The History of Indonesian Labour Law (Part IV)

Reformation Era (1998-at present)

The Economic crisis that hit Asia in 1998 become the primary trigger of the reformation movement. Rapid high-cost economy brings about the ideas of deregulation, privatization, market liberalization, and democracy.  Strict authoritarian administrative was considered to affect the country’s economic resilience and competitiveness. Thus, in order to survive the crisis, it is necessary to change the political map of the country. All things considered. The reformation movement is altered not only the state industrial design but also social and political principles.

Regarding labour matters, Reformation brings new opportunity to deregulate national labour market to increase competitiveness in the global economy. The first step that the transition administration ratifies the ILO Convention No. 87 on Freedom of Association and Protection of the Right to Organize and ILO Convention No. 138 on Minimum Age to be allowed to Work in 1998-99. Ratifications of these conventions not only put Indonesia back in the game as a country that respects human rights but also convinces the international world that Indonesia is on the same level playing field amongst sovereign countries.

Ratification of Convention No.87 resurrects collectivism in the labour realm. It abolishes the single union system and with the issuance of Union Act No. 21 of 2000 put union/s in active the union in a position of active participation in creating sound industrial relations and enforcing workers’ rights. Although, its regulatory objective is to protect worker’s right to associate, the Union Act, however, does not lack criticism. For instance, the stipulation of establishing a union at the company level with only ten persons not only rapidly proliferate the number of unions but also opening a possibility of saturated industrial relations. It gives, as the opponent argue, too much power on collective labour in dealing with the individual employer which could jeopardize sound industrial relations and hamper day to day business processes. The concern of union polarization is also often argued by the opponent of the Act.

In regard to ratifying Convention No. 138, it enhances the degree of protection of underage worker by increasing the working age from 10 years old to 15 years old. It averts exploitation of children as cheap (and docile) labour. Additionally, in the socio-community perspective, it protects school-age children to get a compulsory education and thus in time increase the capacity of the future workforce. It is worth to note that working age revision to 15 years is in line with the state’s nine years- compulsory education which has been a public policy since 1994.

Ethical and community values on labour and employment relations may perhaps change in the early reformation era. From labour as economic tools to fulfill the needs of the society to individual or collective who have certain rights as a human being and as workers. However, it was not followed by revision of the regulatory umbrella, Labour Act No. 25 of 1997. At least not until 2003, when the state issued Labour Act 13 of 2003. The Act replaces as many as 15 labour regulations. Thus, it is a legal umbrella for other labour regulations such as government or ministry regulations.

The Act consists of 17 chapters and regulates almost every aspect of labour, except Safety and Health. Labour Act No. 13 of 2003, a regulatory product of the reformation era, could be seen as the bedrock of modern labour regulations. It implants universal worker’s rights (human rights) in labour policy such as the conception of decent work, anti-discrimination, protection for women at the workplace, rights to associate, and job security. The core improvement compares to the previous obsolete Acts is the principle of labour as individual and social being. It introduces labour (first) as individual with protected individual rights to meet their needs and life demands, and (second) as a social being that contributes to the greater objective in the economic development. Thus, it could be argued that Labour Act 13 of 2003 aim is to humanized labour to achieve a financial goal.

Despite this strong central point, the Labour Act No. 13 of 2003 is far from perfect. Some argued that the Act create challenges instead of answers to ever changing and competitive market and problematic social condition. Type of employment contract: permanent full-time, non-permanent full time, daily/casual, outsourcing that is regulated by the Act in practice create new challenges and sometimes dispute between employee/collective of employees and employer. Employers claimed that the scheme, in reality, is not flexible enough to tackle business challenges. While employee/s or collective of employees perceived the system as a way to legally evade ethical responsibility to provide protection and ensure worker’s rights are upheld.

The revision of definition of children from persons under the age of 15 to 18 years is also socially problematic. This is because the revision is not followed by improvement of the policy of compulsory education. It still regulates 9 years of compulsory education which means children are only required to go to school until they reached 15 years of age. This means that in some regions where the education level of the population is only up to the compulsory level, the labour market is saturated with children age less than 18 years, the legal full time working age. The proponents of this legal definition may perhaps argue that it was establish to provide more protection to children in the crucial stage of  mental and physical development. Additionally, there is separate regulation, that imposed rigorous protection requirements, that allow children between 15-17 years to work. Nonetheless, these arguments do not address the problematic social issues prone to those qualified as children by the Labour Act such as exploitation, poverty and other social problems related to unemployment.

In addition, it could also be argued that at some degree the protection that stipulated in the Act is a form of shifting public responsibility to private actors. For instance, in the case of termination of employment relations, the significant amount of severance that company should pay likely shows the unfair distribution of social welfare responsibility between the state and private sector. Instead of creating a sustainable system of social protection, in relation to (after) employment, the state requires private actors to hold social welfare burdens. This policy, in return, would negatively affect workers when employers, intentionally or unintentionally, circumvent the stipulated regulation because they have not enough capital or unwilling to risk part of their capital to comply with the rule.

Labour Act No. 13 of 2003 is not the only regulation that aimed to align public policy with labour socio-economy and political norms that are progressively changing after the reformation movement in 1998.  The proliferation of labour collectivism likely resulted in the issuance of Act No. 2 of 2004 on Industrial Relations Dispute Settlement. It introduces resolution outside the litigation system and Industrial Relations Court in Indonesian labour policy.    


Labour regulatory objective during the period after Indonesia independence is to move away from the imperialist legal system that disadvantaging labour. The state, at this period, interferes the market to set new labour standards and strike a balance between corporate/employer power and labour power. However, as the new country constantly changing in search of its sovereign form, labour matters become less important. At some point, labour collective was viewed as a hazard to the harmonious socio-political life that the state eagerly pursued.

The fundamental changes in the labour sphere in the new order regime era is greater state interference in the market. It is solely directed by the state’s main agenda to achieve maximum economic gain and political amity. The state was standing on the side of those who have capital as regulatory objective heavily influence by financial interests. Labour is viewed as production instruments, as it is often viewed in the liberal market, and collectivism is perceived as a risk to the economy and socio-political harmony; thus, the state minimizes the power of labour. Consequently, power relations between employers and employees is very much imbalance which in time create complicated industrial relations at the workplace.

Unlike the previous era, state labour policy in the reformation era infused the universal values of human rights and worker’s protection. The central concept of the Act is providing decent work while balancing power relations between employer/s and employee/s. However, some aspects of the Act by design likely increase friction of interest between employer and employee such as the type of employment contract. It is clear that there is more work to be done by the regulator to facilitate labour aspiration, demand of increasingly competitive local and global market and social issues.

UU No 13 Tahun 2003 EnglishUU NO 13 Tahun 2003

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