Overhaul of Indonesian Employment Law – Draft Bill on Job Creation

Issue

Articles in the Employment Law

New rules under the Draft

Expatriate employees
 
 
 
 
 
 
 
 

• Article 42
• Article 43 (revoked)
• Article 44 (revoked)
• Article 45
• Article 46 (revoked)
• Article 47
• Article 48 (revoked)
• Article 49
 

• Each employer employing an expatriate must have a permit issued by the central Government.

• New presidential regulation will be issued to regulate specific positions and terms for expatriate employees.
 

Employment relationship
 
 
 
 
 
 

• Article 56
• Article 58
• Article 59 (revoked)
• Article 61
• Article 61 A (new)
• Article 62
 

• New government regulation will be issued to regulate fixed-term employment agreement and/or completion of work.

• Completion of work is added as a reason to terminate an employment relationship.

• Compensation pay must now be paid to a fixed-term or completion of work employee when their employment is ended, as regulated by the new government regulation.
 

Outsourcing
 
 
 

• Article 65 (revoked)
• Article 66
 
 

• Outsourcing of service (business to business) regulation under the Manpower Law is revoked.
• Labor supplier will be responsible to handle all terms and conditions of employment including any dispute involving its employee.
• New government regulation will be issued to regulate outsourcing of labor.
 

Working hours
 
 
 
 

• Article 77
• Article 77 A (new)
• Article 78
• Article 79
 

• Flexible working hours can be regulated internally by the company.
• New government regulation will be issued to regulate working hours and overtime.
 
 
 

Remuneration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

• Article 88
• Article 88 A (new)
• Article 88 B (new)
• Article 88 C (new)
• Article 88 D (new)
• Article 88 E (new)
• Article 88 F (new)
• Article 88 G (new)
• Article 89 (revoked)
• Article 90 (revoked)
• Article 90 A (new)
• Article 91 (revoked)
• Article 92
• Article 92 A (new)
• Article 93
• Article 94
• Article 95
• Article 98
 

• Central government stipulates policy on remuneration.
‚Ä¢ New government regulation will be issued to regulate remuneration. 
• The formula for calculating minimum wage is regulated in the Draft instead by government regulation.
• Minimum wage for labor-intensive industries is regulated by the governor in the respective region.
• Micro and small businesses are exempted from minimum wage requirements.
• Employees' wages are considered a preferred debt (didahulukan) that are paid in advance when a company goes bankrupt or is liquidated.
 
 
 
 
 
 
 
 
 
 
 
 
 

Termination
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

• Article 150
• Article 151
• Article 151 A (new)
• Article 152 (revoked)
• Article 153
• Article 154 (revoked)
• Article 154 A (new)
• Article 155 (revoked)
• Article 156
• Article 157
• Article 157 A (new)
• Article 158 (revoked)
• Article 159 (revoked)
• Article 160
• Article 161 - 172 (revoked)
 

• Employer can terminate an employee due to poor performance without court approval.
• New government regulation to be issued on termination procedures due to acquisition, merger, inefficiency or bankruptcy, including severance pay and service pay entitlements.
‚Ä¢ Service pay (uang penghargaan masa kerja) will now be a maximum of eight months‚Äô wages, from the previous 10 months.  
• Compensation pay (uang penggantian hak) that was regulated specifically under the Employment law is revoked by the Draft.
 
 
 
 
 
 
 
 
 
 
 
 

Social security
 
 

• Article 18 of Law No. 40 of 2004 on Social Security System
• Article 6 of Law No. 24 of 2011 on BPJS.
 

• New mandatory social security on termination of employment is introduced.
 
 

Additional rewards
 
 
 
 
 
 
 
 
 

Article 92 of the Draft
 
 
 
 
 
 
 
 
 

An annual bonus will be paid as follows:

• 1 month\'s wages for employees having worked for less than 3 years;
• 2 months’ wages for employees having worked 3 to 6 years;
• 3 months’ wages for employees having worked 6 to 9 years;
‚Ä¢ 4 months‚Äô wages for employees having worked 9 to 12 years;  
• 5 months’ wage for employees having worked 12 years or more.

This bonus does not apply to micro and small businesses.