Labour Bill Could Backfire on Workers, Seen as Increasing Business Uncertainty Costs

The Labour Bill, currently being drafted by the House of Representatives (DPR RI) and the government, has come under scrutiny because it converts many administrative sanctions into criminal penalties for entrepreneurs. The issue arises at a time when investors are still shadowed by concerns regarding policy inconsistency and questionable law enforcement.

From just 6 criminal articles in Labour Law No. 13/2003, these offences have now multiplied to 33 articles in the Labour Bill. Consequently, the labour law regime is perceived to be shifting towards criminal law.

Ironically, the expansion of criminal offences for administrative negligence is most likely to ensnare companies in the formal sector. Only formal companies possess complete labour documentation, mandatory reporting, and are registered within the oversight system. When administrative violations are elevated to criminal offences, the first to be caught are not those evading their obligations, but rather the companies that have been compliant and left an administrative trail.

In reality, the formal sector is the backbone of employment absorption, providing social security, employment contracts, and wage certainty. Disproportionate criminal threats risk causing formal companies to halt expansion of permanent employment and shift towards more flexible, looser work schemes. Instead of strengthening protection, this Bill has the potential to erode the quality of the employment relationships it intends to safeguard.

This has also drawn the attention of Fitriana, a lecturer in State Administrative Law at the Faculty of Law, University of Indonesia (FHUI). According to her, the potential criminalisation of entrepreneurs within the future labour legislation must be carefully considered.

She expressed that labour legislation should be able to categorise various types of violations. “There needs to be a clear distinction between serious violations of fundamental rights and administrative violations, which are more appropriately subject to administrative sanctions,” she asserted.

Furthermore, Fitriana emphasised that such a hierarchy of punishment would essentially uphold the basic principle of criminal law: “Criminal law as the ultimum remedium (the last resort),” she said.

This principle aligns with the national Criminal Code (Law No. 1/2023), which will take effect in January 2026, as well as the direction of the Job Creation Law and the government’s deregulation agenda, which prioritises administrative sanctions. The Labour Bill, however, appears to be moving in the opposite direction.

The Labour Bill, laden with criminal articles, also opens the possibility of implicating not just management, but the entire corporate entity. Fitriana stated that the threat of corporate criminal liability is what must be scrutinised proportionally.