“In the New Job Creation Regulation, it has been made more specific that the scale and structure of salary for employees must be made as a guidance for employees who have served 1 (one) year of service for the employer.”
Following the judicial review of the Law No. 11 of 2020 concerning Job Creation (“Law 11/2020”), Indonesian government has promulgated Government Regulation in Lieu of Law No. 2 of 2022 concerning Job Creation (Peraturan Pemerintah Pengganti Undang-Undang (Perppu) or “New Job Creation Regulation”), which serves to amend the Law 11/2020 as mentioned. As such, the provisions under Law 11/2020 have been deemed to have been replaced by the provisions under the New Job Creation Regulation.
The New Job Creation Regulation has amended multiple aspects of law under the Law 11/2020, considering how the Law 11/2020 itself contains provisions with regard to multiple aspects of law. Hereinafter, this article shall discuss the amended provisions concerning manpower.
Outsourcing
Initially, under the original manpower regulation, namely Law No. 13 of 2003 concerning Manpower (“Manpower Law”), outsourcing was regulated in a strict manner, especially with regard to the type of work which can be outsourced to an Outsourcing Company.
Subsequently, the matters of outsourcing are regulated in a more specific manner by the Regulation of the Ministry of Manpower No. 11 of 2019 concerning Second Amendment on Regulation of the Ministry of Manpower No. 19 of 2012 concerning Terms of Outsourcing Work to Other Company (“Outsourcing Regulation”). In this regulation, the types of work which can be outsourced to an Outsourcing Company are as follow:
- Work which is conducted separately from the main business activities, either management or operational of business activities;
- Work which is conducted by direct or indirect instruction from the company, intended to provide explanation concerning how to commence the work to be appropriate with the standard determined by the company;
- Work that constitutes auxiliary activities of the company, which means the activities constitute auxiliary work and in order to support the commencement of the business activities in accordance with the flow of the operation of the work determined by the business sector association formed under the prevailing laws; and
- Work that does not directly hinder production process, which means the work constitutes additional work which if the work were not to be conducted by the company, the operations of the work can commence as usual.
By the elaboration of the types of work which can be outsourced to an outsourcing company, it can be concluded that outsourcing can only be conducted for the work which does not directly affect the main business activities of the company.
However, the Outsourcing Regulation has been revoked in 2021, shortly after the promulgation of the Law 11/2020. Furthermore, in the New Job Creation Regulation, it is stated that outsourcing will be further regulated by a newly promulgated Government Regulation. This means that there might be substantial changes made to the regulation of the commencement of outsourcing. Therefore, further analysis should be made to the implementing regulation as to determine whether the commencement of outsourcing shall be done differently.
Minimum Wages
Pursuant to the Law 11/2020, it is stated that there are multiple layers to determining minimum wages. Such layers are based on the fact that the more specific minimum wage is determined, the higher standard must be upheld.
The layers of determining minimum wage are as follow:
- National minimum wage;
- Provincial minimum wage;
- Regency minimum wage; and
- Specific sector minimum wage.
However, based on the New Job Creation Regulation, the regency minimum can be undetermined if there are no requirements therefor. As such, the determination of the regency minimum wage is up to the discretion of the mayor. Nevertheless, there is an exception in which should the calculation for the regency minimum wage results to higher amount of minimum wages compared to the provincial minimum wage, there must be determined a regency minimum wage.
Furthermore, the New Job Creation Regulation stipulates that upon special circumstances, the formula for calculating minimum wage can be determined further. Therefore, by analysis of the New Job Creation Regulation, the concept of minimum wage is meant to be a constantly changing concept, in which it cannot be determined to be fit-for-all. As such, the government intends for the minimum wage to mirror the circumstances in the public based on data and statistics.
Scale and Structure of Salary for Employees
From the promulgation of the Manpower Law in 2003, it has already been regulated that employers must determine a scale and structure of salary for employees. Furthermore, structure and scale of salary has been one of the main requirements in order for a company to enforce a company regulation. With the promulgation of the Law No. 11 of 2020 and the New Job Creation Regulation, the scale and structure of salary is highlighted to become one of the most noticeable requirements for employers to have.
In the New Job Creation Regulation, it has been made more specific that the scale and structure of salary for employees must be made as a guidance for employees who have served 1 (one) year of service for the employer. Upon the promulgation of the New Job Creation Regulation, there has been misconception that by the wording of this provision, employers must increase the salary of an employee after 1 (one) year of service. However, such conclusion is not what is intended by the New Job Creation Regulation.
While it is a public opinion that employees who have served certain amount of service to be granted a raise in salary, the New Job Creation Regulation simply clarifies that employees who have served 1 (one) year of service in the company must be included in the scale and structure of salary determined by the employer. This is to avoid cases wherein employers exclude lower-level employees from the determination of the scale and structure of salary. Therefore, the New Job Creation Law enforces the principle that the scale and structure of salary must be made in detail and inclusive to the employees.
Author: Yohana Veronica Tanjung
Gaffar & Co., an Indonesian Boutique Law Firm specializing and focusing on commercial law areas e.g. Employment Law, Investment Regulatory, and Information & Technology.
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