In the end of 2022, on the date of 30 December 2022, the Indonesian government passed a new Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation (“Job Creation Perppu”) which revoked Law No. 11 of 2020 concerning Job Creation (“Job Creation Law”). Previously, the Job Creation Law was declared conditionally unconstitutional through Constitutional Court Decision No. 91/PUU-XVIII/2020 which was decided on 25 November 2021 (“Job Creation Decision”).
According to Law No. 12 of 2011 on Establishment of Laws and Regulations as lastly amended by Law No. 13 of 2022, a government regulation in lieu of law may be stipulated by the President in the event of a compelling crisis. Referring to the Constitutional Court Decision No. 138/PUU-VII/2009, the compelling crisis occurs in terms of: (i) there is an urgency to resolve legal issues; (ii) the required law does not exist so there is a legal vacuum; and (iii) the legal vacuum cannot be overcome by drafting laws in the usual procedure due to the urgency to resolve the situation. In the general elucidation of the Job Creation Perppu, it is explained that there are several urgent events including economic growth which is predicted to decline in 2023, the need to create jobs, the Corona Virus Disease 2019 (COVID-19) pandemic, the Job Creation Law declared conditionally unconstitutional by the Constitutional Court. Based on these reasons, the government viewed that there is a compelling crisis that requires the promulgation of Job Creation Perppu.
Job Creation Decision
The Job Creation Decision decided that the formation of the Job Creation Law was conditionally unconstitutional so it had to be amended within a period of 2 years. However, the Job Creation Law remains in force until the amendment is made, if the Job Creation Law is not amended within 2 years, the Job Creation Law will become permanently unconstitutional. With the promulgation of Job Creation Perppu, the provisions in the Job Creation Decision stating that the provisions in the Job Creation Law are conditionally unconstitutional became null and void.
This is due to the fact that Job Creation Perppu revokes the Job Creation Law as stated in Article 185 of the Job Creation Perppu. Despite that the Job Creation Perppu revokes the Job Creation Law, Article 184 letter b of the Job Creation Perppu stipulates that the implementing regulations of the Job Creation Law remain effective and in force, if it does not conflict with the Job Creation Perppu.
The Job Creation Perppu also adopts omnibus method which is similar to the method for forming the Job Creation Law. In fact, under the Job Creation Decision it is stated that there was the absence of legal basis governing the formation of laws and regulations using the omnibus law method. However, on 16 June 16 2022 the Indonesian government has issued Law No. 13 of 2022 on The Second Amendment to Law No. 12 of 2011 on the Establishment of Laws and Regulations, which under the seventh section regulates the omnibus method in planning statutory regulations. Therefore, the omnibus method used in the formation of the Job Creation Perppu has been regulated under the prevailing laws and regulations.
The main points of the revisions:
The Job Creation Perppu has amended and supplemented several provisions that previously has been changed under the Job Creation Law. The provisions of the Job Creation Perppu which differs from the Job Creation Law includes among others the provisions regarding aspects of employment, specifically the minimum wage formula and outsourcing workers.
This might be a response towards the decision of the significant minimum wage increase in 2023. Job Creation Perppu amended the provisions of Article 64 of Law No. 13 of 2003 on Manpower (“Manpower Law”) by stipulating that the determination of the work that can outsourced will be regulated under a Government Regulation. The presence of this provision implies that the implementing regulations will stipulate restrictions on jobs that may be outsourced, in contrast to the Job Creation Law which expands the scope of jobs that can be outsourced.
Moreover, regarding the wage aspect, the Job Creation Perppu introduces a certain index which is a new variable in the formula for calculating the minimum wage as stipulated in Article 88D.
Previously, the Job Creation Law only stipulates that the variable for calculating the minimum wage merely consists of economic growth or inflation. This formula will be further determined under the government regulation, in which currently has not been issued yet and might create a gray area in determining the 2023 minimum wage formula by the corporate sectors.
Essentially, the components of the minimum wage remain the same, which are consisting of wages without allowance, or basic wages and fixed allowances, provided that the basic wage is at least 75% of the total wages as stipulated in Article 94 Job Creation Perppu jo. Article 23(1) Government Regulation No. 36 of 2021 on Wages. Moreover, the wage system under Job Creation Perppu provides that the wage may be calculated based on time unit or yield unit, hence the Job Creation Perppu does not amend the wage unit that has been previously implemented under Job Creation Law.
According to Article 191A of Job Creation Perppu, the applicable minimum wage shall be the minimum wage determined by referring to the Manpower Law. Furthermore, the elucidation of Article 191A of the Job Creation Perppu stipulates that the minimum wage that will be effective for the first time after ratification of this law is the 2021 minimum wage which has been set in 2020
This raises questions regarding the applicability of the 2023 minimum wage which has been stipulated by the governor and Ministry of Manpower Regulation No. 18 of 2022 on Determination of 2023 Minimum Wages.
The Job Creation Perppu also supplements the Manpower Law by adding Article 88F. The relevant article stipulates that the government may determine a different minimum wage formula in certain circumstances. Referring to the elucidation of the Job Creation Perppu, certain circumstances include disasters determined by the president, extraordinary global and/or national economic conditions.
This Job Creation Perppu also reiterates that the obligation of the minimum wage is not applicable for micro and small industry (article 90B). The determination of the wage for micro and small industry will be based on agreement between the corporate and the employee which shall meet at least certain percentage of standard consumption of society. This will be further discussed in the government regulation.
In the midst of various rumors related to the ratification of Job Creation Perppu, the Ministry of Manpower of the Republic of Indonesia has clarified several issues regarding the effect of the existence of Job Creation Perppu towards the manpower sector. The regulation related to manpower, such as foreign labor under Article 42, menstruation and maternity leave, intermission, and employment relationship through certain time or unspecified time work agreement in the Job Creation Law are not amended in the Job Creation Perppu. In fact, Job Creation Perppu restated these provision without amending it as described in the rumors, for instance regarding intermission in accordance with the Job Creation Law, which stipulates that working time includes (i) 7 (seven) hours in a day and 40 (forty) hours in a week for 6 (six) working days in a week; or (ii) 8 (eight) hours in a day and 40 (forty) hours in a week for 5 (five) working days in a week. Additionally, Ministry of Manpower confirmed that under the Job Creation Perppu, companies/employer may not terminate employment relationship unilaterally, whereupon this principle also reflected under the Manpower Law. Further, the social security that was previously regulated in the Manpower Law was not eliminated, in fact the Job Creation Perppu supplement job loss security as one of the additional social security which is currently regulated under Government Regulation No. 37 of 2021 on Implementation of Job Loss Security Program.
Lastly, the amount of severance pays as determined in Article 156 of the Job Creation Perppu is still in accordance with the formulation of the amount of severance pay previously stipulated in the Job Creation Law. With the presence of Article 156(5) jo. 184 letter b of the Job Creation Perppu, this confirms that the provisions for calculating severance pay which has been regulated under Government Regulation No. 35 of 2021 remains in effect.
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MetaLAW, Legal Consultant, Jakarta, Indonesia
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