Strict Compliance for Hiring Foreign Workers in Indonesia’s Banking Sector

Issue 19, May 2026

Banks in Indonesia can continue to employ foreign workers, but the Financial Services Authority (Otoritas Jasa Keuangan - “OJK”) introduces tighter limits on tenure, clearer justification requirements, and a stronger emphasis on knowledge transfer. In practice, foreign hires must now be more carefully structured, time-bound, and supported by succession planning.

Indonesian manpower law already imposes baseline requirements for hiring foreign workers. These include the obligation to hold valid work and stay permits, possess relevant educational or professional qualifications, and perform roles that cannot be readily filled by Indonesian nationals.

However, compliance with general manpower rules alone is not sufficient. Employers must also meet additional requirements imposed by sector-specific regulators. In the banking sector, the OJK plays a central role in overseeing and approving the use of foreign personnel.

The OJK issued Regulation No. 1 of 2026 on the Use of Foreign Workforce and Knowledge Transfer Programs by Commercial Banks (“POJK 1/2026”), effective 23 February 2026, replaces the previous 2017 framework. POJK 1/2026 is built around two core principles: limiting the use of foreign workers to clearly defined and justified needs; and ensuring that their employment supports knowledge transfer to Indonesian personnel.

Positions & Scope of Work

First, banks are now required to justify the use of foreign workers based on actual operational needs. The regulation moves away from viewing foreign workers as a flexible resourcing option and instead positions them as a targeted solution for specific gaps in expertise. This approach is reinforced through ownership-based limitations. Banks with at least 25% foreign ownership are permitted a wider scope in appointing foreign workers, including at the level of the Board of Directors (“BOD”), Board of Commissioners (“BOC”), executive officers, other roles requiring specific competencies, as well as experts or consultants.

By contrast, banks with lower levels of foreign ownership are generally limited to engaging foreign as experts or consultants, unless the foreign shareholder qualifies as a controlling shareholder or exercises effective control. Even where such participation is permitted, the regulation maintains structural safeguards: the majority of the BOD and at least 50% of the BOC must be Indonesian citizens.

Early Termination by OJK

The framework also extends to termination. OJK may require early termination in certain circumstances, including misleading disclosures, criminal conviction, non-compliance, or breaches of prudential and governance requirements. In other cases, termination will follow the employment agreement but will still trigger the relevant administrative obligations.

Greater Focus on Knowledge Transfer

A key aspect of POJK 1/2026 is the increased emphasis on how knowledge transfer is implemented in practice. Banks are required to assign Indonesian employees (at a ratio of 2:1 at the bank level and 1:1 at overseas branches) to work directly with each foreign worker, creating a structured counterpart framework rather than an informal arrangement.

This is supported by broader capacity-building expectations. Banks are expected to conduct ongoing training, including seminars and short courses, and are encouraged to provide international exposure for Indonesian employees, for example through overseas assignments. Taken together, these measures underscore that foreign workers are intended to support a gradual transfer of expertise, rather than to fill roles on an ongoing basis.

There are also practical adjustments on the employment side. The Indonesian language requirement is no longer framed as a strict pre-condition; instead, banks are responsible for facilitating language training during employment. In addition, reporting obligations to OJK have been refined, with banks required to separately track both the use of foreign workers and the implementation of knowledge transfer programs.

Limits and Duration

POJK 1/2026 also introduces a clearer set of limits and control mechanisms on the use of foreign workers. They may be assigned to roles in treasury, risk management, information technology, credit or financing, investor relationship, marketing, finance, and internal audit, or to other functions subject to prior OJK approval. Certain functions remain restricted, with foreign workers prohibited from holding roles in human resources and compliance. This restriction applies to domestic operations, as banks may still employ non-Indonesian personnel in these functions at their overseas branches.

Alongside these role limitations, POJK 1/2026 clarifies the duration of employment. For executive, expert, or specialized roles, the maximum period is five years, calculated cumulatively unless there has been a break of at least three years. Any extension beyond this period requires prior OJK approval, taking into account the individual’s performance, the availability of similar expertise in the domestic market, and the bank’s efforts to develop Indonesian employees, including through overseas assignments.

Regulatory Oversight

Taken together, POJK No. 1/ 2026 does not fundamentally change the availability of foreign workers in the banking sector, but it does change how their use is justified and managed. In practice, the cumulative five-year limit and stricter extension requirements mean that foreign hires can no longer be treated as open-ended, even with reappointment, and will require earlier planning around role scope, timing, and succession. Therefore, careful attention must be given to compliance with Indonesian manpower laws and POJK 1/2026, including the applicable approval and reporting requirements, as non-compliance may lead to administrative sanctions.

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If you have any questions, please contact

1. Hendrik Alfian Pasaribu, Senior Associate - hendrik.pasaribu@makarim.com
2. Alya Azalia Permata Sari, Associate - alya.sari@makarim.com
3. Rahayu Ningsih Hoed, Senior Partner - rahayu.hoed@makarim.com

_{M&T Advisory is a digital publication prepared by the Indonesian law firm, Makarim & Taira S. It informs generally on the topics covered and should not be treated as legal advice or relied upon when making investment or business decisions. Should you have any questions on any matter contained in M&T Advisory, or other comments in general, please contact us at the emails provided at the end of this article.}