Indonesia: Perppu Job Creation Series – Amendments To Manpower Law

The President issued a Government Regulation in Lieu of Law (Peraturan Pemerintah Pengganti Undang-undang or “Perppu” in short) No. 2 of 2022 dated December 30, 2022 regarding Job Creation (“Perppu Job Creation”). This Newsflash discusses the amendments to the Manpower Law (Law No. 13 of 2003 dated March 25, 2003 regarding Manpower).

Perppu Job Creation is effective as of December 30, 2022. Perppu Job Creation expressly repeals and replaces Law No. 11 of 2020 dated November 2, 2020 regarding Job Creation (the “Job Creation Law”). Like the Job Creation Law, Perppu Job Creation amends certain provisions of the Manpower Law. So, the amendments to the Manpower Law under the Job Creation Law are no longer in effect. But, the implementing regulations issued under the Job Creation Law remain in effect unless they contradict Perppu Job Creation.

The pertinent amendments of the Manpower Law are set out below.

• Outsourcing. Article 64 of the Manpower Law prior to the Job Creation Law allowed outsourcing and subcontracting. The Job Creation Law removed Article 64 entirely. Now Perppu Job Creation amends Article 64 of the Manpower Law to expressly allow outsourcing only. Under Perppu Job Creation, Article 64 of the Manpower Law is silent about subcontracting.

The amended Article 64 of the Manpower Law under Perppu Job Creation is fine because it gives an underlying basis for Government Regulation No. 35 of 2021 dated February 2, 2021 regarding Fixed-Term Employment Agreements, Outsourcing, Working Hours and Rest Time, and Employment Termination (“GR 35/2021”). GR 35/2021 deals with, among others, outsourcing.

• City/Regency Minimum Wages Determined by Governors. Under Perppu Job Creation, Governors now may only determine the minimum wage of a regency/city within the province if the minimum wage of the regency/city is higher than the minimum wage of the province.

• Additional Basis for Wage Increases Calculation. Under Perppu Job Creation, in addition to the economic growth and the inflation rate, ‘a certain index' is included as the bases for the calculation of wage increases. Perppu Job Creation does not elaborate what ‘a certain index' means. We will need to wait for the relevant implementing regulation for the clarity of this matter.

• Government Determines Wage Increases. Under Perppu Job Creation, the Government may determine a different method for the calculation of the wage increases in certain circumstances. These circumstances include pandemics and extraordinary global economics conditions.

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