Insights

The Constitutional Court has examined and ruled important changes on the Law No. 6 of 2023 on the Stipulation of Government Regulation in Lieu of Law (Perppu) No. 2 of 2022 on Job Creation into Law (the “Job Creation Law”), specifically on the employment cluster. The decision of the Constitutional Court Decision Number 168/PUU-XXI/2023 (the “CC Decision 168/2023”) discusses several key points:

1. Employment of Foreign Workers

• The CC Decision 168/2023 held that for employing foreign workers now resides with the Ministry of Manpower, as the meaning of the term “Central Government” in the Article 42 paragraph (1) of the Job Creation Law.
• The use of Indonesian Workers will be prioritized as an implication of adding a new provision in the Article 42 paragraph (4) of the Job Creation Law.

2. Temporary Employment Agreement

• The CC Decision 168/2023 has amended the Article 56 paragraph (3) of the Job Creation Law that the period of Fixed-Term Employment Agreement does not exceed a maximum of 5 (five) years, including if there is an extension and is determined based on the employment agreement.
• A Fixed-Term Employment Agreement shall be made in writing in Indonesian language and Latin letters as an implication of amending the Article 57 paragraph (1) of the Job Creation Law.

3. Labor Outsourcing

• The Ministry of Manpower is required to establish boundaries on the implementation of outsourced labor in accordance with the specific type and nature of work outlined in the written outsourcing agreement as stipulated in the revision of the Article 64 paragraph (2) of the Job Creation Law.

4. Implementation of Day Off for Workers

• The CC Decision 168/2023 added a new provision in the Article 79 paragraph (2) letter b of the Job Creation Law that provides confirmation regarding
• The CC Decision 168/2023 amended the Article 79 paragraph (5) of Job Creation whereas employers, based on the Employment Agreements, Company Regulations, or Collective Labor Agreements, shall provide a long day off (istirahat besar/cuti panjang) for Workers.

5. Wages and Minimum Wages Regulations

• The CC Decision 168/2023 ruled the provision of wages for workers which includes the following matters: 1) Wages shall include components that support the needs of a decent life for workers and their families in a reasonable manner, including food, housing, education, health, and old age security; 2) The role of regional wage boards should be re-involved in the formulation of wage policies; 3) The structure and scale of wages shall be proportional according to the contribution of labor to the economic growth of the province or regency/city; 4) Determination of Sectoral Minimum Wage by the Governor; 5) Involvement of additional parties that can be carried out by Labor Unions in determining wages that are higher than the minimum wage; and 6) Preparation of Wage Structure and Scale that considers class, position, length of service, education, and competence.

6. Termination of Employment

• Under the amending of the Article 151 paragraph (3) of the Job Creation Law, if there is a refusal in regards of the employment termination, the settlement shall be carried out through bipartite negotiations in a deliberative manner to reach a consensus between the Employer and Workers/Laborers and/or Labor Unions.
• Under the amending of the Article 151 paragraph (4) of the Job Creation Law, if a consensus is not reached, termination shall be carried out through formal dispute resolution mechanisms and requiring a legally binding decision (inkraacht) from the Industrial Relations Court.
• Based on the amending of the Article 157A paragraph (3) of the Job Creation Law, the obligations between the Employer and Worker remain in effect throughout the process of the dispute resolution until there is a legally binding decision (inkraacht) as in accordance with the Law No. 2 of 2004 on Industrial Relation Dispute Settlement.
• However, in case of the termination on the basis of urgent violation as stipulated in the explanation of Article 52 paragraph (2) of Government Regulation No. 35 of 2021 on Temporary Employment Agreements, Outsourcing, Working Time and Rest Time, and Termination of Employment, the CC Decision 168/2023 is silent and does not regulate further on the obligation of a legally binding decision (inkraacht) prior to the termination, therefore arguably in case of termination due to urgent violation, the Employer is likely allowed to carry out the termination without requiring the inkraacht judicial decision.

7. Severance and Long Service Pay

• The CC Decision 168/2023 has added “at least” term on the Article 156 paragraph (2) of Job Creation Law that the employer shall pay a severance payment. By this amendment, the severance payment shall be calculated with at least based on the categories stipulated under the Article 156 paragraph (2) of the Job Creation Law.

In conclusion, the Constitutional Court Decision No. 168/PUU-XXI/2023 significantly alters Indonesia’s manpower regulations. These changes reinforce manpower rights which may promote fairness and balance between employers and employees in Indonesia.

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Written by: R. Bayu Perdana, Shabrina Hanifa, Marwa H. Loekman and Natasya Salwa Trisnaini.

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