Jurisdiction - Indonesia
Indonesia – Employment Quarterly Review 2013.

14 January, 2014



2013: Predictions For The Year As Of September 2013… 


Minimum Wage Increases

The minimum wage has been increased by 40% in most regions. Many unions have demanded that the salary of all employees must be arbitrarily increased by an amount equal to the increase in minimum wage. In at least one case, the Labour Court has upheld that interpretation which is now under appeal in the Supreme Court.

Many employers have successfully applied to regional authorities for exemption from the minimum wage increase on financial grounds. Hundreds of these exemption approvals have been recently overturned by the Administrative Court which are now under appeal in the Supreme Court.Various federations of unions are now calling for strikes to demand minimum wage increases of up to 100%.

The recent Presidential Instruction No. 9 of 2013 dated September 27, 2013 and MOMT Regulation No. 7 of 2013 dated October 2, 2013 regarding Minimum Wage provide that minimum wage decision making by regional governments must take into account “Decent Living Component”, productivity and economic growth.


Union Activity Increases In 2013


Unions are not very well developed in Indonesia. This is partly because Indonesian employment standards are so generous, the absence of  “termination at will” in Indonesia and requirement for judicial approval of  terminations results in fairly high compliance with employment standards. However, unions have become increasingly active during 2013.


Increased Focus On Protecting Fixed Term Contract And Daily Workers

There are many restrictions and requirements on the use of fixed term contracts and daily workers. Many employers do not know all the requirements. The Ministry of Manpower investigators are getting much more active in enforcing these rules: limits on term and number of extensions, requirements for social security and annual leave for all workers, minimum wage on piece work and daily wages etc. The main sanction for non-compliance with the relevant rules is the conversion of such workers into permanent employees, which has significant consequences

…Updated As Of End Of December 2013

11 September: Outsourcing Of Labour Supply Restricted To Five Circumstances

Under Section 17(2) of Reg. 19, the type of work that can be delegated to the Labour Supplier must be “supporting services or activities that are not directly related to the main production process”. Section 17(3) states that “supporting services as intended by section (2) shall include (meliputi):

a. Cleaning services;
b. Catering services for employee/labour;
c. Security services;
d. Supporting services in mining and oil industry; and
e. Transportation services for employee/labour”.

The Ministry of Labour has recently issued a ruling letter to our firm confirming that these are the only circumstances in which outsourcing of labour supply is permitted.

The Ministry of Labour also confirms that any activities outside of these five circumstances can be outsourced through a services agreement arrangement (rather than outsourcing of labour supply) provided that the intended activities fall within the ancillary activities identified in the relevant industry association “Flowchart” and user company’s “Description” as being open to outsourcing by services agreement.
19 September: Limitation Period On Employee Claims Struck Down

The two year limitation period for employees to file claims for wages and benefits under Article 96 of the Manpower Law has been struck down by Constitutional Court Decision No.100/PUU-X/2012. Given the resulting increased risk of old claims, employers are well advised to properly document and process employee terminations.


19 November: Increased Protection For Outsourced Workers: Regulation 19

The Ministry of Labour recently issued Regulation 19 clarifying the restrictions and requirements applicable to the outsourcing of labour supply and subcontracting of work between companies. The focus of attention has been on outsourcing – labour supply. However, all subcontracts of services are also subject to various new restrictions (i.e., non-core activities only), registration requirements for the service contracts themselves, and various supporting documents under Regulation 19.

Some industry associations have issued the necessary “Flowchart” describing the core activities in their respective industries in contrast with the ancillary activities that can be subcontracted to service providers. Many industry associations have not yet issued such Flowcharts. All companies wishing to enter into or continue services agreements after November 19, 2003, must file their own “Description” of core vs. ancillary activities at the Ministry of Labour which must be consistent with the industry Flowchart.

The Ministry of Labour has recently published SE.04/Men/VIII/2013 which was dated August 26, 2013 regarding Guidelines for Implementing Regulation of MOMT Reg. No.19 of 2012. This decree clarifies the procedures and forms to file outsourcing related documents with the Ministry of Labour.


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