MacroInsight   /     Click here for full PDF version  
 Author: Luthfi Ridho  

• The new labor law will be a breakthrough with major changes on foreign worker, outsourcing worker, minimum wage and severance scheme.
• We think the overall labour costs may potentially decline with the new law, which shall positively impact both domestic and foreign investments.
• Given the complexity and the number of laws that needs being changed, we see the new labour law to be effective in 2021 at the soonest

Easier access for foreign worker
In the new submitted law, it will be easier for foreigner to work in Indonesia. Foreign worker wishing to have role in various job types may also do so without consent from the government. Previously, the company must submit work plan and justification on using foreign worker. We see this to be positive for knowledge transfer and capacity building
Outsourcing will potentially gain more traction
The former labour law article 59 indicates that permanent type work is forbidden from using a contractual or outsourced worker. Deletion of article 59 in the new labour law, to our understanding, could be interpreted as every job could be done via outsourcing. This is positive, in the sense that companies fixed labour costs may drop in the future.
New minimum wage formula
The minimum wage formula was never been specified in the previous labour law, now it is clearly stated that the new formula is not allowed to be modified and/or altered for practical or political use. The new minimum wage formula shall use the regional economic growth (real growth instead of nominal growth previously), this is positive as growth varies from region to region.
More certainty for business owners especially during downturn period
Significant breakthrough also applied in compensation and severance payment if a company wants to exit and/or bankrupt. The new labour law deletes 12 articles regarding the compensation for worker in an event of bankruptcy/closing down. This shall promote more investment as it gives more certainty and clarity during downturn period.


Sumber : IPS