The Indonesian government plants to hand over a revised employment law bill to parliament by early January. This is being done in an effort to boost employment in one of Southeast Asia’s biggest economies, said Finance Minister Sri Mulyani Indrawati.
The bill would try to ease the restrictive rules used under the 2003 Employment Law to recruit or lay off employees, Dr Sri Mulyani said at an economic forum.
Resolving issues with employment and foreign investment is one of the key promises that has been reiterated by President Jokowi. Alongside improvements to education, the revision of the politically sensitive employment law is at the top of the list of hopes that forest investors are keeping an eye on. It is these very same restrictive laws that have deterred these foreign investors from doing business in Indonesia.
The existing employment law includes some of the most generous severance pay rules in the world that investors have cited as a hindrance to formally hire staff.
“The existing employment market really (is) not creating easy job creation for new entrants,” Dr Sri Mulyani said.
The minister continued to explain that the number of people in the workforce is steadily growing on a year-by-year basis and is currently at around 110 million people. Unfortunately, the current employment law provided huge advantages to those already employed, leaving the new workers with relatively few options. The new bill would aim to create more equal opportunities for everyone involved in the workforce while also incentivising businesses to upgrade the skills of their workers.
Many trade unions and students have protested the review of employment laws ever since the President announced his intentions. Dr Sri Mulyani admitted that revising the law was among the most sensitive subjects the government was working on, but said it would try to provide an “even-handed approach” to appease both business and worker unions.
The changes to the employment law would be part of the so-called “omnibus laws” on job creation, which covers 11 diverse areas, such as regulatory simplification, rules on economic zones as well as research and development.
The term “omnibus laws” have been used by government officials for some time to refer to legislation that pulls together a multitude of diverse and unrelated areas to speed up the improvement and enrichment of the investment climate.
Dr Sri Mulyani said a separate “omnibus laws” on taxation issues, including a planned corporate tax cut, will be proposed to Parliament in the month of December.