Job Creation Law update: Labour rights
Read in Indonesian
The Job Creation Bill has been passed into law by the House of Representatives, but many are still demanding that the implementation of the law be postponed as the law is being challenged before the Constitutional Court. This fact does not seem to reflect reality as the government proceeded to issue government regulations and presidential decrees as implementing regulations of the law.
Until late February, the Confederation of Indonesian Labour Union (KSPI) was still relaying their demand that President Joko Widodo postpone the implementation of Government Regulations No.34, 35, 36 and 37 Year 2021. The head of KSPI, Said Iqbal, expressed the organisation’s willingness to discuss those government regulations and demanded that their implementation be postponed until the Constitutional Court made its ruling. He also stated their readiness to challenge those four government regulations to the Supreme Court after the Constitutional Court announced its ruling on the Job Creation Law.
However, the government regulations and presidential decrees have been made and signed. As workers, it is always in our best interest to know what our rights are after fulfilling our responsibilities in order to strive in this current political and social turmoil.
Working hours and overtime
The limit on overtime is increased. Government Regulation No.35/2021 on Fixed-Term Employment Agreement, Outsourcing, Work Time and Break Time, and Termination of Employment stated that maximum overtime duration is increased to four hours per work day or 18 hours per week from three hours per work day in the previous regulation.
The calculation for overtime pay doesn’t change: 1.5 x the hourly wage for the first hour and 2 x the hourly wage for the next hours. The regulation on working hours doesn’t change either: seven hours per day for six normal working days a week and eight hours per day for five normal working days a week, or a total of 40 hours a week.
Paid and unpaid leave
The Job Creation Law also changes regulations regarding sabbatical leave. The previous regulation stated that workers may take sabbatical leave in their seventh year working in the company. However, in the Job Creation Law, the terms and conditions for workers to take sabbatical leave depend on the company’s regulations, work agreement and co-operation agreement.
Aside from this, nothing else changed, including sick leave, period leave, as well as post-partum and miscarriage leave. Companies are prohibited from terminating workers who are sick for less than one year and they are obliged to pay the workers their full wage the first four months of their sick leave, 75% in the next four months, 50% in the next four months and 25% in their last month before dismissal. Women have a right to two days of period leave per month and 1.5 month leave before and after delivery as well as after a miscarriage.
Termination of Employment
Government Regulation No.35/2021 specifies 15 conditions in which employment may be terminated. They are:
The employer carries out merger, consolidation, acquisition, or separation and the worker/labourer is not willing to continue the employment contract or the employer is not willing to take in the worker/labourer;
The employer carries out efficiency measures which is followed by business closure or not followed by business closure due to losses;
The employer is closed due to sustained losses for two years;
The employer is closed due to force majeure;
The employer is in a state of postponement of debt payment obligations;
The employer is declared bankrupt;
The worker/labourer submits request for termination of employment due to violation to worker/labourer’s rights by the employer;
The violation to the worker/labourer’s rights by the employer is not proven by the industrial relations dispute settlement institution and the employer decides to terminate the employment contract;
The worker/labourer submits resignation letter no later than 30 days prior to the date of resignation, not bound by a work commitment programme, and carry out their obligations until the date of resignation;
The worker/labourer has been absent from work for five consecutive workdays or more without submitting a written account supplemented with valid evidence to the employer and the employer has properly summoned the person twice in writing;
The worker/labourer violates provisions that are regulated in the employment agreement, company regulation or collective employment agreement, and previously has been given the first, second and third warnings, with each warning valid for a maximum of six months unless stipulated otherwise in the employment agreement, company regulation or collective employment agreement;
The worker/labourer cannot work due to being detained by the authorities for six months as a result of being made a suspect in a criminal case;
The worker/labourer experiences a prolonged illness or disability due to an occupational accident and is unable to work after 12 months;
The worker/labourer reaches retirement age;
The worker/labourer passes away.
Severance Pay and Working Tenure
Article 167 of the Labour Law stipulates that companies may terminate the employment of his or her workers/labourers because they enter pensionable age. If the entrepreneur has included the workers/labourers in a retirement benefit programme, the workers/labourers in question are not entitled to severance pay, reward pay for period of employment and compensation pay for entitlements that have not been used. If the retirement benefit that they get as a single lump-sum payment at retirement as a result of their participation in a pension programme turns out to be lower than twice the amount of the severance pay, reward pay for period of employment and compensation pay for entitlements left unused, the entrepreneur shall make up the difference.
However, this article was removed in the Job Creation Law Article 81 Paragraph 56.
Article 81 Paragraph 44 of the Job Creation Law which amended Article 156 of the Labour Law stipulated that should termination of employment take place, the entrepreneur is obliged to pay the dismissed worker severance pay and or a sum of money as a reward for service rendered during his or her term of employment and compensation pay for rights or entitlements that the dismissed worker/labourer has not utilised. Therefore, retiring workers are eligible for severance pay, reward pay for period of employment and compensation pay. More details on severance pay can be found in Article 56 of Government Regulation No.35/2021.
Social Security and Health Insurance
The Job Creation Law also amended some of the points in Law No.40/2004 on National Social Security System (National Social Security System Law). Article 18 of the National Social Security System Law specifies five social security programmes, namely health insurance, occupational accident insurance, provident fund, pension and death benefits. The government added a new social security programme, i.e. unemployment insurance, to the Job Creation Law and created five new articles (Articles 46A, 46B, 46C, 46D and 46E) to provide more details about the unemployment insurance programme. The Job Creation Law also mandates BPJS Ketenagakerjaan as the institution responsible for unemployment insurance on a national scale.
Freelancers’ Rights
The work agreement between an Employer and a Freelancer is covered under the term Perjanjian Kerja Waktu Tertentu (PKWT) or Fixed-Term Work Agreement. A work agreement for a specified period of time shall be made based on:
A term; or
The completion of a certain job.
A work agreement for a specified period of time can only be made for a certain job, which, because of the type and nature of the job, will finish in a specified period of time. Time, work volume and attendance are used as the basis for wages.
Some of the changes made in terms of this policy in the Job Creation Law include the revision to Article 59 Paragraph (4) of the Labour Law that stated that a work agreement for a specified period of time may be made for a period of no longer than two years and may only be extended one time for another period that is not longer than one year. Under the new provision, namely Article 8 Paragraph (1) of Government Regulation No.35/2021, a fixed-term employment agreement can be made for five years’ maximum.
Article 10 of Government Regulation No.35/2021 stipulated that a daily work (freelance) agreement should be made for works which time and volume are irregular and the wage is based on attendance. Freelance agreement is made on the condition that the worker/labourer works less than 21 days in one month. If the worker/labourer works for 21 days or more for three consecutive months or more, the freelance agreement is automatically converted to Perjanjian Kerja Waktu Tidak Tertentu (PKWTT) or indefinite employment agreement.
Another breakthrough for freelancers is in Government Regulation No.35/2021 Article 11 Paragraph (3) that stipulated that employers are obliged to fulfill the rights of workers/labourers, including their right to social security programmes.
The Job Creation Law also mandates employers to pay compensation to workers/labourers who have worked for at least one month consecutively at the end of a fixed-term work agreement. This compensation applies even if the employer extends the fixed-term work agreement after the five-year period ends.
How to calculate your compensation?
For a fixed-term work agreement that is valid for 12 consecutive months, the compensation payable is equal to one month's salary.
For a fixed-term work agreement that is valid for more than one month but less than 12 months, the compensation payable will be prorated based on the following formula:
Months of service
_______________ x 1 month salary
12
For a fixed-term work agreement that is valid for more than 12 months, the compensation payable will be prorated based on the following formula:
Months of service
_______________ x 1 month salary
12
