Indonesia – Overhaul Of Indonesian Employment Law – Draft Bill On Job Creation.

Issue

Articles in the Employment Law

New rules under the Draft

Expatriate Employees

• Article 42
• Article 43 (revoked)
• Article 44 (revoked)
• Article 45
• Article 46 (revoked)
• Article 47
• Article 48 (revoked)
• Article 49 

• Each employer employing an expatriate must have a permit issued by the central Government.

• New presidential regulation will be issued to regulate specific positions and terms for expatriate employees.

Employment Relationship

Article 56

Article 58

Article 59 (revoked)

Article 61

Article 61 A (new)

Article 62

• New government regulation will be issued to regulate fixed-term employment agreement and/or completion of work.

• Completion of work is added as a reason to terminate an employment relationship.

• Compensation pay must now be paid to a fixed-term or completion of work employee when their employment is ended, as regulated by the new government regulation.

Outsourcing

Article 65 (revoked)

Article 66

• Outsourcing of service (business to business) regulation under the Manpower Law is revoked.

• Labor supplier will be responsible to handle all terms and conditions of employment including any dispute involving its employee.

• New government regulation will be issued to regulate outsourcing of labor.

Work Hours

Article 77

Article 77 A (new)

Article 78

Article 79

• Flexible working hours can be regulated internally by the company.

• New government regulation will be issued to regulate working hours and overtime.

Remuneration

Article 88

Article 88 A (new)

Article 88 B (new)

Article 88 C (new)

Article 88 D (new)

Article 88 E (new)

Article 88 F (new)

Article 88 G (new)

Article 89 (revoked)

Article 90 (revoked)

Article 90 A (new)

Article 91 (revoked)

Article 92

Article 92 A (new)

Article 93

Article 94

Article 95

Article 98

• Central government stipulates policy on remuneration.

• New government regulation will be issued to regulate remuneration.

• The formula for calculating minimum wage is regulated in the Draft instead by government regulation.

• Minimum wage for labor-intensive industries is regulated by the governor in the respective region.

• Micro and small businesses are exempted from minimum wage requirements.

• Employees' wages are considered a preferred debt (didahulukan) that are paid in advance when a company goes bankrupt or is liquidated.

Termination

Article 150

Article 151

Article 151 A (new)

Article 152 (revoked)

Article 153

Article 154 (revoked)

Article 154 A (new)

Article 155 (revoked)

Article 156

Article 157

Article 157 A (new)

Article 158 (revoked)

Article 159 (revoked)

Article 160

Article 161 – 172 (revoked)

• Employer can terminate an employee due to poor performance without court approval.

• New government regulation to be issued on termination procedures due to acquisition, merger, inefficiency or bankruptcy, including severance pay and service pay entitlements.

• Service pay (uang penghargaan masa kerja) will now be a maximum of eight months’ wages, from the previous 10 months. 

• Compensation pay (uang penggantian hak) that was regulated specifically under the Employment law is revoked by the Draft.

Social Security

Article 18 of Law No. 40 of 2004 on Social Security System

Article 6 of Law No. 24 of 2011 on BPJS.

• New mandatory social security on termination of employment is introduced.

Additional Rewards

Article 92 of the Draft

• An annual bonus will be paid as follows:
  • 1 month’s wages for employees having worked for less than 3 years;
  • 2 months’ wages for employees having worked 3 to 6 years;
  • 3 months’ wages for employees having worked 6 to 9 years;
  • 4 months’ wages for employees having worked 9 to 12 years; 
  • 5 months’ wage for employees having worked 12 years or more.

This bonus does not apply to micro and small businesses.