INDONESIA Trends and Developments Contributed by: Nico Angelo Putra Mooduto, Mahareksha Singh Dillon, Talitha Amanda Ekadhani and Bagas Ananta, SSEK Law Firm
either one day of rest in a six-day working week or two days of rest in a five-day working week. Previously, the weekly rest day requirements were one day of weekly rest for a six-day work- ing week in one week. Practical Consequences for Employers While MK Decision No 168 seeks to enhance worker protections, it presents several practi- cal consequences to employers among others. These include the following. Extended legal processes for employment termination The requirement for a court decision on employ- ment termination is likely to extend the process significantly. Employers must now navigate an extensive legal pathway involving bipartite nego- tiations, potential mediation, and judicial pro- ceedings. The average timeframe for a legally binding decision could span several months to years, creating operational delays and financial costs. For businesses, particularly small and medi- um-sized enterprises (SMEs), this extended process may prove burdensome, impacting workforce management and increasing legal costs. Employers may need to adopt proactive approaches to minimise termination disputes, such as improving internal grievance procedures and engaging in more frequent communication with employees. Increased financial burden on employers The new wage provisions, including regional and sectoral minimum wage requirements, may raise operating costs for businesses in certain indus- tries. Additionally, the inclusion of proportional- ity in wage structures may require businesses to reassess their compensation strategies and adjust wages to reflect employee competencies
and roles. For employers in labour-intensive industries, these wage-related changes could lead to higher payroll expenses, affecting profit margins and potentially influencing hiring prac- tices. Potential delays in resolving disputes Given the length of time involved in the judi- cial process, employees may face challenges in obtaining timely resolutions for their cases. Prolonged legal disputes could create uncertain- ties for both employers and employees, affecting morale and disrupting business operations. The lengthy process may also discourage some employees from pursuing cases, potentially leading to unresolved grievances. To address these challenges, the Indonesian government may consider establishing streamlined proce- dures. Adaptation in human resource policies The new regulatory requirements will necessi- tate substantial changes to the HR policies of businesses operating in Indonesia. Companies will need to adapt their HR practices to ensure compliance with the new labour laws. For exam- ple, the requirement of bipartite negotiations and potential court proceedings for termina- tions underscores the importance of thorough documentation and record-keeping in employee management. HR departments may need to implement strong- er performance management systems and clear- ly document instances of employee misconduct or underperformance. This documentation will be crucial if termination proceedings reach the court, as employers will need evidence to sub- stantiate their decisions.
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