Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation: Material Changes in Employment Laws

As mandated by Constitutional Court Decision No. 91/PUU-XVIII/2020 dated 25 November 2021 (“Constitutional Court Decision 91”), Indonesia has issued Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation ("Perppu 2/2022”) (see our previous article here).

In Constitutional Court Decision 91, the Judges have instructed the Government of Indonesia and the House of Representatives (Dewan Perwakilan Rakyat or DPR) to make the necessary improvements and/or revisions to Job Creation Law so that the content would conform to the provisions of the 1945 Constitution within no later than two years after the issuance of Constitutional Court Decision 91. To avoid the absence of laws and inadvertent reversion to the previous regulatory regime, Perppu 2/2022 was issued on 30 December 2022 as the “emergency” measure. As a reference, a Perppu or Government Regulation in Lieu of Law could be stipulated by the President of Indonesia in a precarious situation forcing the government to act quickly and precisely. Such action is still subject to the supervision of DPR as any Perppu must be passed by DPR.

In this article, we will address the material changes in Job Creation Law under Perppu 2/2022, specifically in the employment section.

Material Changes in Employment Law based on Perppu 2/2022

Specific Matter Job Creation Law Perppu 2/2022
Outsourcing Article 64 of Law No. 13 of 2003 on Manpower ("Manpower Law”) is entirely deleted. It iterated that a company could distribute parts of the works or provisions of the relevant worker’s services to another company through a written outsourcing agreement Amends Article 64 of Manpower Law to allow a company to distribute parts of the works to other companies through written outsourcing agreements. The “parts of works” will be further promulgated through government regulation.
Minimum Wage Calculation Adds Article 88D (2) to Manpower Law, which provides the minimum wage calculation based on variables of the economic growth or inflation. Adds Article 88D (2) to Manpower Law to include “certain indexes” as parts of the minimum wage calculation.
N/A Adds Article 88F to Manpower Law to authorize the Indonesian government to provide a minimum wage calculation that is different from the one under Article 88D (2), for specific reasons.

Transitional Provisions and Concluding Remarks

Based on our reading of Perppu 2/2022, the draft is similar to the previous Job Creation Law. It provides amendments on various previously enacted laws.

Please note that Perppu 2/2022 is effective starting 30 December 2022. The previous Job Creation Law is deemed revoked and declared invalid. However, all implementing regulations that have been amended by Perppu 2/2022 shall remain valid as long as the relevant regulations are not in contravention of Perppu 2/2022. Furthermore, any implementing regulations of the previous Job Creation Law shall remain valid, as long as it does not contravene Perppu 2/2022.

Given the changes in various sectors under Perppu 2/2022, the government will, most likely, issue new implementing regulations before the election season later this year.

The article above was prepared by Marshall S. Situmorang (Partner) and Audria Putri (Senior Associate).

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.