Jakarta – The revision of the labor law is vital to provide a more stable labor system that would lead to more jobs from the expected inflow of labor-intensive investment, an employers' group says.

Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said the planned revision was aimed at new job creation without disturbing the current workforce, despite labor union arguments it puts workers at a disadvantage.

Apindo contends the 2003 Labor Law is slanted in favor of workers' rights and has been an obstacle to new investment, aside from legal uncertainty and complicated bureaucratic procedures.

The argument contrasts with a World Economic Forum survey cited by the Centre for Strategic and International Studies researcher Medelina K. Hendytio, which ranked the law seventh in obstacles to investment.

Sofjan also said several domestic companies had moved their production base to more competitive countries like China and Vietnam. "This revision is not only aimed at attracting foreign investors, but also (bringing back) local companies that have gone abroad," he said.

For the private sector, the group says there are five important issues to be addressed in the revisions, including the seeking of a less burdensome severance pay system. Labor unions say the proposed revisions undermine the interests and welfare of workers.

"Currently, it is very burdensome for companies to have to pay severance pay up to 30 times a worker's wage, even for workers fired for criminal acts," Apindo secretary-general Djimanto said.

Many companies have opted for using contract workers because of the risk of huge severance payment payouts, he added. "Asking for a less burdensome severance pay regulation doesn't mean that we want to avoid paying it," Sofjan said.

Apindo labor law revision negotiating team member Anton J. Supit said that in China, the maximum amount of severance pay was 10 times monthly pay, in Vietnam six times and in Thailand 12 times.

Employers are also seeking a more consistent wage system, outsourcing flexibility as well as clear regulation on labor protests.

Sofjan said any disagreement about the proposed revisions should be addressed in tripartite discussions instead of voiced in street demonstrations. Apindo, as a representative of the business sector, has proposed a discussion next week with the government as well as labor unions on the proposed revisions.

"We are not trying to hassle those who have jobs but instead trying to provide work security for the 65 percent of our working population outside the formal sector," he said.

According to the Central Statistics Agency, 11.19 million people were unemployed as of last year.

Points of contention in revising the Labor Law

I. Current Law

1. Contract-based work

a. Chapter 59 on labor contract

• A contract period lasts for two years and can be extended for another two years
• It cannot be implemented for permanent jobs

b. Chapter 65 on labor protection

• Labor protection and job standards are at least similar to those in the law
• Employers are allowed to outsource temporary work to other companies

2. Leave

Chapter 79: Sabbatical leave is for at least two months and can be taken in the seventh and eighth years of employment. It is effective only for workers in certain companies and regulated in a ministerial decree

3. Remuneration

Chapter 88: Minimum monthly wages are set on the basis of minimum physical needs, with additional considerations of company productivity and economic growth 4. Industrial action Chapter 142: Sanctions on illegal labor strikes are regulated in a ministerial decree

5. Dismissals

1. Chapter 156 on severance pay

a. Employers are obliged to pay severance pay for dismissed workers

b. Severance pay amounts to a maximum nine times the worker's monthly wage for those employed for eight years or more

c. Service pay amounts to a maximum 10 times the worker's monthly wage for those employed for 24 years or more

d. Housing and medical allowances are set at 15 percent of severance and/or service payments

2. Chapter 161: Workers dismissed for violating company regulations and collective agreements after being reprimanded three times consecutively have the right to receive service and severance payments and allowances as stipulated in Chapter 156

3. Chapter 164: Workers dismissed because of a merger receive severance and service payments and allowances of twice the amount as stipulated in Chapter 156

II. Revised bill

1. Contract-based work

a. Chapter 59 on labor contracts

• The period of the labor contract is five years at the longest and cannot be extended
• A labor contract can be implemented for all kinds of jobs

b. Chapter 65 is abolished

• Employers are allowed to outsource part of, or all, of their core business to other companies

2. Leave

Chapter 79: Besides annual leave, employers could grant sabbatical leave to deserving workers, as regulated in company regulations

3. Remuneration

1. Chapter 88: The government sets the minimum wage as a safety net after considering the financial condition of small-scale firms

2. Chapter 89: Employers are obliged to set a remuneration system

4. Industrial action

Chapter 142:

Alternative I: Workers taking part in illegal strikes can be dismissed without any severance pay

Alternative II: Workers taking part in illegal strikes can be prosecuted

5. Chapter 156 on labor dismissals

1. Similar

2. Severance pay amounts to seven times the monthly wage for those employed for six years or more

3. Service payment amounts to six months the monthly wage for those employed for 25 years, or more.

4. Dismissal process refers to Law No. 2/2004 on labor court

III. Apindo:

1. Contract-based work

a. Chapter 59: Labor contract is based on real need

b. Severance of contract (by employed): Workers are obliged to pay any losses to employers

2. Vacation: Similar

3. Remuneration:

• Minimum wages are at least accepted as safety net measures
• Regulation on minimum wages can be postponed through bipartite negotiations

4. Industrial action

• Similar

5. Dismissals

1. similar

2. Severance pay amounts to a maximum five times the monthly wage

3. Service payment is phased out

4. Dismissal process is simplified