“The Enactment of the Omnibus Law and its Amendments to the Manpower Law”
On 2 November 2020, the Indonesian Government enacted Law Number 11 of 2020 on Job Creation (the “Omnibus Law”). The Omnibus Law itself was passed by the Indonesian House of Representative on 5 October 2020.
The main purpose of the enactment of the Omnibus Law is to absorb as many Indonesian workforces as possible amid increasingly competitive environment and demands of economic globalization. For such purpose, the Omnibus Law has amended more than 70 Indonesian laws. The amendment aims to streamline business activities for easing investment either domestic or foreign, and hence, would attract more capital to create jobs for Indonesian citizens. These business activities are now predominantly regulated by the Central Government, departing from the previous regime where they were also shared by the Regional Government.
The laws and regulations which would take particular attention under this alert are concerning manpower under Law Number 13 of 2003 (“Manpower Law”).
We will focus on the important notes on amendments to the Manpower Law, as follows:
IMPORTANT NOTES ON AMENDMENTS TO THE MANPOWER LAW
The Manpower Law exists on Article 81 of the Omnibus Law. The main changes are as follow:
Job Training and Placement of Workforce
Job training now can be held by company’s job training institution (lembaga pelatihan kerja perusahaan) under the Omnibus Law. The authority to provide licensing for job training activities is now the Central Government’s authority.
The Omnibus Law also governed that employer may recruit their own workers or through the implementer of the placement of workforce (pelaksana penempatan tenaga kerja).
An Employer no longer requires specific licenses to employ foreign workers/expatriates. An Employer is only required to obtain Foreign Worker Utilization Plan (Rencana Penggunaan Tenaga Kerja Asing/ “RPTKA”). Failure to secure this RPTKA is now subject to administrative sanction under the Omnibus Law from the previous more stringent criminal sanction.
There are also certain exemptions for an employer to secure an RPTKA. A foreign worker/individual will not need an RPTKA for the following positions:
- A director or commissioner who is simultaneously a shareholder with certain criteria;
- A shareholder with certain criteria;
- Diplomatic employees and consular in foreign countries; or
- Who works under an employer for production activities that are frozen due to a state of emergency, vocation, technology based start-up, business visits, and research for a certain period of time.
Therefore, the Omnibus Law has eased the procedure for recruiting foreign workers.
An employment relationship under the Manpower Law is classified under definite and indefinite periods. In particular, the Omnibus Law heavily alters the provisions for definite period employment relationships.
The Omnibus Law re-emphasizes that definite period employment relationships are only reserved for non-core business activities. The law has also revoked provisions regarding renewal or extension periods for definite period employments, which will be further incorporated under government regulations.
Under these changes, the Omnibus Law inclines to reduce/lower the consequence or risk of definite period employment relationships becoming indefinite period employment relationships as formerly stipulated under Manpower Law.
The Omnibus Law also requires employer to compensate definite employment relationship workers when they have finished their work or period under their agreements, which was previously not regulated under the Manpower Law.
Outsourcing (Alih Daya)
The Omnibus Law has revoked provisions on outsourcing through contract of work (pemborongan pekerjaan) or provision of worker/laborer services (penyediaan jasa pekerja/buruh).
Therefore, arguably, the outsourcing requirement regarding contract of work reverts to the previous arrangement under the Indonesian Civil Code which consists price and service.
The worker/laborer services (penyedia jasa pekerja/buruh), however, are the ones which are now identified as outsourcing (alih daya). They are still regulated under the Omnibus Law.
Another striking change under the Omnibus Law is for the consequence of any violation of provisions which can cause the outsourced workers of the outsourcing companies becoming the workers of the employer companies. They previously exist under the Manpower Law and are removed under the Omnibus Law.
Working Hour and Overtime
The Omnibus Law made working hours more flexible which they are able to be stipulated in the employment agreement, company regulations or collective labor agreement.
The weekly 2 (two) days rest for workers with 5 (five) working days in a week is no longer compulsory, only minimum 1 (one) day rest for 6 (six) working days is mandatory.
Overtime provisions are increased for maximum 4 (four) hours (from previously 3 (three)) in 1 (one) day and 18 (eighteen) hours (from previously 14 (fourteen) in 1 (one) week.
Provision concerning long rest is also removed, but should be regulated for certain companies where this would be further regulated under the government regulation. Already existing long rest provisions under the employment agreement, company regulations or collective labor agreement may not be reduced or removed.
Omnibus Law regulates several new provisions on wage. For instance, an employer is now required to pay wages and is prohibited for not paying it. This affirmation was previously not regulated under the Manpower Law.
An employer who does not pay the wage in accordance with the agreement is now subject to criminal sanctions of imprisonment of minimum 1 (one) year and maximum 4 (four) years imprisonment, and fine of minimum IDR 100 million and maximum IDR 400 million. This violation constitutes as a crime.
The Omnibus Law also regulates that an employer who is late in paying the wage can be fined, while an employee who commits a violation can also be imposed with a fine. These provisions will be regulated by the government
The wage is not allowed to be paid less than the minimum wage. The minimum wage applies for employees who work under 1 (one) year. This minimum wage obligation is exempted for micro and small businesses, where the amount shall be agreed upon between employer and worker.
Employment Termination and Severance Payment
The Omnibus Law incorporates the initial bipartite mechanism in any event of employment terminations, which the employer must notify in writing the affected employer ahead of the termination. Should the worker refuses such termination, then the parties can pursue the avenue as allowed under the industrial relationship dispute
The Omnibus Law entirely removed the employment termination formula for indefinite period employment relationships and move them into the government regulation. The reasons of termination are integrated into one article for ease referencing. The Omnibus Law also highlights that the employment agreement, company regulation or collective labour agreement can regulate other means of employment termination apart from what are stipulated under the Omnibus Law.
An employer who does not pay severance payment is now subject to criminal sanctions of imprisonment of minimum 1 (one) year and maximum 4 (four) years imprisonment, and fine of minimum IDR 100 million and maximum IDR 400 million. This violation constitutes as a crime.
Please note that the information contained in this alert should be only used as a general guideline with respect to the subject hereof and may not contain legal advice for your specific cases. The information herein should not be used or relied upon in regard to any particular facts or circumstances without seeking legal advice from us. We will not be liable nor be responsible for any consequences, damages or other similar forms which may be suffered by any party who had used or relied upon this alert.
Nurjadin Sumono Mulyadi & Partners