Legal Insights

Constitutional Court Ruling 168 

Constitutional Court Ruling on Case Number 168/PUU-XXI/2023 (“Ruling 168”) has altered several provisions in the Indonesian manpower law, as regulated under Law Number 13 of 2003 on Manpower, last amended by Law Number 6 of 2023 (“Manpower Law”), as follows: 

(1) Foreign Manpower 

The legalization of the Foreign Manpower Utilization Plan (i.e., a company’s plan to employ foreign personnel) is now to be exercised by the Ministry of Manpower, and the employment of foreign manpower must take into consideration the preferential use of local Indonesian manpower.  

(2) Fixed Term Employment 

The duration of a fixed-term employment agreement (including any extensions) shall not exceed five years, and the agreement must be made in writing, using the Indonesian language and Latin script. Previously, the Manpower Law did not set a maximum term. 

(3) Outsourcing 

The minister is to designate specific tasks, based on the type and field of work, that may be outsourced to third parties. 

(4) Rest Time 

Employers must provide two days of weekly rest for employees working five days per week. The law does not specify whether the two rest days must be consecutive. 

(5) Long Rest Time 

Certain companies, such as those involved in energy, mineral, or oil exploration in remote areas, are required to provide extended rest periods as stipulated in the employment agreement, company regulations, or collective labor agreement. 

(6) Right to a Decent Living 

Companies must ensure that their employees' income meets a livable standard for themselves and their families, covering necessities such as food and beverages, clothing, housing, education, healthcare, recreation, and old-age security. This standard will be aligned with the regional minimum wage determined by the government. Under the Manpower Law (prior to Ruling 168), a minimum regional wage was not specified. 

(7) Involvement of the Regional Wage Council in Establishing Wage Policies 

In establishing wage policies, the central government must involve the respective regional wage council, which is established by the regional government and includes representatives from such regional government. 

(8) Wage Structure and Scale 

As part of the wage policy, the wage structure and scale are to be made proportional. 

(9) Sectoral Minimum Wages 

Governors are required to stipulate/establish sectoral/local minimum wages at the provincial level (optional for regencies/cities).  

(10) Minimum Wages Index 

Minimum wages must consider certain indexes that represent a variable reflecting the contribution of labor to the economic growth of the respective province or regency/city. 

(11) Certain Circumstances in Determining the Minimum Wages 

The Government, in a ‘certain circumstance’, can determine a minimum wage that is different than in point 10 above, provided that the ‘certain circumstance’ includes, among other things, natural or un-natural disasters, including extraordinary conditions of the global and/or national economy as determined by the President in accordance with the provisions of the law. 

(12) Wages Bargaining above the Minimum Wage 

Bargaining on wages should be determined based on an agreement between employers and workers in the company or the labor union of the company. 

(13) Wage Structure and Scale Thresholds 

Determining the company's wage structure and scale must now take into account the company’s capabilities and productivity, as well as job classifications, positions, length of service, education, and competencies. 

(14) Bankruptcy or Liquidation 

In bankruptcy or liquidation proceedings, the rights of workers/laborers shall take priority for payment over all creditors, including "preferred creditors," except for secured creditors.  

(15) Termination of Employment 

Employment termination can only proceed after obtaining a legally binding decision from the institution responsible for resolving industrial relations disputes (i.e., the industrial relations court). 

(16) Obligations during Industrial Relations Disputes 

 The obligations of both the employer and the employee to one another must continue throughout an employment-related dispute until such dispute resolution process reaches a legally binding decision. 

(17) Severance Payment 

 In the event of employment termination, the employer must provide a severance payment based on the minimum calculation stipulated under the Indonesian Manpower Law. Previously, the Manpower Law did not specify that the calculated amount would constitute the minimum severance payment. 

Court Recommendation 

In addition to the above ruling, the Constitutional Court urges lawmakers to form a new consolidated manpower law comprising the provisions of both the old manpower law (i.e., the manpower law prior to the enactment of the Omnibus Law) and the new Manpower Law no later than two years after the issuance of the court ruling on October 31, 2024.