Transcription
Legal UpdateJob Creation LawNumber 11 of 2020May 2021 Edition
BackgroundThe President of the Republic of Indonesia signed and promulgated, on2nd November 2020, the Law of the Republic of Indonesia Number 11of 2020 concerning Job Creation (Law Number 11/2020), also known asOmnibus Law. The employment cluster of the Job Creation Law revises the2003 Manpower Act and introduces significant changes to rules aroundemployment contracts, working hours and leave, wages and termination(among others). It specifically revises articles or provisions in respect of: Law No. 13/2003 on EmploymentLaw No. 40/2004 on National Social SecurityLaw No. 24/2011 on Social Security AgencyLaw No. 18/2017 on Migrant WorkersAll articles or provisions not revoked by Law 11 of 2020 remain in force.Subsequently, at the end of February 2021, the Government issued four main employmentrelated regulations to accompany the employment cluster of Law 11 of 2020: Government Regulation No 34/2021 on Foreign Workers Government Regulation No. 35/2021 on Non-permanent Contract, Outsourcing, WorkingHours & Rest Hour and Termination Government Regulation No. 36 /2021 on Wages Government Regulation No. 37/2021 on Unemployment InsuranceBetter Work Indonesia (BWI), a partnership programme between the International LabourOrganization (ILO) and the International Finance Corporation (IFC) - member of World BankGroup prepared the following summary highlighting the key changes and novelties introducedby the Job Creation Law and its accompanying government regulations This practical documentonly covers areas of the law that are part of BWI’s scope of labour assessment or are morerelevant for the garment and footwear industry. It draws heavily from the consultation processbetween BWI and the Ministry of Manpower on the meaning and applicability of the new rules aswell as a series of public dissemination sessions done by the Ministry.This guide is limited in scope. Therefore, BWI advises all stakeholders to read the new Law andRegulations in its entirety.
Employment Agreement for a Specified Period of TimeLegal ReferenceLaw No. 13/2003 & Other RegulationsPeriodNo longer than 2 years and is allowed to be renewedonly once for a maximum period of 1 year.Renewal of PKWT/contract may be made once for amaximum of 2 years after a grace period of 30 days.Basis for PKWTProvisions regarding theEmployment Agreement fora Specified Period of Time(PKWT) on article 56, article 57,article 58, article 59 of Law No13/2003 have been amendedby Law No. 11/2020.Ministerial decreeNo. 100/2004 has beenrevoked, in line with changesto Law 13/2003.Government RegulationNo. 35/2021.1.One-time or temporary work;2. Work which is estimated to be completed in thenot-too-long period of time and no longer than3 (three) years;3. Seasonal Work1; or4. Work related to a new product, a new activity,or an additional product that is still in trial orexplorationLaw No. 11/2020 & Other RegulationsNo longer than 5 years.There is no renewal of PKWT/contracts and no graceperiod.1.Based on the period of time: Work estimated to be completed in not-toolong period of time; Seasonal work: The implementation of which dependson: season or weather, which can only beperformed in certain seasons or certainweather. Certain conditions, additional jobsperformed to fulfill certain orders or targets.or Works related to new products, new activities,or additional products that are still inexperimental or trial phase.2. Based on the completion of a certain job: One-time jobs; or Temporary work.In addition to certain jobs as referred in Article 5.1 and5.2 Government Regulation No. 35/2021, PKWT maybe implemented for other certain jobs whose typesand nature or activities are not permanent.RemarkNo longer than 5 years. It can be an accumulation ofconsecutive contracts with no interruption.The period of 5 years is calculated since the promulgationof Law No. 11/2020 namely 2 November 2020.
Legal ReferenceLaw No. 13/2003 & Other RegulationsRegistrationRegistered by the Employers with the local district/city Manpower Office in charge of manpower affairsno later than 7 working days since the signing.Law No. 11/2020 & Other RegulationsRemarkRegistered online by the Employer with the Ministryof Manpower no later than 3 (three) working daysfrom the signing of PKWT.If the online PKWT registration is not yet available,the PKWT registration is made by the Employers inwriting with the local Manpower office at district/citylevel, no later than 7 working days from the signing ofPKWT.Provisions regarding theEmployment Agreement fora Specified Period of Time(PKWT) on article 56, article 57,article 58, article 59 of Law No13/2003 have been amendedby Law No. 11/2020.Ministerial decreeNo. 100/2004 has beenrevoked, in line with changesto Law 13/2003.Government RegulationNo. 35/2021.Calculation ofcompensation for theexpiry or termination ofPKWTUnregulated1.Service period of 12 consecutive months: 1 monthof wage.2. Service period of 1 month but 12 months: theservice period/12 X 1 month of wages.3. Service period 12 months: the service period/12 X1 month of wages.Provisions forcompensation for theexpiry or termination ofPKWTUnregulated1.Must be paid to workers/laborers with a serviceperiod of no shorter than 1 month of work.2. The payment is made upon the expiration ofPKWT.3. If the PKWT is renewed, compensation will bepaid before the renewal is made.4. In the event that one of the parties terminates theemployment relationship before the expirationof the period set in the PKWT, the employeris required to pay compensation money, theamount of which is calculated based on theperiod of PKWT worked by the Worker/Laborer.5. If a PKWT based on the completion of a workis completed in a shorter period than theperiod of time agreed upon in the PKWT, thecompensation money is calculated until the timethe work is completed.1Not applicable to the garment sector.The calculation of compensation money has been ineffect since the promulgation of Law No. 11/2020,namely 2 November 2020.Payment of compensation for the ending ofPKWT due to the termination of the employmentrelationship before the expiration of the PKWTperiod does not eliminate the obligation of the partywho terminates the PKWT before the expirationof the determined period to pay compensation inthe amount of the worker/laborer’s wage until thedeadline for the expiration of the work agreementperiod regulated in article 62 of Law No. 13/2003.When the PKWT status changes by law into PKWTTor for other reasons, the PKWT compensation mustfirst be paid before the employment relationship iscontinued as a PKWTT.Compensation pay for daily workers may be appliedafter the conditions regarding the service period aremet as long as there is certainty about the nature of thework in accordance with the work for PKH.
OutsourcingLegal ReferenceLaw No. 13/2003 & Other RegulationsRequirements foroutsorcing workProvisions regardingoutsourcing in article 64 &article 65 of Law No. 13/2003have been abolished andthe provisions regardingoutsourcing in article 66 ofLaw No. 13/2003 have beenamended by Law No. 11/2020.a. Performed separately from the main activities;Law No. 11/2020 & Other RegulationsUnregulatedb. Performed by direct or indirect orders by theemployer;c. Is a supporting activity for the company as awhole; andd. Does not directly hamper the production process.Prohibition of usingoutsourcingIt may not be used to perform main activities orany activities directly related to the productionprocess, except for supporting service activities orany activities that are not directly related to theproduction process.UnregulatedProtection ofoutsourced workersagainst transfer to otheroutsourcing companiesUnregulatedIf outsourced workers are employed with PKWT, theEmployment Agreement must require the transfer ofprotection of rights for Workers/Laborers in the eventof a replacement of the Outsourcing Company and aslong as the work remains.Government RegulationNo. 35/2021.Remark
Work HoursLegal ReferenceLaw No. 13/2003 & Other RegulationsOvertime hoursNo longer than three hours a day and 14 hours a week.Law No. 11/2020 & Other RegulationsNo longer than four hours a day and 18 hours a week.RemarkThe provisions of overtime work exclude overtimework performed during weekly rest periods and/orofficial holidays.The limit of overtime work does not apply to workers/laborers in certain groups of occupations with theresponsibility of thinking, planning, executing and/or controlling the company operation, whose workingtime cannot be limited and who receive higher Wages.The arrangement for certain groups of occupations isregulated in the E mployment Agreement, CompanyRegulation, or Collective Bargaining Agreement.Provisions regarding workingtime in article 77, article 78 andarticle 79 of Law No. 13/2003have been amended by LawNo. 11/2020Overtime calculationGovernment RegulationNo. 35/2021.Provision of 1400 kilocalories of meal anddrink during overtimeRest days/national holidays:Rest days/national holidays:1.1.Work system of 6 days a week:a. Overtime on rest days:Added payment for the 11th hour of theovertime: 4X the hourly wage.b. Overtime on public holidays that fall on theshortest working day:Added payment for the 9th hour of theovertime: 4X the hourly wage.2. Working system of 5 days a week:Overtime pay is only set up to 11th hour:4X the hourly wage.2.Working system of 5 days a week:Added payment for the 12th hour of the overtime:4X the hourly wage.3 hours or more of overtime.4 hours or more of overtime.Work system of 6 days a week:a. Overtime on rest days:Overtime pay is only set up to 10th hour:4X the hourly wage.b. Overtime on public holidays that fall on theshortest working day:Overtime pay is only set up to 8th hour:4X the hourly wage.
CompensationLegal ReferenceLaw No. 13/2003 & Other RegulationsMinimum wageArticle 88 CHAPTER X, PartTwo on wages of Law 13/2003has been amended by LawNo. 11/2020. There are 5 (five)articles inserted between article88 and article 89 i.e. article88A, article 88B, article 88C,article 88D, and article 88E.Government RegulationNo. 36/2021.Law No. 11/2020 & Other RegulationsRegulates the setting of:Only regulates the setting of: Provincial Minimum Wage (UMP) Provincial Minimum Wage (UMP) by the governor. District/City Minimum Wage (UMK) Sectoral Minimum Wage (UMS)District/City Minimum Wage (UMK) - notmandatory but governor may set UMK undercertain conditions.RemarkThe requirements for setting UMK include localeconomic growth or inflation in the district/city.The UMS, which was stipulated before 2 November2020, remains valid until: Decree for UMS expires orthe UMP/UMK in the area is set higher than the UMS.UMS which was stipulated after 2 November 2020,must be revoked by the governor no later than oneyear since the stipulation; and the governor may nolonger set the UMS.Postponement ofminimum wageEmployers who are unable to pay the minimum wagemay postpone it.UnregulatedWages of workers withthe service period of 1year or longerBased on bipartite negotiations between employersand workers in their respective companies.Based on wage scale structure.Minimum wage forMicro Small MediumEnterprise (MSME)UnregulatedSet by agreement between workers and employersunder the following conditions:1.At least 50% of the average consumption ofpeople at the provincial level.2. The agreed minimum wage is 25% above thepoverty line at the provincial level.
Job Loss Benefit or Unemployment Benefit (JKP)Legal ReferenceLaw No. 13/2003 & Other RegulationsParticipationLaw No. 11/2020 andGovernment RegulationNo. 37/2021Percentage ofcontributionUnregulatedUnregulatedLaw No. 11/2020 & Other RegulationsRemarkEmployers are required to enroll Workers/Laborers asParticipants in the JKP program. Employers mandatory deductions: 0.24% Government mandatory deductions: 0.22%New social security system providing unemploymentbenefits.
Termination of Employment Relationship (Termination)Legal ReferenceLaw No. 13/2003 & Other RegulationsLaw No. 11/2020 & Other RegulationsDescriptionWhen the bipartite negotiations do notreach an agreement, the settlementof the next stage of employmenttermination is conducted through asettlement mechanism for industrialrelations disputes in accordance with theprovisions of laws and regulations.Article 151, article 153,article 154, article 156,article 157, article 160have been amended byLaw No. 11/2020.Article 152, article 155,article 158, article 159,article 161 – article172, and article 184are abolished by LawNo. 11/2020.Insertion of new articlesin Law 11/2020: article151A, article 154A &article 157A.Government RegulationNo. 35/2021.If it is unavoidable, the employer shall notify theworker/labour and/or trade union/labour unionof the purpose and reasons for termination ofemployment no later than 14 working days prior tothe termination of the employment relationship.ProcedureUnregulatedIf the termination is made during the probationaryperiod, a notification letter shall be provided no laterthan the working day before the termination.Workers/labour who reject the termination mustmake a letter of rejection accompanied by itsreasons no later than 7 working days after receivingthe termination notification letter.If the Company Regulation (CR) andCollective Bargaining Agreement (CB)is still in effect when Law 11/2020was promulgated, the provisionsof termination are referred to theregulations in the CR/CBA. Thisconsideration is based on2:a. Even if it only binds the parties withinthe scope of CR/CBA and as longas it does not conflict with laws andregulations, it can be used because itis a rule in Manpower Affairs.b. In principle, CR/CBA is toaccommodate matters that arenot specifically regulated in thelegislation as long as they are notlower than the provisions of laws andregulations.c. CR is a company document that hasbeen legalized by the state & CBA isthe result of negotiations that havebeen agreed upon, so the agreementis to be completed until the timeit expires & the state respects theagreement.
Legal ReferenceLaw No. 13/2003 & Other RegulationsLaw No. 11/2020 & Other RegulationsConsolidation, merger or separation of companies& workers/laborers:Employers do notwant to continuethe employmentrelationship or are notwilling to accept theworkers/laboursArticle 151, article 153,article 154, article 156,article 157, article 160have been amended byLaw No. 11/2020.Article 152, article 155,article 158, article 159,article 161 – article172, and article 184are abolished by LawNo. 11/2020.Consolidation, Merger, change, change ofownership: 2X severance pay1X tenure rewardRights reimbursement Takeover of companies:: Reason andCompensationforTerminationEmployees do notwant to continuethe employmentrelationship or are notwilling to accept theworkers/labours1X severance pay1X tenure rewardRights reimbursement1X severance pay1X tenure rewardRights reimbursementConsolidation, Merger, change of status, change ofownership:Takeover of companies resulting in a change in workingconditions: 1X severance pay1X tenure rewardRights reimbursementInsertion of new articlesin Law 11/2020: article151A, article 154A &article 157A.0.5X severance pay1X tenure rewardRights reimbursementkBecause the company is losing:Government RegulationNo. 35/2021.Efficiency 2X severance pay2X tenure rewardRights reimbursementDetachment money 0.5X severance pay1X tenure rewardRights reimbursementDetachment moneyPreventing the company from losing further:: 1X severance pay1X tenure rewardRights reimbursementDetachment moneyDescription
Legal ReferenceLaw No. 13/2003 & Other RegulationsLaw No. 11/2020 & Other RegulationsLoss, force majeure:Losing for 2 years in a row: 1X severance pay1X tenure rewardRights reimbursemen0.5X severance pay1X tenure rewardRights reimbursementNot because of loss:The company is closedEfficiency:Article 151, article 153,article 154, article 156,article 157, article 160have been amended byLaw No. 11/2020.Article 152, article 155,article 158, article 159,article 161 – article172, and article 184are abolished by LawNo. 11/2020. Reason andCompensationforTerminationForce majeur, but it isnot closed2X severance pay2X tenure rewardRights reimbursementUnregulatedInsertion of new articlesin Law 11/2020: article151A, article 154A &article 157A.Government RegulationNo. 35/2021. 1X severance pay1X tenure rewardRights reimbursementkDue to force majeure 0.5X severance pay1X tenure rewardRights reimbursement k 0.75X severance pay1X tenure rewardRights reimbursementBecause the company is losing:The company is in astate of postponementof debt paymentobligationsThe company isbankrupt 0.5X severance pay1X tenure rewardRights reimbursementUnregulatedNot because the company is losing: 1X severance pay1X tenure rewardRights reimbursement 1X severance pay1X tenure rewardRights reimbursement k 0.5X severance pay1X tenure rewardRights reimbursementDescription
Legal ReferenceLaw No. 13/2003 & Other RegulationsLaw No. 11/2020 & Other RegulationsAs a result of a dispute for which the employer isfound not guilty for the allegations complained byworkers:Industrial relations courtverdictAs a result of request by workers through anindustrial relations court: 2X severance pay1X tenure rewardRights reimbursement1X severance pay1X tenure rewardRights reimbursementSuspected of committing a criminal act thatcaused losses to the company:a. Absent from working for 6 months because ofbeing detained: Rights reimbursement Detachment money according to thearrangements in the employmentagreement/company regulations/collective bargaining agreement.Reason andCompensationforTerminationInsertion of new articlesin Law 11/2020: article151A, article 154A &article 157A.Government RegulationNo. 35/2021.Detachment money according to the arrangementsin the employment agreement/companyregulations/collective bargaining agreementAs a result of request by workers because theemployer attacks, insults or threatens the worker: Article 151, article 153,article 154, article 156,article 157, article 160have been amended byLaw No. 11/2020.Article 152, article 155,article 158, article 159,article 161 – article172, and article 184are abolished by LawNo. 11/2020. Other than complaints by employers:Criminal proceedings 1X tenure rewardRights reimbursementb. Absent from working for more than 6 monthsbecause of being detained: 1X tenure reward Rights reimbursementCourt decision before the end of the 6 month period:a. The employee is found guilty of a criminal actthat caused losses to the company:: Rights reimbursement Detachment money according to thearrangements in the employmentagreement/company regulations/collective bargaining agreement.b. The employee is found guilty of a criminal actthat does not caused losses to the company:: 1X tenure reward Rights reimbursemenDescription
Legal ReferenceResignArticle 151, article 153,article 154, article 156,article 157, article 160have been amended byLaw No. 11/2020.Article 152, article 155,article 158, article 159,article 161 – article172, and article 184are abolished by LawNo. 11/2020.Insertion of new articlesin Law 11/2020: article151A, article 154A &article 157A.Government RegulationNo. 35/2021.Reason andCompensationforTerminationLaw No. 13/2003 & Other RegulationsLaw No. 11/2020 & Other RegulationsIn accordance with the procedure:Meeting the requirement in Goverment RegulationNo. 35/2021 article 36.1: Rights reimbursementDetachment moneyAbsent for 5 days ormore consecutivelywithout writteninformation,accompanied by validevidence and has beenproperly and in writingsummoned by theemployer twice Violating argaining agreementafter the issuance of thefirst, second and thirdreprimands Committing a violationSerious mistakes:Prolonged illnessor disability due tooccupational accidentsand unable to performtheir jobs after exceedingthe limit of 12 months Rights reimbursementDetachment money according to thearrangements in the employment agreement/company regulations/collective bargainingagreement.Rights reimbursementDetachment money Rights reimbursementDetachment money according to thearrangements in the employment agreement/company regulations/collective bargainingagreement.1X severance pay1X tenure rewardRights reimbursement 0.5X severance pay1X tenure rewardRights reimbursementDetachment money according to thearrangements in the employment agreement/company regulations/collective bargainingagreement. Rights reimbursementDetachment money 2X severance pay2X tenure rewardRights reimbursementUrgent in nature stipulated in the collectivebargaining agreement: Rights reimbursementDetachment money according to thearrangements in the employment agreement/company regulations/collective bargainingagreement. 2X severance pay1X tenure rewardRights reimbursementDescription
Legal ReferenceLaw No. 13/2003 & Other RegulationsLaw No. 11/2020 & Other RegulationsRetired 2X severance pay1X tenure rewardRights reimbursement 1.75X severance pay1X tenure rewardRights reimbursementDied 2X severance pay1X tenure rewardRights reimbursement 2X severance pay1X tenure rewardRights reimbursementGovernment dissemination sessions of Law No.11/2020 and itsGovernment Regulation can be access through below link: PP 35–Ibu Sumondang/ Ibu Lena Kurniawati:https://www.youtube.com/watch?v .com/watch?v epPfKCJsqt8 PP 35-Ibu Agatha:https://www.youtube.com/watch?v udLONwpZjz811/2020–PHI Jamsos:https://www.youtube.com/watch?v Fxbktp4OxWc Article 151, article 153,article 154, article 156,article 157, article 160have been amended byLaw No. 11/2020.Article 152, article 155,article 158, article 159,article 161 – article172, and article 184are abolished by LawNo. 11/2020.Reason andCompensationforTerminationaInsertion of new articlesin Law 11/2020: article151A, article 154A &article 157A.Government RegulationNo. 35/2021.2 PP 36–Ibu Dinar Titus/Ibu Lena Kurniawati:https://www.youtube.com/watch?v HgTzFKMt5-E&t 10600shttps://www.youtube.com/watch?v cgULwHshtV0 PP 37-PHI Jamsos:https://www.youtube.com/watch?v HgTzFKMt5E&t 10600s PP37-HKLN:https://www.youtube.com/watch?v SqZGzZpMLao PP 34 – HKLNhttps://www.youtube.com/watch?v 2FuoRJoUKjwDescription
Overtime pay is only set up to 8th hour: 4X the hourly wage. 2. Working system of 5 days a week: Overtime pay is only set up to 11th hour: 4X the hourly wage. Rest days/national holidays: Work system of 6 days a week: Added payment for the 11th hour of the overtime: 4X the hourly wage. b. Overtime on public holidays that fall on the
