Omnibus law – Job Creation Law No. 11 of 2020 – Employment cluster.

The Indonesian government has issued four implementing regulations on 2nd February 2021, as a follow up to the issuance of Law No. 11 of 2020 on Job Creation (“Job Creation Law”) which was issued on 2nd November 2020, whereby these implementing regulations shall accommodate the changes to Law No. 13 of 2003 on Manpower (“Manpower Law”), specifically as follows with the relevant highlights.

1. Government Regulation No. 34 of 2021 on the Utilisation of Foreign Workers/Tenaga Kerja Asing (TKA)

(Regulation 34), enforcement date 1 April 2021
Restrictions on the utilisation of TKAConcurrent position rules
Employed in an employment relationship for a certain position and periodEmployers can employ the foreign workers who are already employed by other foreign workers
Prohibited from holding an HR-related positionsThe term of expatriate who concurrently holds a position is no longer than the period of ratification of the Manpower Planning of Foreign Workers (RPTKA) of the first employer
The positions that may be occupied are determined by the ministerConcurrent positions as:

  • Directors and commissioners
  • TKA in the vocational, digital economy, and oil and gas sectors

2. Government Regulation No. 35 of 2021 on Definite Period Employment Agreements, Outsourcing, Working Hours and Breaks, and Employment Terminations

(Regulation 35), enforcement date 2 February 2021

Definite Period Employment Agreement/Perjanjian Kerja Waktu Tertentu (PKWT)

Types of PKWT
Based on the periodBased on completion of a certain workBased on other certain works/daily work/casual work
Work with an estimated completion in a relatively short time.

Work that is seasonal, or applicable under certain conditions.

Work that is in relation with new products, new activities, in the experimental or try-out phase.

The maximum term is 5 years, this is including the extension of the contract.

Work that will be completed at once.

The period is based on the agreement between the parties and can be extended for a certain period until the work is completed.

The work of which the type and nature, or its activities are not fixed, subject to the terms of time and volume.

The workday is less than 21 days in a month.

Compensation pay

Regulation 35 requires employers to pay compensation to a definite period employee when the PKWT ends (“Compensation Pay“). The amount of Compensation Pay will depend on the employment period of the relevant definite period employee.

The formula for calculating the Compensation Pay is as follows:

Completed contract periodAmount of compensation pay
12 months consecutively1-month wages
1 month or more but less than 12 months(Work period (in months) / 12) x 1-month wages
More than 12 months

The Compensation Pay must be paid upon the expiry of the PKWT. If the PKWT is extended, the Compensation Pay for the initial contract period must be paid when the initial contract period expires. The Compensation Pay covering the period of extension must be paid when the extension expires.

If the work is completed earlier than the end of the intended contract period under the PKWT, the Compensation Pay is calculated based on the actual work period the employee has completed (not the intended contract period).

If a party terminates the PKWT prior the expiry of the intended contract period, the employer is obliged for the Compensation Pay calculated based on the employee’s period of employment until the early termination of the PKWT.

For currently ongoing PKWTs, the Compensation Pay will be calculated from 2 November 2020, which is the date the Omnibus Law became effective.

Registration PKWT

Regulation 35 requires employers to carry out online registration of a PKWT within three working days from the date of signing of the PKWT. If the online registration is not yet available, manual registration can be made at the Local Employment Office at the latest seven working days from the date of signing of the PKWT.

Outsourcing

  • There is no longer differentiation between job supply (pekerjaan pemborongan) or labor supply
  • There is no limitation of core and non-core of work to be outsourced
  • The outsourcing company must be in the form of a legal entity and must comply with the Business License issued by the Central Government
  • The employment relationship between the outsourcing company and the workers/labourers it employs is based on a written PKWT or Perjanjian Kerja Waktu Tidak Tertentu (PKWTT)
  • Protection of workers, wages, welfare, working conditions, and disputes that arise are carried out in accordance with the provisions of laws and regulations and are the responsibility of the outsourcing company and are regulated in the Employment Agreement and Company Regulations or Collective Labor Agreement

Working hours

Working hours

Regulation 35 recognises normal working hours that are less than 40 hours per week. These normal working hours of less than 40 hours per week can be implemented by companies that have one of the following characteristics:

  • The companies have work that can be completed in less than seven hours in a day and less than 35 hours in a week
  • The companies implement flexible working hours
  • The companies have work that can be completed outside a particular location
Overtime
  • The new provision of overtime is adjusted from maximum of 3 hours/day and maximum of 14 hours/week, to be maximum of 4 hours/day and maximum of 18 hours/week.
  • Regulation 35 also includes provisions for employees who can be exempt from overtime pay eligibility, i.e., employees in certain position classifications (golongan jabatan) that have responsibilities as the thinkers, planners, executors and/or controllers of the company’s operations whose working hours cannot be limited and who are paid higher salaries.

Termination of employment

Notification termination letter

There is a significant change to the termination procedure in Indonesia. Previously, the general rule was that termination of employment requires prior court approval (except in certain circumstances and if the termination is mutually agreed by a bipartite forum). The Regulation 35 requires an employer to give notice to the employee (and the union, if one exists) in writing that the employer intends to terminate the employee.

The notice of termination is to be issued at the latest 14 days before the effective date of termination. If the employee is still on probation, the written notice must be issued at the latest 7 days before the effective date of termination.

A written notice of termination must include at least:

  • the reason for termination
  • the termination payment and other entitlement for the impacted employees

If workers/labourers have been notified and rejects the termination of employment, settlement of termination of employment must be conducted through bipartite forum between the employer and workers/labourers and/or workers union/labor union.

If the bipartite forum fails to reach an agreement, the termination of employment shall be conducted through the next stage in accordance with the process of industrial relationship dispute settlement.

If the employee has no objection to the termination, the employer must report the termination to the Local Employment Office/Disnaker.

Termination pay components (for indefinite period employees)

In general, the termination pay components in accordance with Regulation 35 is less than the formula previously set out in Manpower Law No. 13 of 2003. This is due to adjustments on the multipliers of the termination pay components subject to the reasons of termination.

In compliance with the relevant implementing regulation specifically Regulation 35, the Employer is required to revisit and make relevant changes of the existing provisions stipulated in the PKWT, Company Regulation/Peraturan Perusahaan (PP), or Collective Labor Agreement/Perjanjian Kerja Bersama (PKB), also for the compliance for the PKWT registration at the Ministry of Manpower local office/Dinas Ketenagakerjaan (Disnaker).

3. Government Regulation No. 36 of 2021 on Wages

(Regulation 36), enforcement date 2 February 2021

Wage components

  • Wage without allowance
  • Basic wage and fixed allowance
  • Basic wage, fixed allowance, and non-fixed allowance
  • Basic wage and non-fixed allowance

In addition, the workers also entitled for non-wage income, a mandatory form of this type of income is Religious Festive Allowance/Tunjangan Hari Raya (THR), which must be paid by employers to their workers at least 7 days prior to the relevant annual religious festive days.

For a non-mandatory form, employers may also provide other optional non-wage income such as incentives, bonus, work facility replacement money, service money for certain business.

Wage types

PeriodRemarks

Hourly

(only applies to part-time workers)

Based on agreements between workers and employers, on condition that determined wage amounts cannot be lower than the results of hourly-wage calculations that are based on the following formula:

Hourly Wage = Monthly Wage / 126

DailyFor a six-day working-week system:

Daily Wage = Monthly Wage / 25

For a five-day working-week system:

Daily Wage = Monthly Wage / 21

Monthly

Minimum wage

  • The minimum wage is the lowest monthly payment that can comprise one of the following structures: 1) Wage without allowance; or 2) Basic wage and fixed allowance
  • The minimum wage applies to workers who have been working for periods of less than one year for the relevant company
  • The minimum wage comprises the provincial minimum wage (upah minimum provinsi – “UMP”) and the regency/city minimum wage (upah minimum kabupaten/kota – “UMK”) with certain requirements (e.g., in relation to economic growth or inflation within the relevant regency/city)

4. Government Regulation No. 37 of 2021 on the Unemployment Insurance Program

(Regulation 37), enforcement date 2 February 2021

Participants

  • The Unemployment Insurance Program (Jaminan Kehilangan Pekerjaan/JKP) participants are Indonesian citizens who have been included in the social security programs i.e., BPJS Healthcare and BPJS Worker
  • Below 54 years old
  • Have a working relationship with an employer (PKWTT or PKWT)

Financing

  • Fees: 22% burden of the Central Government from the State Budget
  • Sources of funding: Program fee re-composition from Jaminan Kecelakaan Kerja (JKK) by 0.14%, Jaminan Kematian (JKM) by 0.10%
  • The basis for calculating wages is the wages that are registered with the BPJS, the upper limit of wages is IDR 5 million

Benefits

  • Cash benefit, paid by BPJS Worker for 6 months with the following conditions:
    • 45% of the Wages for the first 3 (three) months
    • 25% of the Wages for the next 3 (three) months
  • Access to work market information, provided in the form of job market information services and / or job guidance carried out by Job Introducers or Inter-Work Officers through
  • Work training, competency-based training conducted through the Training Institute Government-owned, private, or company.

Terms & conditions

  • Experienced the termination of employment for certain reasons
  • Has a minimum contribution period of 12 months in 24 months and has paid Contribution for at least six consecutive months before dismissal occurs
  • Excluded from the reason of termination of employment because of resignation; permanent total disability; pension; pass away

If you have further queries on the above, please feel free to contact us at infoindonesia@acclime.com

Omnibus law – Job Creation Law No. 11 of 2020 – Employment cluster
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