2021 Provincial Minimum Wage

All the provinces and special regions in the Indonesia have issued the 2021 provincial minimum wage on 1 November 2020 (see below).

Whilst, the Minister of Manpower Circular Letter issued on 26 October 2020 addressed to all of the Governors in Indonesia direct them to maintain the same amount of figure as per the 2020 provincial minimum wage; five provinces and special regions decide differently with with the Circular Letter directive. This likely a micro reflection of the Central Government policy efficacy at the regional level and mismatch of labor politics between Central and Regional Governments.

Job Creation Act No. 11 of 2020: The enactment of the Perceived Controversial Omnibus Bill

The President of Republic of Indonesia has finally signed the contentious Omnibus Bill into Law on 2 November 2020, despite marathon protests and rallies by trade unions and civil societies since early October 2020. The 1.187 pages Law (consists of 769 pages on Articles of Law and 418 pages of Explanation) is registered in the State Gazette as Law No. 11 of 2020 concerning Job Creation (full version and Chapter IV of the Law can be downloaded below).

Interestingly, at least on the Employment Chapter, the Legislative did not actually repeal Labour Act No. 13 of 2003 but instead change, remove or set new provisions stipulated in Labout Act No. 13 of 2003, as stated in Article 80 (a) Part One Chapter IV of the Omnibus Law. This means that those provisions of Labour Act 13 of 2002 that were not amended, removed or reset (and its derivative regulations) are still applicable as long as they are not in conflict with provisions stipulated in the Omnibus Law. Thus, at the face value, there are two Laws governing the subject matter. As such, compilation and comparison are needed to capture all of the valid Employment related Law provisions.

The 2021 Minimum Wage Setting

In one of our posts from August 10, 2020 we had proposed a point of thought to postpone increment of the minimum wage for at least one year and have the 2020 minimum wage applied until 31 December 2021. The primary reasoning for this point of though is the unfavorable economic picture as a result of the Covid-19 pandemic will likely last for at least two years. Also that pushing an increased minimum wage likely exacerbate non-conformance of minimum wage anywise as businesses are struggling to keep their operations going.

Similar reasoning seemed to be used by the Government of Indonesia when issuing the recent Ministry of Manpower Circular Letter No. M/11/HK/04/X/2020 signed on 26 October 2020. Point C of the Circular Letter in question read the following:

C. Determination of the 2021 Minimum Wage
Taking into account Indonesia’s economic conditions during the COVID-19 pandemic and the need for national economic recovery, the Governor is requested to:

  1. make adjustments to the determination of the 2021 minimum wage to be the same as the 2020 minimum wage;
  2. to determine the minimum wage after 2021 in accordance with statutory provisions;
  3. set and announce the 2021 provincial minimum wage on 31 October 2020.

Although the above seems to be the most logical administrative decision on the subject matter considering the current situation, major trade unions in Indonesia will not accept the 2021 minimum wage decision/s lightly. One of the major trade unions, Konfederasi Serikat Pekerja Indonesia (KSPI), has condemned this circular letter, stating that increase in the minimum wage next year will in fact encourage economic growth due to increase in the purchasing power of workers. Also, that the Minister of Manpower only takes into account the interests of employers alone. Further, KSPI threatens to conduct large-scale demonstrations and warn the Government of exacerbation of union activism against unpopular administrative decisions and labour regulations which include the circular letter in question and the contentious Omnibus Law.

It appears the last two months of the year 2020 is going to be a bumpy road for Indonesia Industrial Relations, with potential escalation of conflict between the relevant stakeholders.

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.