Prohibition with Exceptions: An Overview of the Minister of Manpower’s Circular on Retaining Diplomas and Personal Documents

Overview

On May 20, 2025, the Indonesian Minister of Manpower issued Circular Letter No. M/5/HK.04.00/V/2025, prohibiting employers from retaining workers’ original diplomas or personal documents, except in limited cases, i.e., when such documents are issued through employer-funded training programs with strict safeguards in place. This policy aims to protect employee rights, promote fair labor practices, and align HR policies with modern standards. While the Circular Letter is advisory and lacks direct sanctions, it signals clear regulatory expectations. Employers are encouraged to review their internal policies, update existing agreements, and seek legal guidance to ensure compliance and effectively manage potential risks.

Introduction

On 20 May 2025, the Indonesian Minister of Manpower issued Circular Letter No. M/5/HK.04.00/V/2025 (“Circular”) concerning the Prohibition of Employers Retaining Diplomas and/or Personal Documents Belonging to Workers/Laborers. This Circular addresses the longstanding practice of retaining original employee documents, such as diplomas, identity cards, or family documents, as a precautionary measure to safeguard business interests or maintain employee retention.

With the issuance of this policy, the Ministry signals a renewed emphasis on employment practices that promote autonomy, transparency, and regulatory alignment. For employers, the Circular presents an opportunity to reassess internal procedures related to document handling, particularly in contexts involving new hires, outsourced labor, and company-sponsored training programs.

This article begins by exploring the assumed background and rationale behind the issuance of the Circular, followed by a summary of its key provisions, a discussion of potential compliance and enforcement challenges, and practical recommendations to help employers navigate its implications effectively.

Background and Rationale

In sectors that rely heavily on operational or field-based personnel, such as blue-collar workers, recent graduates, or migrant labor, employers have traditionally implemented document retention measures to maintain workforce stability or protect investments in training and onboarding. These measures, while often grounded in legitimate business considerations, have drawn increasing regulatory scrutiny due to broader concerns about employee freedom of movement and consent.

Through the Circular, the Ministry aims to standardize practices in a way that promotes fairness, protects employee dignity, and reflects evolving labor expectations. For employers, this development underscores the importance of aligning internal HR frameworks with modern labor principles while also maintaining legally defensible systems to manage workforce obligations and mitigate turnover risk.

Key Provisions of the Circular: Employer Compliance Focus

The Circular outlines several key provisions that employers are encouraged to understand and incorporate into their HR and compliance functions:

Prohibition on Withholding Personal Documents
Employers are advised against requiring or retaining original personal documents, such as diplomas, competency certificates, passports, birth certificates, marriage books, or vehicle registration documents, as a condition of employment.
Support for Career Mobility
Employers are expected to avoid policies or practices that could limit employees’ ability to pursue other employment opportunities. This aligns with the government’s objective of supporting fair and competitive labor market dynamics.
Review of Internal Policies and Contracts
Companies are encouraged to review existing employment agreements, onboarding materials, and SOPs to ensure that there are no provisions requiring the submission or retention of personal documents as a form of collateral.
Limited Exception for Employer-Funded Training
An exception may apply if documents, such as diplomas or competency certificates, are issued as a result of employer-funded training. In this case, document retention may be permitted under the following conditions:
- A written employment agreement explicitly details the arrangement; and
- The employer assumes full responsibility for the safekeeping of the retained documents and for any potential loss or damage to those documents.

This exception offers a structured pathway for employers to manage post-training obligations, provided that safeguards are in place and agreements are properly documented.

Practical Considerations for Employers.

While the Circular introduces additional guidance for employee protections, it also highlights the importance for employers to take proactive compliance steps to avoid potential disputes or regulatory scrutiny:

Audit Existing Practices: Employers should evaluate whether any current or legacy policies involve document retention, and assess whether such practices need to be revised or phased out.
Clarify Internal Guidelines: HR teams should be equipped with updated protocols for managing employee documentation in line with the Circular.
Prepare for Policy Inquiries: As awareness grows, employers may receive requests from current or former employees regarding the return of personal documents. Employers should be prepared to respond transparently and in good faith.
Engage Legal Counsel Where Needed: For agreements involving document retention related to training reimbursement or post-training obligations, legal input is recommended to ensure proper structure and enforceability.

Potential Loopholes and Enforcement Challenges

Although the Circular reflects strong policy direction, there are still several implementation and interpretation challenges that employers should be aware of:

Advisory Nature
The Circular does not establish penalties or sanctions, and therefore may not carry the force of binding regulation. While it reflects regulatory preferences, enforcement mechanisms are likely to depend on future regulations or precedents established through labor court rulings.
Undefined “Urgent Legal Interest” Phrase
The Circular references an exception for “kepentingan mendesak yang dibenarkan secara hukum, or legally permissible urgent legal interest” but does not specify any criteria. Employers should exercise caution when relying on this term and are advised to seek legal advice if they intend to invoke this exception.
Unclear Retroactive Application
It is currently unclear whether the Circular applies to pre-existing employment agreements. Employers may consider conducting an internal legal review to assess whether any provisions in existing contracts require revision in light of the Circular.
Regional Law Enforcement Disparities
Implementation will depend on local manpower authorities, whose capacities and priorities may vary. Employers operating across multiple jurisdictions should strive for consistency in internal compliance, regardless of the degree of enforcement at the local level.

Conclusion

The Circular reflects a policy shift toward fairer and more transparent employment practices, particularly regarding the handling of employee documents. While it does not carry direct legal sanctions, the Circular sets a clear expectation for employers to align with evolving labor standards and avoid practices that may be seen as coercive or outdated.

To ensure compliance and mitigate potential risks, especially in areas where the Circular remains open to interpretation, employers are encouraged to seek professional legal advice. A proactive review of internal policies, contracts, and training arrangements can help businesses navigate these changes with confidence and maintain strong, defensible employment practices.

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