Labour Bill Must Ensure Business Certainty
The discussions regarding the Labour Bill (RUU Ketenagakerjaan) are deemed to require careful attention to business certainty and the investment climate in Indonesia. The labour regulations to be implemented must be capable of providing protection for workers while simultaneously creating certainty for the business world, ensuring that they do not add costs and risks to business activities.
Such certainty is crucial amidst issues of policy inconsistency and rule enforcement, which remain a primary concern for investors. In this context, the design of labour regulations must consider the effectiveness of field implementation and the government’s supervisory capacity.
Muhammad Saleh, Director of Legal Affairs at the Centre of Economic & Law Studies (Celios), stated that legal certainty is a key task in creating a conducive business climate. Therefore, the Labour Bill currently being discussed by the House of Representatives (DPR RI) and the government must be implementable consistently.
“From the perspective of investment and law, economic sentiment and investor confidence fundamentally depend on the aspect of law enforcement. They observe the risk of inconsistent law enforcement and perceive uncertainty,” said Saleh.
According to him, investors have frequently faced regulatory changes, particularly those related to law and licensing. In practice, these conditions are seen as a source of uncertainty for business actors.
“Consequently, investors must incur legal costs for uncertain legal matters,” he added.
Saleh believes this issue must be considered in the drafting of the Labour Bill. New regulations should not add the ‘cost of uncertainty,’ which could ultimately influence corporate decisions regarding expansion or job creation.
Furthermore, labour supervision capacity remains a challenge. Citing data from the Ministry of Manpower, Saleh noted that there are approximately 1,400 labour inspectors tasked with supervising at least 400,000 medium-to-large companies, not including millions of other registered business entities.
“Entrepreneurs and investors certainly look for regulatory consistency in field implementation,” said Saleh.
He added that the challenge of business certainty must also be viewed in the context of investment costs in Indonesia. Referring to the Incremental Capital-Output Ratio (ICOR), Indonesia remains at 6.5. This figure is higher than the average of major ASEAN nations, which sits around 4, indicating ongoing challenges in investment efficiency.
“From the perspective of law enforcement, our legal certainty and law enforcement officers are still considered poor,” said Saleh.
Meanwhile, Fitriana, a lecturer in State Administrative Law Studies at the University of Indonesia (FHUI), assessed that the design of sanctions in the Labour Bill needs to be drafted proportionally, considering the character of each type of violation.
She argued that labour regulations should distinguish between violations of fundamental and serious rights and those that are merely administrative. This distinction is necessary so that enforcement instruments can function effectively.
“There needs to be a clear distinction between violations of fundamental and serious rights, and administrative violations, which are more appropriately subject to administrative sanctions,” said Fitriana.
She emphasised the importance of applying the principle that criminal sanctions should be a last resort, or ultimum remedium. According to Fitriana, this approach aligns with the national Criminal Code (Law No. 1/2023), effective from January 2026, as well as the direction of the Job Creation Law and the government’s deregulation agenda, which prioritises administrative sanctions.
“Criminal law as ultimum remedium,” she stated.
In the Labour Bill, several provisions that previously fell under administrative jurisdiction could potentially face heavier consequences. One such example relates to negligence in social security registration and provisions regarding the submission of personal documents between employers and employees.
Fitriana believes these provisions must be designed carefully to avoid consequences that are counterproductive to the formal business sector.
She noted that formal companies possess more complete labour documentation, have reporting obligations, and are recorded in supervisory systems. Therefore, changes in the sanction mechanism must consider the compliance characteristics of companies and the ultimate goal of enforcement.
This is highly relevant as the formal sector is a pillar of employment absorption. Based on research data, the number of formal workers reaches approximately 60 million, or about 40 per cent of the total working population.
Fitriana also warned that consequences for corporations must be determined proportionally. Determining the responsible party must be based on concrete actions, including who performed, ordered, or allowed the violation to occur.
“In short, the criminal act and the perpetrators must be specifically proven. Who performed, ordered, or allowed the violation to happen,” she said.
She added that for certain types of violations, financial sanctions could be an option, provided they are effective in restoring workers’ rights and preventing repeated violations.
“But in my opinion, it must be seen whether the type of violation warrants a sanction that is effective for restorative purposes [to restore rights] or preventive purposes [to prevent recurrence],” concluded Fitriana.