New labor law
New labor law
Both workers and employers won some and lost some in the labor
law that was approved by the House of Representatives on Tuesday
after more than five years' delay that was marred by intermittent
labor demonstrations.
The law on the development and protection of workers' rights,
called the Manpower Law, will annul more than a dozen previous
laws, notably the controversial Manpower Law No. 25/1997 enacted
during Soeharto's authoritarian rule, and the so-called time-bomb
Labor Regulation No. 150 that was issued by then manpower
minister Bomer Pasaribu in June 2000.
Law No. 25, which has never been enforced, fully reflected
Soeharto's repressive labor policies that legalized and promoted
the exploitation of workers in the name of industrial
competitiveness to fuel high growth and to compensate companies
for the heavy costs of corruption.
However, Labor Regulation No. 150 swung the pendulum too far
in favor of workers, stifling new investment and prompting
expanding companies to hire temporary workers to circumvent the
rigid rules. The regulation reflected the euphoria of the
workers' newfound freedom of expression and association that
tended to drive trade unions into radicalism to advance their
interests.
The new law seeks a middle ground, striking a good balance
between the objectives of spurring new investment to create jobs
and of protecting basic workers' rights, as well as ensuring the
best welfare possible for workers within the context of the
Indonesian condition.
Obviously, neither party could be accorded their complete
demands.
Workers stood to lose the most if the legislation had been too
punitive toward companies, as this would have further dampened
the demand for workers in the already glutted labor market, with
almost 40 million unemployed and underemployed people and an
annual supply of 2.5 million new job seekers.
On the other hand, companies that inhumanly exploit their
employees never last, and cannot maintain their competitiveness
for long, not only because such a practice creates violent
industrial relations and disrupts operations.
Besides, such inhuman treatment of workers in the formal
economy is rather improbable under the current democratic era
that guarantees freedom of expressions and association, as the
international market has been shunning companies that do not
treat their workers properly.
The law guarantees minimum standards for decent working
conditions, the workers' right to strike, and severance and
compensation payments. It goes a long way toward providing what
workers badly needed -- stronger bargaining power -- through
regulations that protect the labor market from the rigors of the
demand-supply mechanism.
A freewheeling labor market would never work in the interest
of workers, given the unequal status of employers and employees,
and because in the bread-and-butter terms of jobs and wages, the
interests of employers and workers often oppose each other.
The law stipulates clear-cut, elaborate provisions on the
recruitment and rights of temporary workers and the outsourcing
of services to other companies, which all boil down to more
severe restrictions on such practices. For example, companies are
banned from outsourcing services that are part of their permanent
production process or core business. Likewise, temporary workers
cannot be hired for jobs that are an integrated part of the
production process.
However, the law also annuls current rigid rules, such as
those that ridiculously required employers to provide severance
pay and service benefits to workers who have voluntarily resigned
to seek greener pastures, and to those who have been found to
have commuted crimes.
The new law seems to be the best trade-off between the
interests of workers and employers that could be achieved by the
government and the House, out of a realization that an overly
protective legislation could kill the industrial goose that lays
the golden egg -- discouraging new investment in labor-intensive
businesses and prompting existing companies needing expansion to
hire temporary workers.
However, the new legislation should still be supplemented with
another law which will govern the settlement of labor disputes. A
bill on the step-by-step process of resolving disputes between
employees and employers through the labor court is still pending
at the House.
It is most urgent for the House to speed up deliberations on
the bill, as it will provide the legal basis for the
establishment of a labor court in every district court and will
also govern fund-raising by trade unions to support members on
strike, the instrument of last resort for workers to exert their
bargaining power.
However the labor court is to be designed, the trial
procedures and proceedings should be unambiguous, more expedient,
understandable to the parties involved, and bearable with regards
to costs incurred, than the arduous procedures currently applied
by the regional and central labor tribunals.
At the end of the day, though, the labor law is merely
written rulings that have yet to be translated into individual
company regulations and collective labor agreements. It has also
yet to be enforced in a steadily changing economic condition,
which has different impacts on the various industry sectors in
which businesses operate -- and provide jobs.
The management of peaceful industrial relations will still
depend very much on how capable company or factory trade unions
are in developing effective bargaining relationships with
employers; and how transparent and honest are employers with
regards to the condition of their businesses, and how willing
they are in allowing employee participation in the decision-
making process in matters related to workers' interests.