“While company regulations have been regulated by the prevailing Manpower Law, there are many other matters which need to be stipulated specifically by the company regulation so that the company regulation can be legalized by the Manpower Authorities and binding within the company.”
Under the Law No. 13 of 2003 concerning Manpower (as has been modified by Law No. 11 of 2020 concerning Job Creation, which hereinafter shall be collectively referred to as the “Manpower Law”), there is an obligation for certain enterprises (hereinafter referred to as “Company” or “Companies”) to have company regulation to prevail internally.
As such, the company regulation is stipulated to contain at least:
- The rights and obligations of the Company;
- The rights and obligations of the employees;
- Working conditions;
- Company discipline and rule of conduct; and
- The period of validity of the company regulation.
Obligation for Existence of Company Regulation
Pursuant to the Manpower Law, company regulation is not mandatory for any company. Instead, there is a threshold for the obligation as mentioned, which are:
- The Company must at least employ 10 (ten) employees; and
- The Company has not made or entered into collective labor agreement (Perjanjian Kerja Bersama) with the employees.
Therefore, the obligation to create company regulation only applies to the Companies with the requirement as mentioned.
Legalization of Company Regulation
In order for a company regulation to prevail in a Company, it must be regarded that the company regulation must first be legalized by the Manpower Authorities. Thus, a company regulation does not automatically apply after the creation thereof; but rather, it must first obtain an approval from the Manpower Authorities.
In principle of the Manpower Law, it is of the utmost importance that the Company and the employees have the same position, i.e., no party is allowed to have a higher position than the other. Therefore, considering how the company regulation is made by the Company, the provisions mentioned therein cannot only be beneficial to the Company. This is why the company regulation must be legalized first by the Manpower Authorities in order for it to prevail.
Upon procedure of the legalization of company regulation, the provisions of the company regulation shall first be checked by the Manpower Authorities; whether there are any arbitrary provisions which put the Company in a higher position over the employees. This is to ensure that the employees are not being taken advantage of or being undermined by the provisions of the company regulation. Only after the provisions have been approved by the Manpower Authorities that the company regulation can be legalized and thus deemed to prevail internally within the Company.
Socialization of the Company Regulation to the Employees
In addition to the verification of provisions under the company regulation by the Manpower Authorities, the Manpower Law and its implementing regulation also stipulates that the company regulation must first be informed to the employees.
The purpose of such obligation is to make sure that the employees have been made aware that the Company intends to apply certain provisions in the company regulation to prevail and bind the employees as well as the Company.
Regarding the socialization of the company regulation to the employees, it is stated in the Manpower Law that the company regulation must be made by the Company by consideration of any inputs and suggestions made by the employees. Therefore, by socialization of the company regulation, the employees are entitled to analyze and suggest any amendment of the provisions to the Company.
Nevertheless, at the end of the day, company regulation is still made by the Company without having to obtain any agreement from the employees. The reason why this is allowed by law is because the provisions must undergo verification process by the Manpower Authorities. Therefore, if the Company intends to apply provisions which can harm the position of the employees, the Manpower Authority can act on such provisions by not legalizing the company regulation. Thus, as has been mentioned before, without being legalized, the company regulation cannot legally apply to the Company and the employees.
Matters to be Stipulated under Company Regulation
Aside from the mandatory provisions which must be stipulated under the company regulation as elaborated above, in practice, there are many other matters which must be stated in the company regulation. The reason why there are additional matters that need to be stipulated in the company regulation is because if the company regulation only regulates the bare minimum, usually the Manpower Authorities cannot approve the provisions and thus the company regulation cannot be successfully legalized.
Through extensive experience of legalization of company regulation by the Manpower Authorities, it can be found that the additional matters to be regulated must be determined by the Company because there is a lack of determination thereof in the prevailing laws and regulations. Furthermore, there are instances wherein the prevailing regulation can be circumvented by being otherwise stipulated in the company regulation.
Usually, the additional matters which need to be stipulated for the reasons mentioned above include the following:
1. Severance Pay for Termination of Employee
Upon the amendment of the Manpower Law by Law No. 11 of 2020 concerning Job Creation (hereinafter referred to as the “Omnibus Law”), there has been modifications in the provisions concerning termination of employees.
Previously, the severance pays only constituted an element for employees’ rights arising out of termination of employees only for few reasons. However, upon the promulgation of the Omnibus Law, the severance pay now constitutes an element for employees’ rights arising out of termination of employees for considerably a lot of reasons.
Considering how the Manpower Law does not regulate the specific calculation for the severance pay, it is important for Companies to regulate its own policy of severance pay when it comes to termination of employees for other reasons.
2. Social Security Elements
Upon the promulgation of the Omnibus Law, there has been an additional element of the social security for which Companies must register their employees, which is the Job Loss Security (Jaminan Kehilangan Pekerjaan). Therefore, it is important for the Companies to include this additional element in the company regulation to make sure that the employees are entitled for the Job Loss Security.
3. Disciplinary Procedure
While disciplinary procedure has been regulated by the Manpower Law and its implementing regulations, there are specific matters in which the Companies have authority to determine its own disciplinary procedure. For example, the Company may determine on its own the types of violation which warrants types of procedure, e.g., 3 (three) warning letters or immediate termination.
By the Omnibus Law, it has been stipulated that Companies may determine certain grave violations which warrants immediate termination, without as much as notification letter of termination by the Company. Such violations can be stipulated either in the work agreements, company regulation, or collective labor agreement.
However, considering the hassle of renewing all existing work agreements, the Company may resort to determining such violations in the company regulation in order to bind all employees to the new provisions. Therefore, the Manpower Agency usually suggests for Companies to determine the grave violations as mentioned in the company regulation.
Author: Yohana Veronica Tanjung
Gaffar & Co. is an Indonesian Boutique Law Firm which specialises and focuses on commercial law areas, e.g. Capital Market & Financial Services, Investment Regulatory and Corporate Secretarial, including Employment Law.
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