum standard set by the government and is not sufficient to cover the cost of living (Rohdewohld, 1995), salary supplements are provided in the form of various standardized allowances such as rice and family allowances, special allowances when working in remote areas, housing or a housing allowance, medical care, and either transport to and from work or a gasoline allowance. When civil servants are working on specific aided projects, extra payments, which can be very substantial, are also paid, e.g., a house to live in, a monthly voucher for petrol, rice, and project honoraria. Depending upon the experience level and point of reference, senior managers in Indonesia will argue that there are fewer employment regulations in Indonesia than elsewhere and that compliance is not a problem, or that compliance is a problem, and/or that there is greater regulation than elsewhere but virtually no enforcement. Due to the problems of public access to legal information (Rohdewohld, 1995), it is possible that many simply do not know what they are required to do anyway. 3. Issues in core HR functions 3.1. Equal opportunity policy and practice The constitution does not explicitly forbid discrimination based on gender, race, disability, language, or social status but it does stipulate equal rights and obligations for all citizens, both native and naturalized. Notwithstanding that equal opportunity is not a priority for Indonesian Page | 75

companies (Hutchings, 1996), it is of interest to consider the equal opportunity policy and practice in respect to a number of specific diversity factors in Indonesia. The approaches to forced and child labor, womens opportunities, ethnic and religious diversity, and opportunities for the disabled and older workers tend to vary somewhat from those adopted in many western countries. 3.1.1. Forced labor and child labor The government prohibits forced and bonded labor by children but does not always enforce this effectively (Bennington, 2001). Since the economic crisis, it is believed that at least 2 million children work at least 4 hours a day (BDHRLHR, 1999). Employers are allowed to hire children but they must provide access to education, socialization, and mental and spiritual guidance and they must not work them for more than 4 hours a day (Soeharto asks Latief, 1997). Since 1987, parental consent has been required and dangerous or difficult work has been prohibited for children. There is no minimum age for children forced to work for socioeconomic reasons but adolescents (ages 1517) cannot work during certain hours of the night, below ground, in mines, or in jobs that would have an adverse effect on morality, such as in entertainment facilities (BDHRLHR, 1999). Even though there are many reports of terrible working conditions and appalling pay for children (see Bangun& Sprague, 1999), no employer is known to have been prosecuted. 3.1.2. Gender Although the constitution states that women are equal to and have the same rights, obligations, and opportunities as men, in practice, women face some legal discrimination (BDHRLHR, 1999). Female workers in manufacturing generally receive lower wages then men, and many jobs are gender stereotyped to the disadvantage of women (Cukier, Norris, & Wall, 1996). Apart from receiving lower wages, women are often hired as day laborers instead of as fulltime permanent employees so that companies avoid providing benefits, such as maternity leave, and in some cases do not receive employment benefits, such as medical insurance and income tax deductions. Women do receive extra provisions though, such as 3 months paid maternity leave and 2 days paid menstruation leave per month. They are also protected from dismissal due to marriage, pregnancy, or confinement (Bennington, 2001). Other protections include special conditions regarding work at night (e.g., the employer is obliged to make a written request to the Local Office of the Department of Manpower, which sets out the kind of business and character of the job and the reasons why they want to employ women at night). The employeris required to give full protection on safety, health, and sexuality by ensuring that the femal worker is not pregnant and at least 18 years old, and the employer must provide transportatio and good nutritious meals and drinks. Women are also prohibited to work in mining and an Page | 76

jobs that are dangerous for their health, safety, and honor (Triaswati, 1996, p. 20). Notwithstanding the protective legislation for women in some areas, the regulations ar reported to be commonly neglected (Grijns& van Velzen, 1993). For example, the governmen has acknowledged that pregnant women often are dismissed or are replaced while on leave and some companies even require that women sign statements that they do not intend to become pregnant (BDHRLHR, 1999). One social legal aid information center recorded an 80% increase in legal cases for women in 2 years until 1997 with half of the complaints bein related to pregnancy, about one quarter related to marriage to coworkers, and about 7% relate to employers refusing to allow time for breast feeding at work (Women workers, 1997). Som job advertisements even overtly require that female applicants be single (Women workers 1997). Even though women are allowed 2 days of menstrual leave per month by law, this leave i not allowed in all cases, and some women in management positions will not openly take such leave but instead report that they are working at home. Some multinational companies do no provide menstrual leave but indicate preparedness to consider this benefit on an individua basis if requested by a female worker. On the other hand, some companies indicate that thei businesses would not cope if all of the women took this extra time off every month. Issues pertaining to women workers remain sensitive and have led to protest marche (Protesting workers make 10 km march, 1999). Some companies in Indonesia place stric controls on the behavior of unmarried women requiring that they live in company dormitorie and their activities outside working hours are also monitored (Hadiz, 1997). On the other hand, sexual exploitation of women in the workplace is not uncommon (Hill 1996), and even though only a small percentage of harassment incidents are reported, whe they reach court, women generally lose their cases! (Triaswati, 1996). In theory, women have the same rights as men in respect to employment, yet th guidelines from 1978, 1983, 1988, and 1993 also state that womens participation in th development process must not conflict with their role in improving family welfare and th education of the younger generation. Conversely, in March 2000, Indonesia signed th protocol of the United Nations Convention for the Elimination of All Forms of Discrimi nation Against Women (Corruption keeps money from wage earners, 2000) so the situatio for women may improve. 3.1.3. Ethnicity and religion Although the government officially promotes racial, religious, and ethnic tolerance, thi would appear to be out of control in some areas of Indonesia, such asMaluku and Aceh, wher violence at the time of writing continues unabated. Even the requisite citizen identity card carries information about the persons name, date of birth, place of birth, religion (and thi must be one of five recognized religions), address, and until very recently, a special symbo Page | 77

was placed so that Chinese could be readily distinguished from other Indonesians (Ching 1998). The new government has since done away with the discriminatory sign. Discrimination is rife on ethnic and religious groundssometimes this is positive discrimination (e.g., preference for Chinese in certain positions such as finance or marketing roles) but mostly it is negative. The ethnic Chinese, who constitute less than 5% of the population and are major players in the economy, are often discriminated against. The Chinese have been restricted from joining the civil service, state enterprises, the armed forces, the police force, and from entering a university. At the same time, the large Chinese Indonesian business groups that dominate the private sector as well as pribumi or ethnic Malay companies normally recruit out of their own ethnic pool. Given that over 85% of the population is Muslim (Bishop & McNamara, 1997), the focus is on providing for their religious needs. For example, although a prayer room is not compulsory, many employers will provide a suitable venue and employees are provided with timenot more than 10 minutes five times a day for the purpose of prayer. Extra time is provided for religious purposes on Fridays. Many employers are very conscious of the possible issues that can arise in respect to religious differences so have made efforts to accommodate different religious beliefs, although none would be so extensive as for those of the Muslim faith. 3.1.4. Disability Companies that employ over 100 persons are required to provide 1% of their jobs to the disabled. It is not difficult to predict, with discrimination against women and other groups being prevalent, that this law will have limited success in the foreseeable future. Although some factories have made special efforts to hire disabled workers, most of those with disabilities will be dependent upon family or reduced to begging for a living (Government studies required hiring of disabled, 1999). 3.1.5. Older workers Age discrimination legislation does not exist in Indonesia. Advertisements in Indonesian newspapers and Indonesian Internet sites commonly refer to age, gender, and the need to provide a photograph. 3.2. Recruitment, selection, and retention Recruitment tends to be a high priority in the private sector due to both growth and turnover rates (e.g., 1113% in one manufacturing firm was seen to be high). It takes on added importance because of the difficulty of dismissing employees, which requires government authorization in each individual case, and because local staffs tend to be inclined to low levels of loyalty and high job hopping behaviors. Multiple methods of recruitment are used by firms in Indonesia (e.g., word-of-mouth; print advertisements): referral from universities, recruitment consultants, and the Internet. Advertising is very expensive in the few newspapers considered to have the reach to make an advertisement placement worthwhile and therefore not Page | 78

used as frequently as in western countries. Excluding unskilled occupations, the order of importance of factors in recruitment is generally as follows: age, education, sex, marital status, and training, with age seen to be important by the most number of employers and training as the least important (Report, 1997). At managerial levels, patronage still exists but seems to belessening, but in the public sector, politics and patronage continue to play a dominant role (Habir, 1995). There is evidence to suggest that there are shortages of quality employees in marketing, finance, and systems. Quality is seen to relate primarily to motivation and productivity. The recruitment of expatriates is a sensitive issue and attracts quite a deal of attention, arguably due to the number who seek extensions to their work permits. They are only allowed in positions that cannot be filled by locals (Tjiptoherijanto, 1998), and for every 10 local workers hired, a maximum of one expatriate will be allowed (King, 1993). According to Soeharto asks Latief (1997), there are about 70,000 expatriates working in Indonesia. Increasingly expatriates are recruited from other Asian countries, such as India and the Philippines, to staff middle management ranks. Although the majority of registered expatriates are from the United States (Hugo, 1993), over recent times employers have found them to be too expensive. Due to the differences in salaries between local workers and expatriates, there is a government decree requiring expatriates to pay US$100 per month during the period of their contracts to finance vocational training programs for local workers (Soeharto asks Latief, 1997). There is also regulation to ensure the Indonesianization of positions held by expatriates. However, with the coming ASEAN Free Trade Area (AFTA) in 2003, such regulations may have to be removed or adjusted. Retention of staff is a stated goal of HRMin many organizations due to the practice referred to as the hijacking (poaching) of highly skilled staff. This mostly occurs in respect to employees who are university graduates, although there is the case of P.T. Zebra Taxi in Surabaya, which had 90 out of 220 drivers hijacked at one time (Lecraw& IPMI, 1991).Itis noteworthy that the reason that a further 55 were not hijacked was because they were on secondment to P.T. Zebra Taxi from the marines. Some HR managers are very frustrated by the hijacking activity because it seems that even if jobs are enriched, compensation seemingly generous, and succession plans clearly in place, nothing will prevent it. 3.3. Training No government-imposed training levy applies across all sectors in Indonesia, although in some sectors such as banking, the Central Bank of Indonesia has required that 5% of salaries be spent on training. In respect to companies, the estimate of training expenditure is about 1% of payroll, which is about the amount spent in most newly industrialized countries (Report A, 1997). At the government level, Presidential Decrees in late 1994 stipulated that staff would have to be trained before they could be promoted; the intention being to eliminate Page | 79

automatic promotion every 4 years. Also, the Ministry of Home Affairs makes participation in training and education compulsory and requires every unit within the Ministry to allocate 1530 days per annum per employee for education and training. Although the amount is believed to be much greater than in the private sector, quantifying it seems to be almost impossible. However, there is also criticism from some quarters that, in the civil service, training has failed to achieve its goal to contribute to greater efficiency. Instead, it is used primarily for the salary supplements and promotions it attracts and for the private benefits it generates throughmoonlighting (Report A, 1997). Further, it has been found that the more educated receive more formal training than the less educated (Report A, 1997). Since the economic meltdown though, there are reports that organizations are refusing to spend money on training just as they are failing to provide salary increments. 3.4. Compensation There is little transparency in the compensation systems that apply in both public and private sectors in Indonesia. A paternalistic attitude continues as evidenced by the rice allowance, which although difficult to quantify creates interesting economic behavior, e.g., it is not unusual for middle to senior government officials to sell their rice allocation to more lowly paid members of their organization, who in turn sell the rice back to the (government) rice market. This is attributed to the rice being very old and of poor quality. On the other hand, some give their rice allocation to others in return for special favors, such as information. These allowances do not exist in the same way in the private sector; however, the private sector employee is likely to earn as much as four times that of a civil service employee (Rohdewohld, 1995). What is very obvious in Indonesia is the enormous difference between the lowest and highest paid employees in many organizations. For example, this ranges from 1:7 in the civil service (Rohdewohld, 1995) to 1:201:150 in the private sector. 3.5. Performance management Productivity and quality of labor are seen to be major problems in Indonesia. For example, Report A (1997) shows that output per worker in Indonesia is about one quarter that of Korea and one tenth that of the United States. However, it is acknowledged that these data fail to take into account unit labor costs, which result in an Indonesian worker being seen as three times more productive than an American worker and twice as productive as a Korean worker. A comparison of the quality of production labor across many countries in the region indicated that Indonesias labor was readily available but ranked alongside China in having the lowest quality rating (Report A, 1997). In respect to the availability and quality of managerial labor, Indonesia was joined by China, Thailand, and Vietnam on the worst possible rating and at the Page | 80

same level in terms of low availability with countries such as China, Hong Kong, Singapore, Korea, and Thailand (Report A, 1997citing International Herald Tribune, July 29, 1991). Rohdewohld (1995) reports that in the public sector, absenteeism is high and that even if employees are at work, they may spend their time preparing for private work. He argues that due to the inadequacy of government salaries, moonlighting is accepted in the workplace. This attitude is also illustrated in the following statement: many government employees still tend to look upon their salaries as something more akin to a retainer, with extra payments from the public filling out the rest of their legitimate compensation package (Schwartz, 1994, p. 136). Furthermore, due to the low salaries of civil servants, there is a tendency to concentrate on obtaining allowances such as the project honoraria, which can result in the neglect of routineactivities that do not attract this allowance, and as many activities as possible being reformulated into projects. Rohdewohld (1995) describes this phenomena as projectism, which he says leads to a rather erratic, incremental, and spontaneous way of work which is dictated by the supply of domestic of foreign project funds (p. 102). The culture, particularly in the civil service, has been described as reflecting its Javanese heritage in terms of the tendency to avoid open criticism, the preference for consensus and harmony, the importance of oral communication over written communication, and the importance of personal relationships over functional relationships (MacAndrews, 1986, cited inRohdewohld, 1995). Performance appraisal systems vary across organizations from a management by objectives approach to upward and 360 degree feedback. Views differ on whether either upward or 360 degree feedback actually works in the Indonesian culture (or multitude of cultures) because directing rather than delegating is seen by most managers in Indonesia as the best style, so it is difficult to understand how such an approach might succeed. Rewards for good performance vary from an extra months salary to an extra 12 months salary for individuals, and some incentives are based on team performance. In the civil service, promotion is not unduly affected by performance given that promotion is an employees right, but it is possible that other benefits might flow from good performance such as fully paid training and education outside of Indonesia. 3.6. Separation and retirement Although some industries still need to increase the size of their labor force due to expansion, others are finding that with increases in the minimum wage, the availability of labor saving technology, and the increasing global competition, that downsizing must occur. Permission is needed to terminate the services of any employee and this can be a drawn out process, effectively deterring many employers from embarking upon such an exercise. Even when termination is for a cause, except in cases involving moral turpitude or serious criminal Page | 81

conduct (Geringer et al., 1993), it is necessary to pay an amount equivalent to 1 months wages for each year of service up to a maximum of 4 months wages, as well as a prorata long service payment. In the public sector, it is almost impossible to terminate a persons employment although the Inspector General of the Ministry of Home Affairs has called for the sacking of inefficient staffofficials who complicate services by creating complicated procedures, collecting levies, or asking for bribes, should be got rid of because their practices cause a high cost economy and weaken the citys competitiveness (Inspector General calls, 1997, p. 3). 4. Multinational HRM practice in Indonesia The large multinational firms have been subject to considerable criticism about their management of workers in third world countries, yet Hadiz (1997) argues that there is little evidence that they treat their workers any worse than other firms. However, Nike has beensingled out as one multinational providing bleak working conditions. In one instance, women in a rural Nike factory (which is a Taiwanese joint venture) were said to be considerably worse off than those who work in other factoriesthe local community referred to the women from Nike as walking ghosts who work in Satans factory (merekepergidanpulangsepertihantu daripabrikSetan). Despite such reported conditions, Beeson and Hadiz (1998) quote the chief executive officer of Nike as saying that there are still thousands of Indonesians lining up for jobs at their factory gates! When the factory next to Nike was also given a Nike contract, the impact on the workers was both sudden and negative (Hancock, 1997). Interestingly, apart from the Nike operation, most export-oriented factories adhere to national laws in respect to wages and working conditions, yet it is rare for them to pay women all of their wage, benefits, and leave requirements (Hancock, 1997). Notwithstanding this, Hancock (1997) found that most reported being contented with their employment conditions, but the question of choice may well need to be posed. Hutchings (1996) says that although MNCs may have been respecting local customs and conforming to local practices, with regard to their treatment of women, it has been to their advantage. Although in some countries (e.g., India) companies might provide child care facilities, it has been argued in excuse that child care provisions and flexible hours are unheard of in Indonesia because it would not be culturally acceptable for parents not to take care of their own responsibilities and so such provisions would not be used even if provided (Hutchings, 1996). 5. Role of HR managers The role of HR managers varies considerably and is somewhat dependent upon size, sector, cultural influences, and type of ownership of the business. The roles, although not mutually exclusive, vary between the provision of housing and social facilities for families in remote areas, personnel administration, relationship management, and preventing strikes. The ratio of Page | 82

HR staff varies too, although the norm is around 1:80 in organizations in which the HRM function exists in a recognizable form (calculating ratios of HR to other employees is a little different in this country due to the existence of employees, such as drivers who are assigned to managers but are not part of the HR staff as such). To reduce the ratio any further will require automation. Human resource managers generally report to either the most senior manager under the chief executive or directly to the chief executive. The degree of sophistication, assessed on the basis of role clarity, perceived importance in the organization, and degree of delegation to line managers was most evident in the private sector services area. A subtle but evident thread in interviews with HR managers is the constant requirement for them to work at gaining credibility and justifying their role. Although some HR managers are highly qualified, HRM is not necessarily seen to be a prestigious role. The title of HR managers varies across organizations. Human resource development rather than HRM is common because human resource development is seen as much broader than HRM, which tends to be seen as personnel administration. As only one university in Indonesia offers a degree in HRM and relatively few subjects are taught in this area, the backgrounds of those working in HRM vary a great deal. Where professional HR practitioners exist, they tend to have either psychology or law backgrounds. The banking sector has a preference for those with a background in psychology, whereas the manufacturing sector has a preference for those with labor law backgrounds. However, some HR practitioners do not favor those with legal backgrounds because it is believed that when a problem arises, lawyers are trapped in the system, meaning that they have to follow the rules set down and cannot argue creatively as to why something different should apply. Some see advantages in having HR managers who have a management background because this is thought to provide leverage to management acceptance as an internal consultant. 6. Current challenges The challenges facing HR managers in Indonesia are considerable. Culture change and having efficiency understood as a priority are the major challenge facing HR managers in both civil and private sectors. Talent search is seen as the major challenge for the service industry. In the civil sector, there is a perceived need for less bureaucratic behavior and more entrepreneurial behavior, presumably not of the kind that reflects the common reports of bribes being sought by civil servants and of projectism. In organizations in which expatriates are employed, there is a greater need to have expatriates focus of skills transfer and to do themselves out of their jobs. In some cases, the degree of sophistication of HR practices is high, although the constraints imposed by the government regulations result in significant inefficiencies for Page | 83

those who have a professional approach to HRM focusing on fair compensation, prevention of occupational health and safety problems, development of the workers, etc. Some westerners might argue that there should be greater empowerment of the workers and greater involvement in the decision-making processes at the firm level. However, the profile of organizational behavior is quite different to that of western countries and to many other Asian countries. Hofstede (cited in Stening&Ngan, 1997) places Indonesians as very high in power distance and collectivism and quite high in femininity and in uncertainty avoidance, although other researchers have found that there is a narrowing of the differences between Indonesian and American managers compared to Hofstedes earlier findings (Heuer, Cummings, &Hutabarat, 1999). As further evidence of more convergence than commonly perceived, Habir and Larasati (1999) have found cases of a number of large Indonesian companies (including state enterprises) that are successfully implementing such international practices as empowerment, participation, and incentiveoriented human resource systems. Based on these cases, the authors argue that the Indonesian culture is not necessarily an obstacle to such practices, as is so often perceived. In conclusion, it would be unwise to generalize too much about HRM in Indonesia because conditions, philosophies, and practices vary widely across enterprise types, industries, andregions. However, the challenges in respect to training, equity, labor regulations, and the chaotic legal system, as well as coping with the ethnic and religious tensions and the coming international free trade provisions, point to the need for incredible sophistication. Not surprisingly, recent reports from practitioners in Indonesia have indicated the utmost importance of HRM in Indonesia given its particular economic circumstances (Supriono, 1999).

Conclusion
Indonesia, located in Southeast Asia, is a nation consiting of over 13,000 islands (some publications cite more than 17,000 islands). Only 6000 of these islands are inhabited. The islands spread between the Indian and Pacific oceans, linking the continent of Asia and Australia. The name Indonesia is composed of two Greek words: "Indos" which means Indian and "nesos" which means islands. Indonesia's flag has two colors; red and white. (Just like the banner of this page.) The red stands for bravery, and white for purity and truth. The Dutch began to colonize Indonesia in the early 17th century; the islands were occupied by Japan from 1942 to 1945. Indonesia declared its independence after Japans surrender, but it required four years before the Netherlands agreed to relinquish its colony.Fossil remains of Homo erectus, usually known as Java Man, indicate that 500,000 years ago the Indonesian archipelago has already been inhabited. It is believed that the modern population came from the Austronesian people who migrated to South East Asia from Taiwan. Early sovereignties that thrived include Srivijaya Empire (3rd-14th

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centuries), Tarumanagara (358-732), Sailendra (800-900), Sunda Kingdom (669-1579), the Kingdom of Mataram (752-1045), Kediri (1045-1221), Singhasari (1222), and Majapahit (1293-1500). The spread of Islam in the country started in the western region of the archipelago. By the end of the 16th century, Islam is the prevailing religion in Java and Sumatra. Traders and royal families became the first to accept the new religion. During the early 16th century, European (Spanish, Portuguese, British, Dutch) voyagers began exploring the archipelago. The Portuguese were the first to arrive in Indonesia in 1512. They established trading places, forts, and missions in different islands of the archipelago. The Dutch began its domination in the early 16th century through the creation of the Dutch East India Company (VOC). It set up a land-based colonial territory in Java known as the Dutch East Indies. The VOC engaged itself in various internal political affairs of Java and had fought different wars. In the early 1900s, Indonesias struggle for independence begun through the formation of its first nationalist movement, the Budi Utomo. But the Dutch imprisoned those who supported such political activities including Sukarno, the countrys first president. The effects of WWII and the Japanese offensives finally ended the Dutch era. Sukarno and Hatta declared independence on August 17, 1945 2 days after the surrender of Japanese emperor in the Pacific. The next day, Sukarno and Hatta were proclaimed president and vice-president by the Central Indonesian National Committee (KNIP). Indonesia enjoyed prosperous economic status in the late 1960s and lasted for almost 3 decades under the rule of president Suharto. But the 1997 East Asian Financial Crisis crippled the country resulting to mass protests and resignation of Suharto in 1998. In 2004, Indonesia had its first direct presidential voting and elected Susilo Bambang Yudhoyono as the new president.Majapahit kingdom was founded in eastern Java in the late 13th century. Under Gajah Mada, its influence stretched over much of Indonesia. This period is often referred to as a Golden Age in Indonesian history The present day culture of Indonesia is an outcome of the interplay of age-old- traditions from the time of early migrants and the Western thought brought by Portuguese traders and Dutch colonists. The official language of Indonesia is known as Indonesian or 'Bahasa Indonesian'. With respect to music, Kroncong is a musical style that applies guitars and ukuleles as the primary musical instruments. There are several varieties of traditional games like bull races in Madura, cockfighting in Bali and stone jumping in Nias. Another kind of national sport is sepaktakraw, which is started in Melaka. The patterns are alike to volleyball: to maintain the rattan ball in the air by using the players' feet. Rice is served as the main dish for most native Indonesians, with side dishes such as meat and vegetables.Greetings can be rather formal as they are meant to show respect. A handshake is the most common greeting accompanied with the word "Selamat". Food is often taken from a shared dish in the middle. You will be served the food and it would not be considered rude if you helped yourself after that. Business cards are normally exchanged after the initial handshake and greeting. Business cards should display your title. This helps enhance your image and credibility. National culture influenced on the strategic decision making and leadership style and human resoure management practices such as performance appraisal. The relationship between organizational culture and human resources practices can be explained as follows. When the member of organization i.e. employees, understand and internalized the organzationanl culture which can be said as the way things are done around here, it will enable for employee to choose strategy, and behavior that fit with their personality as well as with the main routines of organization activities. Indonesias economy may grow 6.1 percent to 6.4 percent next year, supported by domestic consumption and investment. Indonesias economy grew at the fastest pace in more than a year last quarter, joining an Asian rebound as the region leads a recovery from last years global recession. That momentum may falter as Greeces near default has prompted governments from Germany to Spain to implement budget cuts to convince investors they can tame deficits, threatening to damp demand. The rupiah slid for the first time in six days today on concern investors will pare holdings of

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higher-yielding assets after Moodys Investors Service downgraded Greeces sovereign rating to junk. The currency traded at 9,170 per dollar. The rupiah may trade between 9,100 and 9,400 against the dollar next year, Martowardojo said during the hearing. Indonesias economic growth and higher interest rates compared with other countries are supporting the rupiah, Nasution told reporters in Jakarta after attending the same meeting today. Inflation may range between 4.9 percent and 5.3 percent in 2011, the finance minister said. Gross domestic product in Southeast Asias largest economy increased 5.7 percent in the three months to March 31 from a year earlier. The public sector in Indonesia requires people who have capabilities and skills of analysis, decision making, and policy design which is hard to accomplish if the educational background is senior high school or less. One of the steps for the recruitment and selection process that need to be highlighted is the third step, the examinations because this step will determine whether the applicants are fit with the jobs or not. Due to the decentralization of the recruitment and selection process, many problems occur. Bribery, nepotism, question tests leakage, demonstration of results manipulation will likely occur during the recruitment and selection process. Basic salary is given on a monthly basis, and an annual incentive is legally required. Some companies resort to deferred compensation while others include various allowances. Funded pension plans, which provide retirement benefits in the form of monthly pensions, are keenly eyed by the government through the Department of Manpower and Ministry of Finance. The retirement process, along with its specifications, is governed by the Pension Law and the legal entity of Dana Pensiun is created in the absence of a trust law. The remuneration received by public servants is lower compared to employees in the private sector and even to employees in state-owned enterprises. Employees in the private sector can earn three to four times more than employees in the public sector. The income of the public servants is based on three components which are basic salary, allowances and other salary supplements. The government realizes that to improve the skills and abilities of public servants, training and development should be done as the government knows that many public servants arc high school graduates. The government has appointed The National Institute of Administration to arrange training for all public servants. Each ministry also has its own training; however, the training held by The National Institute of Administration is seen as more important especially when a public servant wants to be promoted in the future. As a result, the public servants who have higher education will obtain more training than those who have less education. The performance appraisal is difficult to use because its intangible characteristic in some of the elements. The principal elements to be measured are loyalty, work achievement, responsibility, fidelity, honesty, cooperation, initiative and leadership. The performance appraisal is confidential. The appraiser must be a person who already supervises the public servant at least for six months. An employer can fire an employee at any time provided he gives the employee a one month notice. All employers in Indonesia are required by law to provide safety equipment to employees if they are performing tasks that require them. Under Indonesian law, an employer is required to pay an employee for days that he has failed to turn up for work if he failed to turn up due to circumstances beyond his control. These circumstances include falling sick. All employees in Indonesia must be given a minimum of 12 days of working leave annually. Employee relation

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Hrs policy is to ensure equal opportunity in all aspects of employment regardless of race, color, religion, sex, pregnancy, national origin, ancestry, citizenship, age, marital status, disability, veteran status, sexual orientation, gender identity, or any other basis protected by law.Sodexo is committed to a policy of affirmative action, which will facilitate the placement of qualified women and minorities at all levels of the organization. So we conclude that Human resource management is working well in Indonesia.

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References
http://www.infoplease.com/ipa/A0107634.html#ixzz1MOKMrYhs http://en.wikipedia.org/wiki/History_of_Indonesia http://www.indo.com/indonesia/history.html http://www.nationsonline.org/oneworld/History/Indonesia-history.htm http://www.localhistories.org/indonesia.html http://najwazuhur.wordpress.com/2010/03/02/the-human-resource-practices-in-thepublic-sector-in-indonesia/ http://www.indexmundi.com/indonesia/economy_profile.html http://www.asiarooms.com/en/travel-guide/indonesia/culture-of-indonesia/index.html http://www.kwintessential.co.uk/resources/global-etiquette/indonesia.html http://www.indonesiatravel.org.uk/culture-religion-of-indonesia.html
Diponegoro, S. (2009). The Impact of Culture on Human Resource Management Practices: An Empirical Research Finding in Indonesia. Oxford Business & Economics Conference Program . 24-26.

http://www.ehow.com/list_6608254_indonesian-labor-laws.html
http://www.hrmasia.com/country-reports/hr-in-indonesia/32945/

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