FAQ on the Amendment of Indonesian Manpower Law Provisions Pursuant to the Omnibus Law

We have provided below the Frequently Asked Questions (FAQ) regarding amendments of manpower law provisions pursuant to Law No. 11 of 2020 on the Job Creation (“Omnibus Law”).

1. What are employment-related legal frameworks that have been amended by the Omnibus Law?

In the employment sector, Omnibus Law amended 4 (four) laws, which are:

1. Law No. 13 of 2003 on Manpower (“Amended Law 13/2003”);
2. Law No. 40 of 2004 on National Social Security System;
3. Law No. 24 of 2011 on Social Security Institution; and
4. Law No. 18 of 2017 on Protection of Indonesian Migrant Workers

Following up the above amendments, the Indonesian government has finally issued several implementing regulations, which are:

1. Government Regulation (“GR”) No. 34 of 2021 on The Utilization of Foreign Manpower (“GR 34/2021”);
2. GR No. 35 of 2021 on Fixed Term Employment, Outsourcing, Working Hours and Rest Times and Termination (“GR 35/2021”);
3. GR No. 36 of 2021 on Wages (“GR 36/2021”); and
4. GR No. 37 of 2021 on The Job Loss Security Program (“GR 37/2021”).

2. Is there any change in the types of employment recognized by Indonesian law?

In general, the types of employment remain the same under the Amended Law 13/2003. Indonesian prevailing laws acknowledge 2 (two) types of employment based on its underlying agreement, which are: (i) permanent employee or Perjanjian Kerja Waktu Tidak Tertentu (“PKWTT”); and (ii) fixed-term employee or Perjanjian Kerja Waktu Tertentu (“PKWT”).

3. How are the arrangement of PKWT and is there any limitation on the PKWT that employers have to comply with?

The Amended Law 13/2003 classified PKWT based on the: (i) term of employment; and (ii) the completion of the work (Art. 56 (2) of Amended Law 13/2003). We note that GR 35/2021 further classified PKWT to be as follows:   

No.

Type of PKWT

Requirement and Limitation

1.

PKWT based on Period of Time

• Scope of works: (i) Work that is estimated to be completed in a short time; (ii) Seasonal work, depending on (i) season or weather or (ii) certain conditions to fulfil certain orders or targets; or (iii) work related to new products, new activities, or additional products that are still in trial or experiment (Art. 5 (1) of GR 35/2021).
• Contract period: Maximum 5 (five) years, including the extensions (Art. 8 (2) of GR 35/2021).

2.

PKWT based on completion of work

• Scope of works: Limited to one-time completed work, temporary work.
• Contract period: As specified on the PKWT, however any extensions are allowed if deemed necessary (Art. 9 (1) and (4) of GR 35/2021).

3.

PKWT for Daily Worker

• Scope of works: Limited to works that keep period and volume keeps changing, thus the payment is based on the worker attendance at work (Art. 10 (1) of GR 35/2021).
• Contract period: Maximum 20 days in a month. If the worker works for >20 days for 3 consecutive months, thus such must be deemed as permanent workers (Art. 10 (4) of GR 35/2021). 

 

Furthermore, employers are required to register any PKWT to the District Employment Office (Dinas Ketenagakerjaan) within: (i) 3 (three) days from the date of signing for online registration; or (ii) 7 (seven) days from the date of signing for manual registration (Art. 14 (1) and (2) of GR 35/2021).

4. How are the arrangement on the utilization of foreign workers?

The arrangement for the utilization of foreign workers under the Amended Law 13/2003 is in line with the previously enacted regulations, namely: (i) Presidential Regulation No. 20 of 2018 on Procedure for Foreign Workers Utilization; and (ii) Minister of Manpower Regulation No. 10 of 2018 on Guidelines for Foreign Workers Utilization.

The prevailing laws required any employer to obtain the ratification of the Foreign Workers Utilization Plan/Rencana Penggunaan Tenaga Kerja Asing (“RPTKA”) by the Central Government. The Amended Law 13/2003 emphasizes this provision by amending Article 42 of Law 13/2003.

However, the Amended Law 13/2003 provides exceptions of RPTKA obligations to: (i) directors or commissioners with certain share ownership; (ii) diplomatic and consular officers at representative offices of foreign state mission, and (iii) foreign manpower required for a production process which has halted due to an emergency situation, vocational programs, technology-based start-up companies, business meetings or research for a certain time (Art. 42 (3) of Law 13/2003).

However, several provisions that are remained under the Amended Law 13/2003, namely: (i) foreign workers should only be hired under a PKWT agreement; (ii) individuals are prohibited to hire foreign workers; and (iii) foreign worker shall not occupy personnel positions (Art. 4, 9, and 11 (1) of GR 34/2021).

5. How are the arrangement regarding working hours and overtime?

In general, the working hours remain the same, except for certain sectors where the working hours to be stipulated in the employment agreement, company regulations, or Collective Labor Agreement/Perjanjian Kerja Bersama (“CLA”) (Art. 21 (4) of GR 35/2021).

However, the new provision increases the limit for overtime hours, from a maximum of 14 (fourteen) hours per week to be 18 (eighteen) hours per week (Art. 26 (1) of GR 35/2021).

6. How are the arrangements for employee termination?

The Omnibus Law requires employers to make every effort to prevent termination, but if it is unavoidable, the intention and grounds for the termination must be conveyed to the employee and/or to the labor union (Art.151 (1) of Amended Law 13/2003).

In the event that the employees refuse to terminate the agreement, the termination shall be carried out in accordance with the mechanism based on Law No. 2 of 2004 on Industrial Relations Dispute Resolution.

The Omnibus Law removes articles regarding the calculation of severance packages. Pursuant to GR 35/2021, the severance package consists of: (i) severance pay, (ii) term of service recognition; and (iii) compensation pay (Art. 156 (1) of Amended Law 13/2003). Detailed calculation of each termination basis to be seen more clearly in the implementing regulation of Art. 40 – 57 of GR 35/2021.

7. How are the arrangements for outsourcing activities?

The Omnibus Law eliminated certain provisions on the outsourcing, which are (i) the types of outsourcing works namely, work outsourcing/pemborongan pekerjaan and work service providers/penyedia jasa tenaga kerja; and (ii) types of work that can be outsourced which were acknowledged by the Law 13/2003.

The Amended Law 13/2003 only recognized one type of outsourcing, which is through an outsourcing company/perusahaan alih daya and no restrictionson the outsourced works is implemented (Art. 66 (1) of Amended Law 13/2003).

8. What are the implications of Amended Law 13/2003 to the employer?

Having regard to the amendments set out above, employer may need to adjust their employment agreements, policies, and company regulations or CLA to adhere with the Amended Law 13/2003 and its implementing regulations.

The article above was prepared by Marshall S. Situmorang (Partner), Audria Putri (Senior Associate), and Aniendita Rahmawati (Associate).

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances. For more information, please contact us at [email protected].