The Job Creation Law Polemic
The passage of the job creation bill has sparked labor protests across many regions.
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A student protester from Bogor’s Pakuan University holds the national flag on Wednesday (14/10/2020) during a protest against the Job Creation Law at Kujang Monument in Bogor municipality, West Java.
The passage of the job creation bill has sparked labor protests across many regions. These protests reject the new Job Creation Law, especially the “cluster” of labor provisions in it, as they are deemed to sacrifice the workers’ interests.
The following are brief notes on a number of critical issues in the Job Creation Law that may give rise to new problems in the future.
Provisions on termination of employment (PHK)
The first critical issue concerns the provisions on termination of employment. The reasons allows for dismissing an employee in the Job Creation Law include: incorporations, mergers, takeovers or business splits (demergers), efficiency, business closure citing losses, force majeure, debt restructuring (PKPU), and bankruptcy.
In addition, the reasons permitted under the provision include the companies harming their employees’ interests (conflict of interest), employee resignations, employee absenteeism and violations of labor agreements or corporate regulations, as well as employee retirement.
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Conceptually, the reasons for dismissals contained in the Job Creation Law are not very different from those in the Manpower Law (Law No.13/2003). The difference lies in the fact that the Job Creation Law has eliminated some requirements for dismissals, so it has made it easier and simpler for employers to justify dismissing an employee.
One example is in the reason for dismissing an employee due to prolonged losses. The Manpower Law requires that a company prove such losses through financial reports from the last two years that have been audited by a public accountant. This clause has been eliminated in the Job Creation Law.
This is at the root of the fear among workers that it will become much easier for companies to dismiss their employees in the future.
Besides this, the permitted reasons for dismissals in the Job Creation Law are looser. This is unlike the Manpower Law, which stipulates restrictive and rigid methods of judging dismissals. Pursuant to the Job Creation Law, companies have the possibility of adding other considerations for dismissal through labor agreements, company regulations or employee cooperation agreements. This is at the root of the fear among workers that it will become much easier for companies to dismiss their employees in the future.
The Job Creation Law also eliminates Articles 161 to 169 of the Manpower Law. The original articles regulate the method of calculating the compensation (termination pay) of dismissed employees based on the reason for the dismissal.
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A reflection of a banner is seen in a pair of sunglasses during a protest against the Job Creation Law held by students from Pakuan University on Wednesday (14/10/2020) at Kujang Monument in Bogor municipality, West Java. The student protesters said that the Job Creation Law, or omnibus law, betrayed and harmed the people. They also said that the manner in which the House of Representatives (DPR) deliberated and passed the law showed that lawmakers were unconcerned about the people during the Covid-19 health emergency.
It must be stressed that the actual reason for an employee’s dismissal affects how their compensation is calculated, as well as the amount of compensation. These are interrelated, just like the two sides of a coin.
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In the Manpower Law, calculating the amount of compensation is easier and simpler. For dismissals as a result of business closure due to losses, for instance, employees are eligible to compensation of one full month’s salary, one length of service award, and compensation of rights for the employee.
These provisions have been cut from the Job Creation Law, and are to be stipulated in the implementing regulations (government regulation; PP). This will give rise to a heated debate over drafting the legal substance of the PP. Regulating the calculation and amount of compensation based on the reason for dismissal will make it difficult to draft the PP. This requires an open dialogue, so the PP regarding this matter is acceptable to all parties.
While the Manpower Law fixed the PH at an additional 15 percent of the total compensation and the PMK, the Job Creation Law has eliminated this provision entirely.
The Job Creation Law still retains some components of the previous provisions on compensation for dismissal that cover severance, length of service award (PMK) and compensation of rights for the employee (PH), with a slight change. While the Manpower Law fixed the PH at an additional 15 percent of the total compensation and the PMK, the Job Creation Law has eliminated this provision entirely.
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The philosophy for grouping together the clauses on compensation for dismissal in such a manner is not very clear. In its implementation, the significance of this group of clauses on compensation for dismissal simply becomes vague.
The PMK component – as it is called – should be placed separately as an award for appreciating the employee’s length of service, which only applies to service periods of three years or more under the revised provision in the Job Creation Law.
But employees can still lose their entitled PMK even if they meet the requirements, so the purpose and aim of awarding a PMK only becomes vague. For instance, employee resignation is on permitted reason for a dismissal. Under the Manpower Law, employees who resign are entitled to only the PH and termination pay. They are not at all entitled to the PMK, even if they fulfill the requirements.
It is unclear what considerations have been taken to connect awarding the PMK to the reasons for dismissal. Conceptually, the PMK is awarded as a form of appreciation for an employee’s period of loyal service to the company. It should thus be adhered to, whether the employee makes a mistake (and is dismissed) or resigns.
The implementing regulations to be derived from the Job Creation Law need to appropriately and correctly regulate the components of the compensation for dismissal so they align with the purpose and aims of the group of provisions on compensation for dismissal. Otherwise, what is the purpose and aim of grouping together the components of the compensation for dismissal?
PKWT and outsourced workers
The Job Creation Law also eliminates several provisions on fixed-term employment contracts (PKWTs) and the outsourcing system.
For the PKWT, the new law adopts most provisions contained in the Manpower Law. The difference is that the Job Creation Law does not clearly stipulate the contractual period for the PKWT. Some circles have thus interpreted the PKWT as an employee contract that has an unlimited contractual period.
By its very name, it is absolutely impossible for the PKWT to have an indefinite contractual period. The Job Creation Law stipulates that the contractual period of the PKWT is to be regulated in the relevant PP. In referring to the previous norm, the maximum contractual period of the PKWT is three years.
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It is likely that the contractual period of the PKWT will remain three years, or at most six years. This has to do with the compensation to be awarded to PKWT workers when their contracts expire.
Coordinating Minister for the Economy Airlangga Hartarto handed over the government\'s response on the discussion of the Omnibus Law on the Work Creation Bill (RUU) to the Chairman of the Indonesian Parliament Puan Maharani at the DPR RI plenary meeting at the Parliament Complex, Senayan, Jakarta, Monday (5/10/2020).
Awarding compensation to workers contracted under a PKWT is a breakthrough in the Job Creation Law. Companies are now obligated to pay compensation for PKWT workers when their contracts expire. The calculation formula for this particular compensation is to be stipulated in the relevant PP.
As regards outsourcing, the Job Creation Law eliminates Articles 4 and 65 of the Manpower Law. The original provisions regulated the kinds of work that were allowed to be outsourced.
This means that the law does not have a clear definition of the kinds of work that can be handled by outsourcing companies. Everything is left up to a particular company’s business strategies and needs.
The Job Creation Law contains more regulations on the technical aspects related to the working relationship between workers and outsourcing companies. As such, the implementation of the regulations on the outsourcing system relies solely on those provisions that regulate employment contracts, in particular the PKWT.
It must be acknowledged that the Job Creation Law has made breakthroughs by including a compensation award for PKWT workers, plus the job loss protection scheme (job guarantee).
This is more or less the fundamental philosophy of the compensation for dismissal.
Although they do not solve the entire problem of the PKWT and outsourcing system, these breakthroughs at least restore the philosophical basis of the compensation for dismissal. As long as people cannot earn an income because they were dismissed, they can still continue to support themselves and their families until they find new jobs or another source of livelihood. This is more or less the fundamental philosophy of the compensation for dismissal.
These breakthroughs, at the very least, reduce the discriminative treatment that PKWT workers and outsourced workers have been experiencing so far, although it is still far from perfect.
Edy Sutrisno Sidabutar, Analyst, labor affairs
