Indonesia: Labor Law to Be Revised

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(Jan 25, 2012) On January 17, 2012, Indonesia's Constitutional Court ruled that outsourcing labor, which in this context means hiring workers on short-term contracts without benefits, is unconstitutional. The idea behind this decision is that workers have "the right to a decent job and a decent life" and that this principle should be the basis of labor law. (Faisal Maliki Baskoro et al., Revision of Labor Law May Benefit 16 Million Workers, THE JAKARTA GLOBE (Jan. 20, 2010).) The decision should lead to a revision of existing labor laws, particularly the law on manpower, so that outsourced laborers have the same benefits as permanent company employees, according to news reports. (Id., see also Major Labour Laws of Indonesia (Aug. 4, 2005), available at International Labour Organization (ILO) website [this website includes, inter alia, English and Indonesian-language texts of Act No. 21, 2000, on trade unions, and Act No. 13, 2003, on manpower].)

The Indonesian Workers Association has been taking action through the courts on the issue of outsourced labor since 2003. Timbul Siregar, the Association's chairman, called the recent decision a victory for the 16 million outsourced workers in the country, who make up about 40% of the workforce. Siregar added that the organization would be working to make sure the changes are implemented. With such a large number of workers not considered to be full-time, long-term employees, the Court's decision could have an impact on a large number of people. (Baskoro et al., supra.)

Arguing that revision of the law on manpower would result in greater harmony between workers and employers, Siregar stated:

Most friction comes from worker dissatisfaction. The revision will reduce the amount of friction. … We are currently working on a dispute settlement between Chevron and its outsourced drivers. The new labor law should be able to force Chevron to pay the drivers their overtime pay. (Id.)

A spokesman for the Indonesia Employers Association (Apindo), on the other hand, stated that the Court's decision could result in layoffs of local contract employees or relocations to other countries by corporations. Haryadi Sukamdani of Apindo argued, "[l]ocal manufacturers are already in competition with cheaper imported products. Now, employee costs will rise. ... I don't think the judges in the Constitutional Court understand the effect of their ruling." (Id.)

The Indonesian Manpower and Transmigration Ministry is planning to revise the applicable law and produce a manual to guide companies in avoiding labor relations difficulties. (Id.)

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Last updated: 01/25/2012