When an international retail company opened operations in Jakarta, management quickly realized that Western-style performance reviews—direct, numeric, and sometimes harsh—did not translate well in Indonesia. Employees felt uncomfortable, and some even reported unfair treatment to the HR department. This experience highlights the importance of conducting performance appraisals in a way that respects Indonesia’s legal and cultural environment.

Legal Framework
Under Indonesian labor law, particularly the Manpower Law (Law No. 13/2003, amended by Law No. 11/2020) and Government Regulation No. 35/2021, employers are allowed to evaluate performance as long as the process is transparent, objective, and tied to clear employment agreements or company regulations. Appraisals must never be used arbitrarily as grounds for dismissal without due process. Termination still requires legal justification and, in most cases, negotiation or compensation.

A Real Case
In 2019, a manufacturing firm in West Java dismissed dozens of employees after citing “poor performance” without documented appraisals or feedback sessions. The case reached the Industrial Relations Court, which ruled in favor of the employees. The court emphasized that without a structured appraisal system and documented evidence, performance cannot be used as a legitimate termination ground. The company was ordered to pay significant severance packages.

Best Practices for Foreign Employers
To avoid disputes, performance reviews in Indonesia should:

• Be based on pre-agreed KPIs or job descriptions stated in employment contracts or company regulations.
• Include regular feedback sessions (quarterly or bi-annually), rather than sudden end-of-year reviews.
• Be documented, signed by both manager and employee, and communicated respectfully.
• Be developmental in nature, combining evaluation with coaching and training opportunities.
• Consider Indonesia’s collectivist culture, where indirect feedback and respect for hierarchy are highly valued.

Conclusion
Performance appraisals in Indonesia are not just an HR formality—they are part of the legal and cultural framework that protects employees. For foreign employers, a structured, transparent, and culturally sensitive approach ensures compliance, avoids costly disputes, and builds stronger employee engagement.

References

1. Law of the Republic of Indonesia No. 13 of 2003 on Manpower, as amended by Law No. 11 of 2020 on Job Creation (Omnibus Law).
2. Government Regulation No. 35 of 2021 on Fixed-Term Employment, Outsourcing, Working Hours, and Termination of Employment.
3. Ministry of Manpower – Guidelines on Performance Management and Employment Relations. https://kemnaker.go.id
4. International Labour Organization (ILO) – Indonesia: Fair Employment Practices. https://www.ilo.org/jakarta