By : Robie Aryawan Haris, Aljefri Febrizarli, Renaldy Maxmiliaan Warokka
The Law No. 11 of 2020 on Job Creation (Undang Undang Cipta Kerja) or also known as the Omnibus Law (“Omnibus Law”) is a comprehensive set of laws, issued by the Legislation Body of the House of Representative of the Republic of Indonesia (Dewan Perwakilan Rakyat – DPR), on behalf of the Indonesia government, to address several complex issues by amending numerous laws and regulations.
In the framework of strengthening protection for employees and increasing the role and welfare of employees in supporting the investment ecosystem, the Omnibus Law amends, removes, or stipulates several new regulations which are regulated in, among others, in manpower sector particularly under Law Nr. 13 Year 2003 on Manpower (“Manpower Law”).
II. KEY CHANGES OF MANPOWER LAW UNDER OMNIBUS LAW
The following are the key changes with regard to the amendment to the manpower sector:
1. Use of Expatriate
The Omnibus Law removes the requirement to obtain specific licenses in use of expatriate and provides that the use of expatriate would only be based on an expatriate utilisation plan (Rencana Penggunaan Tenaga Kerja Asing – “RPTKA”), except for (i) directors or commissioners with certain shares ownership or shareholders in accordance with the prevailing laws, (ii) diplomats and consular working at representative offices of foreign countries or (iii) foreign workers required by the employers in the types of production activities that have stopped due to emergencies, vocational, start-up companies (start-ups), business visits, and research for a certain period of time.
Basically, these newly set-out provisions are strengthening the current practise on work permits, which has been regulated under ministry regulation level under Ministry of Manpower Regulation No. 10 Year 2018 concerning the Procedures on Use of Foreign Worker. The new feature in the Omnibus Law is only the exception of RPTKA for “foreign workers required by the employers in the types of production activities that have stopped due to emergencies, vocational, start-up companies (start-ups), business visits, and research for a certain period of time” which has not been previously stipulated.
The Omnibus Law retains the prohibition to employ foreigners in a human resources position, as well as the requirement only to employ foreign worker under a fixed-term employment agreement.
2. Fixed-Term Employment Contract
The Omnibus Law removes the specific term limit for fixed-term employment contract (Perjanjian Kerja Waktu Tertentu- “PKWT”) and the procedure for the extension and renewal of PKWT as regulated under the Manpower Law which limits the PKWT contract to two years plus a one-year extension and permitting a renewal of up to two years only after a break. However, this shall not be interpreted that the Job Creation removes such regulation of specific term limit and procedure regarding PKWT. Based on new Article 59 paragraph (4) of the Manpower Law as amended by the Omnibus Law, it stipulates that the provision regarding type and nature or job activity, term, and time limit for the extension of PKWT will be further regulated under the Government Regulation.
The Omnibus Law also now requires the employer to pay compensation for the employee at the end of PKWT. The regulation regarding compensation will be further regulated under Government Regulation.
The Omnibus Law has revoked the provision on the criteria of work that is permitted to be outsourced. As a result, company now has more flexibility to outsource any types of work to a third party. Please note however, the Omnibus Law requires the work contract between the outsourcing company and the outsourced employee to be made in a written agreement and if the work contract is PKWT, it is required to be stipulated in the work contract regarding transfer of employee’s rights protection in the event of changes of outsourcing company and to the extent the work is remain existed.
4. Working Hours
The Omnibus Law provides that subject to the approval of the relevant employees, the overtime work may be performed for 4 hours per day and 18 hours per week at the maximum.
Previously, the Manpower Law only permitted the overtime work for 3 hours day per day and 14 hours per week at the maximum.
The Omnibus Law change the policy to determine the minimum wage which previously stipulated under the manpower law. Under the Omnibus Law, the determination of minimum wage shall contain the variable of economic growth or inflation instead of the fulfilment of decent living as previously stipulated. The formula to determine the minimum wage will be further regulated in the Government Regulation.
The Omnibus Law provides that the Governors must determine the provincial minimum wages and may also determine the regency/city minimum wages subject to the regional economic growth and inflation.
The other new feature in the Omnibus Law is the Micro and Small-Scale Business is exempted from the minimum wage requirement. The regulation regarding wages in the micro and small-scale business will be further regulated under Government Regulation.
The Omnibus Law provides that the payment of employee’s outstanding wage is prioritized over payment to the creditors, including secured creditors’ claims, claims of state’s rights, auction houses, and public institutions established by the Government. This provision is a further implementation of Constitutional Court Decision No. 67/PUU-XI/2013 which stipulates that the wage shall be considered as a preferred debt and shall take priority over the other creditor. While the other rights provided under the law (e.g. severance pay), shall only be prioritized over the other creditor who does not hold in rem security.
The Omnibus Law removes the expiration period for claim of wage payment which previously stipulated 2 (two) years after the existence of rights.
6. Long Leave
The Omnibus Law removes the employee’s rights for 2 (two) months long leave after working 6 (six) consecutive years in the company which previously stipulated in the manpower law. The Omnibus Law provides that a long leave may be given by certain companies and its shall be regulated under the employment contract, company regulation, or collective work agreement.
7. Termination and Reason of Termination
The Manpower Law and the Omnibus Law provide that the employer shall generally avoid any employment termination. However, the Omnibus Law provides more flexibility on the termination of employee. If the termination is inevitable, the employer should simply notify the reason for termination to the employee and/or to the labour union. This removes the provisions under the Manpower Law that the employer may only terminate the employee if: (i) it is agreed by the employee; or (ii) after the determination by Industrial Relation Court has been obtained.
The Omnibus Law also emphasize the reason for termination to become as follows:
The employment contract, company regulation and collective labour agreement may provide for additional termination reasons in addition to the reason regulated under the Omnibus Law, in which this is new regulation that has not been regulated under the Manpower Law. However, the detail procedure of termination will be further regulated under Government Regulation.
8. Severance payment
The Omnibus Law is no longer distinguish the calculation of the termination packaged based on various termination reasons. In short, the Manpower Law distinguishes the calculation for certain termination reasons such as, in the event of efficiency measures, mergers, acquisitions, changes of ownership, consolidations, spin offs, death, retirement, or prolong illnesses which can be higher considered to other reasons, which has been taken out by the Omnibus Law. However, the detail regulation regarding procedure of termination and severance payment will be further regulated under the Government Regulation.
Moreover, the Omnibus Law has also taken out the provision of compensation for payment in cash for untaken annual leave and/or long leave, if any, expenses or costs for the employee and his family’s return to the place of hiring, compensation in cash in lieu of housing and/or medical allowance in the amount of 15% of the total entitlement of service pay and/or merit pay (“Compensation Pay”).
Previously, under the Manpower Law, the terminated employees enjoy a greater compensation which consisted of 3 components, namely (i) service pay which is payable to the terminated employees up to 9 (nine) month’s wage depending on the years of the service, (ii) merit pay which is payable to the terminated employees up to 10 month’s wage depending on the years of the service and (iii) Compensation Pay.
9. Social Security Benefits Due to Loss of Jobs
The Omnibus law introduces a new social security program namely unemployment security or “jaminan kehilangan pekerjaan” that will be administrated by the Manpower Social Security Organizing Agency (Badan Penyelenggara Jaminan Sosial Ketenagakerjaan) and the Government. The employees that terminated by the employers shall be entitled to benefits from the unemployment social security program in the form of cash, access to information on the job market and job training. The regulation regarding unemployment security will be further regulated under Government Regulation.
This summary only highlights certain manpower issues under the Omnibus Law and may not be complete and comprehensive.
For more specific inquiry regarding the manpower section of Omnibus Law or other emerging legal issues in Indonesia, please contact the following lawyers:
Robie Aryawan Haris (email@example.com)
Renaldy Maxmiliaan Warokka (firstname.lastname@example.org)
Aljefri Febrizarli (email@example.com)