Controversy around the Recently Approved Omnibus Law (Bill) on Job Creation

The House of Representatives (HoR) in a plenary session on 5 October 2020 has approved the Government proposed Omnibus Bill concerning Job Creation. Since the Law was passed, trade unions, students and civil societies have been conducted rallies to oppose the Law citing numerous contentious Articles in the Manpower/Employment Chapter V of the presumed final draft of the Omnibus Bill passed by the HoR. Furthermore, some of the National Trade Unions and Environmental Groups have voiced their intent to lodged Judicial Review to the Constitution Court.

However, according to the co-chair of the HoR the final draft (at least two versions currently circulating- one of the versions is enclosed below) circulating in public was not the actual final draft. In fact the final Draft of the Law in question has yet been published by the HoR. According to the HoR co-chair, the House of Representatives is in the process of finalizing the manuscript.

There is no clarity on how public could get a hold of the presumed final draft(s) when the House of Representatives claimed that they are still in the process of finalizing the manuscript. What is more, why the House of Representatives found draft finalization is still necessary when they have approved the draft? As anything could happen in Indonesia, no one would even know or have the inclination and means to get to the bottom of the issue.

Nonetheless, if we review the Formation of Legislation Act No. 12 of 2011, Article 72 stipulates that the Chair of the House of Representatives shall provide an approved bill to the President maximum seven days since the date of the approval. This seven days period, according to the Explanation chapter of the Act No. 12 of 2011, is considered sufficient (reasonable) for technical writing (editorial drafting) the Bill into the President Official Sheet to the signing of the confirmed Law by the President, as well as recording to the State Gazette once the President signed the Law. On the matter of Omnibus Law concerning Job Creation, the 7th day falls on 12 October 2020.

More on the meaning of technical writing as above, whether or not a technical writing or editorial drafting includes amendment of content, the Formation of Legislation Act does not clearly explained. However, an effective formation of legislation would imply that in the final stages of administration approval (after the HoR hearing finished and approval decision is made), there should not be any content review or amendment. Any amendment, logically speaking, shall be limited to editorial to avoid issues such as typo or grammatical error. At this point of time, there is no reasonable explanation to hold the final approved draft from the public, although circulating a final approved draft is not regulated in any legislation or even a common administrative practice in Indonesia, if by circulating it the Government could clear out public confusion and resentment towards the content of the Omnibus Law on Job Creation.

Another question on the approved Bill is what happen if the President did not sign it? According to Article 73 of Act No. 12 of 2011, the President has 30 days to affix their signature to officially enact a Bill into Law. If the President failed to sign a Bill within 30 days, it would be automatically enacted and shall be registered into the State Gazette. There is no explanation or stipulation in the Act No. 12 of 2011 stating that the President shall provide reasonable official and public explanation for not signing a Bill. In this Omnibus Bill, however, an official explanation may perhaps necessary as the Bill is proposed by the President. It would be found abnormal for a President to refrain from signing a HoR approved Bill which originally proposed by their Administration. The only explanation is that the act of not signing and thus officially enacting the Omnibus Bill due to technicality would be a political move from the President to save his Administration from proliferation of public criticism on the subject matters.

Considering the above, Indonesian (and foreign investors) shall perhaps wait until 5 November 2020 to get an official copy of the Law to analyze the content and assess the risks related.

Indonesia Wage Support Policy during Covid-19

Covid-19 pandemic continues to slow down Indonesia economic output. It has also fundamentally affecting the Indonesia workforce – especially for low wage workers. Pandemic-induced job losses, underemployment, lost of productivity, and education interruption, put a strain on the common households.

The current Minister of Manpower Regulation No. 14 of 2020 issued on 14 August 2020 intents to give a much needed break for the Indonesia formal workforce while keeping skilled workers rate of participation in the labour market. Article 2 of the Minister of Manpower Regulation Government in question stipulates that the assistance in the form of subsidized salary/wage for workers/laborers aims to protect, maintain, and increase economic capacity on workers/laborers in handling the impact of the Corona Virus pandemic.

The Government wage subsidy assistance is given in the form of money amounting to IDR 600,000 per month (equivalent to US$ 40.69) for four months from the issuance of the Regulation or as per availability of the Ministry of Manpower budget ceiling concerning the implementation of the wage subsidy policy (Article 4).

The wage subsidy only applied for formal workers who receive wage less than IDR 5,000,000 per month (equivalent to US$ 340) from their employer and registered in the Employment Social Security (BPJS Ketenagakerjaan) up to June 2020 (Article 3).

The Employment Social Security agency will verify and validate the wage subsidy recipient data and transfer it to the Budget User Proxy (Kuasa Penerima Anggaran/KPA) that is the official at the Directorate General Development of Industrial Relations and Labour Social Security. Payment of the wage subsidy to the verified recipients would be done by designated Government Banks (Article 5 and 7).

Although, the Ministry of Manpower Regulation No. 14 of 2020 likely lessen the gravity of financial burden of the common household, as the Regulation only applies for formal worker in a formal employment relations, it does nothing to help the informal and gig economy workers – those who are at the very bottom of the labour market food chain. This group of workers, which before the pandemic reached around 70 million workers, typically did not have secure employment contracts, benefits or social protection.

Also, the processes of the disbursement of funds could be improved. It further initiates question about a much streamlined administration processes during national emergency. Also, discourse on eradication of unnecessary bureaucracy in the era of governmental administrative reform.

The Article on Ministry of Manpower budget ceiling concerning the implementation of the wage subsidy policy creates a notion of transparency on budget management. Whether or not a statement of budget ceiling should be specified and informed to all stakeholders for the purpose of external monitoring on the agency accountability and program impact (Chapter V of the Regulation stipulates internal monitoring by the Director General).

Lastly, the Regulation does not provide complaint or appeal avenue for recipient candidates who are rejected during the verification and validation, or wage subsidy recipients who later on are deemed as false recipients. In other words, the Regulation does not guarantee procedural justice for the already strained workforce.

Indonesia Covid-19 affected- Economy and its Ramification on the Determination of the 2021 minimum wage

At the beginning of 2020, not one person in Indonesia, including policy makers, thought that Covid-19 would become a global pandemic that negatively affected the economy. As is well known, the macroeconomic assumptions noted in the 2020 State Budget show economic growth of 5.3%. This figure is obtained from Indonesia’s economic growth in 2019 to the second quarter of 2020. Until recently, the Minister of Finance of the Republic of Indonesia stated that in the worst case scenario, Indonesia’s economic growth rate could reach – 0.4%. Meanwhile, the Coordinating Minister for Maritime Affairs and Investment stated that the bad impact of Covid-19 on the Indonesian economy will be felt for the next 5 years.

Further, several economists predict that the unemployment rate in 2020 and 2021 will increase sharply compared to 2019. At the end of 2019, the Government of the Government is targeting the 2020 unemployment rate to fall to 4.8%. As a result of the pandemic, the National Development Planning Agency (Bappenas) estimates the Open Unemployment Rate (TPT) in 2020 will reach 8.1% to 9.2% and the unemployment rate is estimated to increase by 4 to 5.5 million people. Furthermore, in 2021, the TPT is estimated to reach a range of 7.7% to 9.1%.

The decline in Indonesia’s economic growth rate and the increase in unemployment during the Covid-19 period likely caused by a decrease in consumption power that parallel to the decline of national consumption activities, decline in production and other economic transactions (trade and investment), economic stagnation, and social turmoil.

In this gloomy of economic future, how will the country approach the issue of annual minimum wage increase?

The general informal protocol of determining next year minimum wage prescribe a central government directive, in this case from the Minister of Manpower, to the regional governments and its local officers to start the discussion on minimum wage. Usually this directive is issued every end of July to early August of the current year. The discussion will include related stakeholders such as the employer/industry association, trade unions, and the relevant government agency. Manpower Minister Regulations stipulates the issuance of the provincial minimum wage on 1 November, and the regent/city minimum wage by the latest on 21 November. Of the calculation formula, the same Regulation as delegated by the contentious Government Regulation No. 78 of 2015 prescribed the formula of the minimum wage calculation based on economic indicator of national inflation rate and gross domestic growth.The National Regulations on Minimum wage also stipulate the determination of minimum wage to be held annually.

Considering the Indonesia Labour Regulations does not adopt the contract law of force majeure principles; at the face value, the determination of the 2021 minimum wage should go through the normal process. Then again, if the economic indicator shows a strong indication of negative growth, will the number of the 2021 minimum wage decrease compare with the current 2020 minimum wage? Even if the relevant stakeholders agreed to increase the 2021 minimum wage, could the industry implement it? Also, the tight labour market in the era of pandemic likely exacerbate non-conformance of minimum wage anywise.

Looking at the challenges, there are several points the national stakeholders and policy makers could consider to address the 2021 minimum wage:

-Delay increment of the minimum wage for at least one year and have the 2020 minimum wage applied until 31 December 2021.

-The Government to create a periodic price interventions for basic commodities including providing subsidy, together with economic stimulus package for strategic industry in Indonesia to keep consumption, production and unemployment rate in an acceptable level.

-Labour policy makers and relevant stakeholders to review the annual minimum wage determination to a longer period of 3-5 years, and start conversing about one national minimum wage, one provincial minimum wage and industry specific minimum wage which could cut the complexity of labour remuneration regime in Indonesia, increase social dialogue between all actors and increase market flexibility.

-Increase labour force skills and adaptability to fit with the new industry normal.

-Adopt force majeure principle in the Indonesia labour regulations that include a fair and just contingency mechanism.

What is going to happen in the next few months concerning the 2021 minimum wage is as unpredictable as the discourse of when the pandemic would end. Hopefully, these last 4 months of the 2020 will as well serve as a learning curve for the labour policy makers to find the fittest solution for an ever difficult problem.

Indonesia Labour Regulations Profile Volume I – English

We are republishing the Indonesia Labour Regulations Profile (ILRP) Volume I – English. The Profile was first published in 2017 when we are still under the name of Indonesia Labour Databank.

ILRP Volume I is the first series of Indonesia Labour Regulations summary. The other two series are Occupational Health and Safety (ILRP OHS Volume II) and Environmental (ILRP ENV Volume III). As we are revamping the ILRP series including revising the Volume I, we think it is a good idea to share the 1st publication of ILRP Volume I.

Taking into consideration that many of the law and regulation references are still applicable today, please be mindful of updated regulations such as religious festivity allowance, and national social security and healthcare contributions.

You can download the ILRP Volume I below:

Guidance for the New Normal in the Workplace

Not long after the President of Republic of Indonesia announce that Indonesian shall live alongside the Covid 19 and adapt to a new normal, the Minister of Health issues Decree No. HK.01.07/ MENKES/328/2020 concerning Guidelines for Prevention and Control of Coronavirus Disease 2019 (COVID-19) in the Office and Industrial Workplace to Support Business Continuity during (the) Pandemic.

The summary of the guidelines for a workplace is as follow: –

a. Companies required forming a Covid-19 Handling Team in the workplace consisting of the leadership, staffing section, K3 section and Health workers who are strengthened by a decree from the Management.

b. Management shall establish policies and procedures for workers to report every case of suspected Covid-19 (symptoms such as fever or cough, runny nose, sore throat pain, or shortness of breath) to be monitored by health workers.

c. Do not treat positive cases as a stigma.

d. Work from home arrangements by determining essential workers who need to keep working  or come to work and workers who can do work from home.

e. At the entrance of the workplace take a temperature measurement using thermo-gun, and before entering work apply Covid-19 Risk Self-Assessment to ensure workers who will come to work are not infected by Covid-19.

f. Limit overtime so workers can properly rest. If possible, avoid shift 3 (work time which starts at night until morning). Shift 3 is arranged in particular for workers aged less than 50 years.

g. Require workers to wear masks since traveling to / from home, and while at work.

h. Regulate the nutritional intake of food provided by the workplace, select fruits that contain lots of vitamin C such as oranges, guava, and so on to help maintain endurance. If possible workers can be given vitamin C supplements.

i. Ensure that all work areas are clean and hygienic:

-conduct periodic cleaning using appropriate cleansers and disinfectants (once every 4 hours). Especially door handles and stairs, elevator buttons, shared office equipment, areas and other public facilities;

-maintain workplace air quality by optimizing air circulation and sunlight entering the workspace, cleaning air conditioner filters.

-provide facilities for washing hands (soap and running water), instructions at the location of hand washing facilities and post educational posters on how to wash hands properly. As well as providing a hand sanitizer with a minimum alcohol concentration of 70% in places that are needed (such as entrances, meeting rooms, elevator doors, etc.);

-physical distancing in all work activities-arrangement of inter-worker distance of at least 1 meter in each work activity (work desk /workstation arrangement, seat arrangement in the canteen, etc.).

-campaigning the Healthy Living Community Movement (Germas) through Healthy Lifestyle and Clean and Healthy Lifestyle (PHBS) in the workplace such as balanced food and regular exercise. Wash Hands With Soap (CTPS). Encourage workers to wash their hands when they arrive at work, before meals, after contact with customers / meetings with others, after the bathroom, after handling objects that might be contaminated. Avoid using personal tools together such as prayer tools, cutlery, and others.

j. Educate workers about COVID-19

The Minister of Health Decree in question also guide employers to immediately report and coordinate with the community health center (PUSKESMAS) or Local Health Office when their workers are suspected or infected by Covid-19.