Fewer workers employed to avoid rows, reduce risks

Fewer workers employed to avoid rows, reduce risks

The Jakarta Post, Jakarta

The labor-intensive manufacturing sector is introducing major
changes to the way it operates to avoid potential labor disputes
as a result of what the sector sees as unfavorable regulations.

Many large manufacturers with over 1,000 workers are
downsizing and reducing employee numbers, or subcontracting
orders to smaller companies, to reduce labor costs and avoid
production disruptions caused by labor disputes.

Many textile and garment manufacturers in West Java are
transforming themselves into traders because their products are
no longer competitive in overseas markets due to illegal fees and
operational disruptions by workers.

"After 10 years of operation, I had to close down my textile
firm last year due to problems with workers, who frequently went
on strike while the company was dealing with financial problems,"
said businessman Lili Asjudiredja on Tuesday.

His company, which had 1,200 workers, found itself in
financial difficulty because of illegal fees and the inflow of
cheap smuggled textiles from China.

"If only the workers understood the company's situation and
were not provoked by other parties, my company could still be
operational," said Lili, who is chairman of the West Java Textile
Association and a member of the House of Representatives.

After paying some Rp 30 billion (US$3.18 million) in
compensation to the dismissed workers, Lili opened a textile
spinning firm with several colleagues. The firm employs 400
workers on annual contracts.

Many businesspeople said their reluctance to employ huge
numbers of workers was partly due to Law No. 13/2003 on labor,
which stipulates that companies must provide numerous allowances
and a hefty severance pay for fired employees.

For example, if a company was forced to lay off workers who
had been with the company for nine years, it would have to give
them severance pay of up to nine times the workers' monthly
salary.

This excludes the "working-award allowance", which can reach
more than nine times the monthly salary for workers who have been
with a company for at least 24 years.

Businesspeople say it is difficult to dismiss unproductive
workers because of the number of allowances they must provide
fired employees, with each allowance able to amount to more than
one-month's salary.

Due to these problems, Lili said, some of the giant textile
manufacturers in West Java were choosing to reduce the number of
their workers and subcontract overseas orders to nearby home
industries that have lower production costs.

These small firms can produce textiles and garments at a lower
cost because they are not registered with any government agency,
so they do not have to comply with labor regulations.

Workers in such companies are paid less than minimum regional
wages and receive no allowances or insurance. The workers are do
not sign contracts, meaning they can be fired at any time.

The chairwoman of the National Front for the Struggle of
Indonesian Workers, Dita Indah Sari, confirmed that employees at
these small unregistered firms received few if any rights.

Some companies, she said, preferred to tie up their workers
under renewable annual contracts so they could more easily
dismiss the employees without having to pay much money.

"Our concern is that workers are not that demanding because
their bargaining position is becoming weaker. If they are fired
they will have trouble getting a new job because a lot of
manufacturing firms are shutting down," said Dita.

According to Dita, some 175 manufacturing firms were closed in
West Java alone over the past two years, putting some 750,000
people out of work.