Job Creation Law Amends Indonesian Employment Law

The final draft of the Job Creation Law has already signed by President Joko Widodo on Monday, 2 November 2020 and officially turning it into Law No. 11 of 2020 (“Job Creation Law“) has been in effect since 2 November 2020. This legal insight will be focusing on the manpower and general corporate aspects and compare them with the corresponding area under the new Job Creation Law.
Job Creation Law:

Revised Areas

Detailed Revisions

Job-training institutions The Job Creation Law offers greater flexibility and certainty to privately owned job-training institutions, which can be seen in the removal of required forms for this type of institution.
Worker-placement agencies The Job Creation Law no longer stated that the private worker-placement agencies should be legal entities, it can be inferred that there are possibilities to establish a different form of entities.
Employment of foreign workers The obligation to obtain a license for the employment of foreign workers has been eliminated. Alternately, any employer who wishes to employ foreign workers must provide a foreign worker recruitment plan that has been validated by the central government.
Work agreements for specified

timeframes (perjanjian kerja waktu

tertentu – “PKWT”)

(i) PKWT must also be focused either on a fixed period or on the completion of a specific amount of work that is now to be decided based on work agreements, (ii) PKWT is limited to some forms of work only, but there are currently no restrictions on their validity, extension, and renewal periods, (iii) PKWT is no longer to be regarded as PKWTT until it is written, (iv) Employers are also expected to provide PKWT employees with benefits under some conditions and (v) PKWT is also forbidden from having compulsory probation periods, but probation periods are now considered to be working periods.
Outsourcing Deleted the provisions on (i) criteria for some forms of work that can be outsourced and (ii) prohibition on employers hiring outsourced employees for key tasks or other activities specifically related to production processes, which seems to suggest that any form of job can now be outsourced.
Working hours, breaks and leave Extends overtime working hours up to a limit of four hours per day and so it’s 18 hours a week. The Job Creation Law also states that the weekly time off is set at just one day every six working days per week. Furthermore, due to the elimination of the clause which dealt with long periods of leave, it can be inferred that those periods are now optional and no longer an obligation for employers.
Wages The amendments that have now been made to this specific area are divided into the following (i) elimination of rules requiring employers to pay fines if they pay employees at rates below the minimum wage, (ii) minimum-wage estimates can also be made using a minimum-wage measurement formula that incorporates economic growth or inflation variables, (iii) prioritize payment of workers’ salaries and other rights over debt payments to other creditors of employers when employers are declared bankrupt or undertake any termination of their debt-payment obligations.
Termination of employment The Job Creation Law aims to shorten the process of job termination by allowing the parties involved to be told first of any terminations and by requiring only bipartisan negotiations to be conducted if the employees have already been notified of their termination. Moreover, the Job Creation Law no longer expressly allows the employer to obtain a stipulation from the industrial relations dispute settlement organization in respect of the termination of employment and eliminates all penalties for termination of employment without this stipulation.


Criminal provisions and administrative


Criminal sanctions now extend to infringements of provisions relating to the minimum wage, as well as to infringements of the obligation to allow compensation payments and/or tenure rewards, and to the requirement to re-employed any worker who has not been found to have committed any criminal offense. Conversely, infringements of employees’ right to strike would no longer be subject to criminal sanctions.
Unemployment insurance

The Job Creation Law has also implemented the idea of unemployment insurance. The benefits that would be given by such insurance could be in the form of cash, access to information on the job market, and training courses for employees with a monthly salary of up to a maximum of six training courses or sessions.

Indonesian migrant worker placement


The Job Creation Law has now changed the licensing system for licensing system.

For companies engaged in the recruitment of Indonesian migrant workers (Surat Izin Perusahaan Penempatan Pekerja Migran Indonesia/SIP3MI). Besides, the provisions relating to the period of validity and the extension/renewal of such licenses have now been omitted by the Job Creation Law.

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