Indonesia’s Omnibus Law Makes Changes to Labor-Related Sectors
The government and the House of Representatives have already concluded the discussion over the Omnibus Law on Jobs Creation, which is seen to trigger changes to labor-related sectors. Thus, the Omnibus Law in Job Creation No. 11 of 2020 has been issued on 2 November 2020 by the President of Indonesia.
Fundamentally, the bill is revising several laws. These include the 2003 Law on Labor, 2007 Company Law, 2009 Law on Tax General Procedures and Provisions, the 2008 Law on Income Tax, and the 2009 Law on Value Added Tax. It is also amending the Tax on Luxury Goods Sale and the 2017 Law on Indonesian Migrant Workers Protection.
Airlangga Hartarto, the Coordinating Minister for Economic Affairs, said that the amendments in the bill were parallel to the government’s vision of having an improved business climate and ease of doing business.
Simultaneously, the bill aims to empower small businesses and cooperatives, generate more job opportunities, and encourage research and development.
The bill also simplifies land acquisition, creates special economic zones, and accelerates the government’s strategic projects.
Erwan Teguh and Peter Sutedja, analysts at CGS-CIMB Sekuritas Indonesia, shared that the bill shows the government’s pursuit in making reforms for the betterment of the country’s economic performance. Besides, the bill is seen improving the investment outlook for 2021, the analysts said.
Criticisms in Changes to Labor-related Sectors
The changes to labor-related sectors were not welcomed openly by everyone, however.
Labor groups express their concerns toward the Job Creation Bill, noting that it could remove employee safeguards and benefits, among others.
Meanwhile, some businesses are sharing their sentiment on the strictness of labor laws in Indonesia. Some opt to leave their assets untouched in case of bankruptcy instead of paying high amounts of severance pay.
The Confederation of Indonesian Workers’ Unions (KSPI) voiced its negation over the revision on employment termination rules, foreign workers, minimum wages, and preventing employers from dealing with criminal prosecutions should there be labor issues.
KSPI Chairman Said Iqbal said that the workers did not agree with amendments concerning menstrual and maternity leaves, severance pay, and contract workers.
In addition, the group is also against the revision of outsourcing, working hours, health insurance, and pension benefits.
However, Airlangga explained that the bill was able to tackle the labor group’s issues. For example, the government official said that the bill is pushing for unemployment insurance for all employees. The bill is under the country’s social security program for workers.
Airlangga said this benefit would not benefit from the work accident benefit, life insurance, and pensions.
The government official also clarified that the bill did not impose any changes to menstrual and maternity leaves. At the same time, the bill is not removing employee protection, Airlangga explained.
From the Business Perspective
On the other hand, the Job Creation Bill is eyeing to streamline processes to apply business licenses and intellectual property. It is also set to simplify the registration of limited liability companies.
Airlangga said that public places—including bus terminals, airports, and train stations—will have designated areas for small businesses to sell their products.
The bill is also allowing at least nine members to establish cooperatives. This is a fewer number from the previous mandate of 20.
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