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The New Implementing Regulation on Employment Cluster of Omnibus Cipta Kerja

By: Putu Surya Resa Aditya

The Government has finally issued and enacted the implementing regulation on the Employment Cluster. There are four implementing regulation for employment cluster/sector which have been issued and registered under the State Gazette. These are the four-implementing regulation for employment cluster: (i) Government Regulation No. 34 of 2021 concerning the Use of Foreign Workers; (ii) Government Regulation no. 35 of 2021 concerning fixed term employment contract, outsourcing, working and rest periods, and termination of employment; (iii) Government Regulation no. 36 of 2021 concerning Wages; (iv) Government Regulation no. 37 of 2021 concerning the Implementation of the Job Loss Insurance Program.

The said Implementing regulation shall provide legal certainty for some of the revoked provision as stipulated under the Law No. 13 Year 2003 regarding Manpower. However, we have highlighted some of the issues which might be relevant for the Employment cluster.

  1. Issues related to Government Regulation No. 34 of 2021 concerning the Use of Foreign Workers (“PP 34/2021”)

Through PP 34/2021 the Government is now classifying the types of Plans for the Use of Foreign Workers (RPTKA), specifically for the RPTKA for Special Economic Zones (KEK), the attestation of the RPTKA is intended for a maximum of 5 (five) years, while in the case of RPTKA KEK contains the positions of directors and commissioners, the granting of attestation is only given once and  valid as long as the foreign workers concerned are still becoming part of Board of Directors or Board of Commissioners in the Company.

Furthermore, PP 34/2021 governs the payment of the Compensation Fund for the Use of Foreign Workers (DKPTKA) in PP No. 34/2021 in principle does not change. However, PP 34/2021 does not regulate in detail on the procedures for administrative sanction related to RPTKA ratification and DKPTKA. The said issues will be addressed and regulated under Ministry of Manpower’ regulation. While the effective date of the PP 34/2021 is on 1 April 2021, the Ministry of Manpower should in a proper and timely manner to issue the said regulation in order to provide legal certainty.

  1. Game Changing Issues related to PKWT and Termination of an Employee Under Government Regulation No. 35 of 2021 concerning Fixed Term Employment Contract, Outsourcing, Working and Rest Periods, And Termination of Employment (“PP 35/2021”)
  1. Fixed Term Employment Contract (PKWT)

Under the PP 35/2021, Fixed Term Employment Contract (PKWT) may be executed based on: (i) time period; or (ii) completion of certain work.

PP 35/2021 governs a longer time period for PKWT based on time period for up to 5 years, previously under the Law No. 13 Year 2003 regarding Manpower (“Manpower Law”), PKWT is only allowed for up to 2 (two) years and may be extendable for 1 (one) year. In addition, the said PKWT may only be renewed for one time only after a grace period of 30 (thirty) days up to 2 (two) years of working period. The simplification of 5 years period as stipulated under PP 35/2021 has opened a “grey area” of interpretation especially related to the renewal of PKWT, there are no clear restriction as previously governed under Provision (5) of Article 59 of Manpower Law that renewal of PKWT may only be granted for once and up to two years.

Meanwhile for PKWT based on completion of certain work does not have a clear provision on the maximum amount of period, the provision only determined that once a work is completed prior to the end of the respective completion period, the PKWT shall be deemed terminated upon the completion of the said work. The issues related to PKWT based on completion of work arise when the work is not completed by the end of the agreed completion period, the said PKWT may be extended until the work is completed without giving a legal certainty on how long the extension period is allowed for PKWT based on completion of work. This issue might lead to an extensive and abusive working period for PKWT based on completion of work, since the one who can assess whether a work is completed is the employer.

Nonetheless, PP 35/2021 provide a scheme for a relief in PKWT through compensation for the workers upon the termination of PKWT. PKWT workers/employees shall be compensated by the Company under the following formulation:

  1. 12 consecutive months will be eligible for one monthly wage compensation; and
  2. Less than or more than 12 months will be eligible for compensation in a pro-rate basis, for instance 4 months of working period, the formulation will be four divided by twelve times the amount of monthly wage, if it is a-13 months of working period, thirteen divided by twelve times the amount of monthly wage.

This compensation formula will hopefully provide significant satisfaction for the employees who are working for an employer under the basis of PKWT.

In order to protect the employees even further, PP 35/2021 dictated that every PKWT shall be registered via online or in writing if the online registration facility is unavailable to the Ministry of Manpower. PP 35/2021 are still lacking on what kind of legal consequences if an employer did not register the PKWT and will there be a mechanism to check whether the said PKWT is considered to be a renewal of previous PKWT and longer than 5 years of working period. Therefore, we have to wait and see on how the Ministry of Manpower would address these issues on their PKWT’s registration online platform.

  1. Termination of Employment

The process of termination of an employee is not different with what previously governed under Manpower Law. The substantive provision that will be significantly impact the landscape of Manpower Law regime in relation to the termination would be related to the notification of termination by employer and amount of compensation packages that are now are clearly stipulated under the PP 35/2021.

The notification of termination shall be given by the employer within 14 working days prior to the termination day and shall be in accordance with one or several reasons under PP 35/2021. Once there are no rejection against the said termination, the employer will be able to register the said termination to the Ministry of Manpower. The said rejection from the employee shall be made within 7 days prior to termination date.

PP 35/2021 provide clearer guidance for termination’ compensation packages, these are the following formulation for the packages:

Condition

Severance Pay

Long Service Pay

Rights Compensation

Standard Termination

1x

1x

Merger, Consolidation, Spin-Off

1x

1x

Acquisition

1x

1x

Acquisition, by request of the Employee

0,5x

1x

For efficiency purposes due to the company’s suffering losses

0,5x

1x

For Efficiency purposes to prevent company’s losses

1x

1x

Company closing due to the company suffering losses for 2 (two) consecutive years or 2 (two) not consecutive years

0.5x

1x

Company closing not

due to the company

suffering losses

1x

1x

Force Majeure which cause the company to close

0.5x

1x

Force Majeure which does not the company to close

0.75x

1x

Suspension of Payment (PKPU) due to the company’s suffering losses

0.5x

1x

Suspension of Payment (PKPU) not due to the company’s suffering losses

1x

1x

The company entering bankruptcy process

0.5x

1x

By employee request in accordance to Point g of Article 36 of PP 35/2021.

1x

1x

By employee request as stipulated under Point g of Article 36 of PP 35/2021 but the Company was not found to commit any violation as stipulated under point g of Article 36 by industrial relation court

with separation payment as stipulated under Employment Agreement, Company Regulation or Collective Work Agreement.

Voluntary resignation by the employee

with separation payment as stipulated under Employment Agreement, Company Regulation or Collective Work Agreement.

Employee absent for 5 (five) or more days without prior notice and has been summoned 2 (two) times by the company

with separation payment as stipulated under Employment Agreement, Company Regulation or Collective Work Agreement.

Employee violated the employment agreement, or company rule with 3 (three) warning letters consecutively

0.5x

1x

Employee violated serious matter in the employment agreement, or company rule

with separation payment as stipulated under Employment Agreement, Company Regulation or Collective Work Agreement.

Employee detained for 6 (six) or more months by the authority due to criminal act allegation that causes the company to suffer losses

with separation payment as stipulated under Employment Agreement, Company Regulation or Collective Work Agreement.

Employee detained by for 6 (six) or more months by the authority due to criminal act allegation that does not causes the company to suffer losses

with separation payment as stipulated under Employment Agreement, Company Regulation or Collective Work Agreement.

Employee was found guilty of criminal act that causes the company to suffer losses

with separation payment as stipulated under Employment Agreement, Company Regulation or Collective Work Agreement.

Employee was found guilty of criminal act that does not causes the company to suffer losses

1x

Employee suffer long term sickness or disability that causes them to be unable to work for 12 (twelve) months

2x

1x

Employee suffer long term sickness or disability that causes them to be unable to work for 12 (twelve) months but the termination was requested by the employee

2x

1x

The employee reaches their retirement age

1.75x

1x

The employee is deceased (given to the heir)

2x

1x

Note:

  • x means the amount of wages and working period as stipulated under provision (2) of Article 40 of PP 35/2021.
  • means the amount of rights payment as stipulated under provision (4) of Article 40 of PP 35/2021.
  • means unavailable/not granted.

 

  1. Component of Minimum Wages as stipulated under Government Regulation no. 36 of 2021 concerning Wages (“PP 36/2021”)

Pursuant to PP 36/2021, Indonesia has now recognized wages that are paid on hourly basis, it is stipulated under the PP 36/2021 that wages could be determined on hourly basis, however hourly basis may be applied for employees who work part time.

The minimum monthly wage will be vary across provincial and/or regency/city government as it is shall be determined by: (i) Provincial Minimum Wage (Upah Minimum Provinsi - “UMP”); or (ii) Regency/City Minimum Wage (Upah Minimum Kabupaten – “UMK”). Moreover, minimum wages shall be determined based on economic and manpower condition, which comprises of the following variables: (i) purchasing power parity; (ii) Manpower absorption levels; and (iii) Median Wages and will be subject to be adjusted on an annual basis.

The implementation on how this would affect the minimum wages will depends on how quickly the provincial government and regency/city government to adjusts its existing regulations or issuing new regulation regarding its minimum wages as dictated under PP 36/2021.

 

  1. New Insurance for Job Loss under Government Regulation no. 37 of 2021 concerning the Implementation of the Job Loss Insurance Program

Job Loss Security/Insurance (Jaminan Kehilangan Pekerjaan – “JKP”) comes from funds allocated from BPJS Ketenagakerjaan derived from the premium of the Death Security and Work Accident Benefits. If we refer to Article 11 PP No. 37 of 2021, the amount of premium of job loss benefits (JKP) is 0.46% of monthly wages, whereby 0.22 percent is paid by the Central Government, and 0.24 percent is allocated from Work Accident Benefits (Jaminan Kecelakaan Kerja – “JKK”) and Death Benefits (Jaminan Kematian – “JKM”) respectively 0.14% of the JKK premium and 0.10% of the JKM premium

Currently, workers who have been registered with the BPJS Ketenagakerjaan will automatically be included in this JKP program. For new participants, the employer needs to register its new employee to enter JKP’s program as stipulated in Article 6 PP No. 37 of 2021. The legal consequences if the Employers failed to register its employees as participants of JKP shall be subject to administrative sanction from either Minister, Governor, or Regent/City Mayor.