INDONESIA Trends and Developments Contributed by: Nico Angelo Putra Mooduto, Mahareksha Singh Dillon, Talitha Amanda Ekadhani and Bagas Ananta, SSEK Law Firm
of five years for fixed-term contracts, inclusive of any extensions. This limitation addresses concerns that employers may abuse fixed-term contracts to avoid offering permanent employ- ment and related benefits. By capping the dura- tion, the court ensures that employees who have worked continuously for extended periods have a clearer path to job stability. For foreign workers, the amended Article 42(4) of the Manpower Law stipulates that they may only be employed in positions deemed essential and must have competencies that cannot be fulfilled by local workers. Additionally, employers are required to prioritise the employment of Indo- nesian workers, reinforcing the government’s commitment to protecting local employment opportunities. This provision reflects Indonesia’s efforts to balance economic globalisation with national interests, ensuring that foreign employ- ment does not undermine local job markets. Wages and decent standard of living The Constitutional Court emphasised the impor- tance of fair wages and a decent standard of living for workers by amending Article 88 of the Manpower Law. Article 88 now explicitly requires wages to meet the basic needs of workers and their families, encompassing food, health, education, recreation, and old-age security. It includes the principle of a “living wage”, which supports workers’ rights to financial security and wellbeing. MK Decision No 168 also adds Article 88(c) to the Manpower Law, which mandates governors to set the minimum wage at both provincial and district levels. Moreover, collective bargaining is encouraged under Article 90A of the Manpower Law, which mandates that wages above the minimum level
be determined through agreements between employers and trade unions or labour unions. By reinforcing collective bargaining rights, MK Decision No 168 empowers workers to negoti- ate for fair wages and better working conditions. Adjustment of wage structure and scale Under Article 92(1) of the amended Manpower Law, the wage structure within companies must now consider multiple factors, including class, position, seniority, education, and competence. Employers are obligated to implement a propor- tional wage scale that reflects these variables. This amendment ensures that wage determina- tions are transparent and based on objective cri- teria, providing employees with a clearer under- standing of their compensation structure. This structured wage policy helps prevent dis- criminatory practices and enhances transpar- ency within the workplace, allowing employ- ees to make informed career decisions. It also establishes a merit-based compensation system that rewards skills and contributions, fostering a positive work culture. Preference for employee creditors in bankruptcy MK Decision No 168 strengthens protections for employee creditors by amending Article 95(3) of the Manpower Law. It specifies that, in the event of bankruptcy, payments of employees’ wages and other rights that have not been received by employees will take precedence over other creditors, except those creditors holding secu- rity rights. Weekly rest day requirements MK Decision No 168 revises Article 79(2)(b) of the Manpower Law on the weekly rest day require- ment, allowing for greater flexibility. Under the amended provision, employees are entitled to
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