Riyadi Suparno, Jakarta – Both employers and labor unions have come to the conclusion that the controversial 2003 labor law needs to be amended, but they differ markedly in their views on how to do so, making it difficult for them to agree.
Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said Thursday that the existing labor law had discouraged investment in labor-intensive industries.
"We in Apindo have tried to help attract investment into labor-intensive industries. But investments do not come because of this law," Sofjan said on Apindo's 58th anniversary.
Businesspeople consider the labor law has led to encouraging a high-cost economy, discouraging investment by making hiring and firing more difficult and expensive.
Sofjan said earlier that the cost of severance payments in Indonesia is the highest in the region, as high as 32 times the related monthly salary.
Labor unions said that the law put labor at a disadvantage, with no certainty as to the future.
The Confederation of Indonesian Prosperous Labor Unions (KSPSI) chairman Rekson Silaban argued that the law's rules on contracting and outsourcing had often been misused by employers and thus penalized workers, leaving them with no certainty as to their employment.
Employers apparently prefer to hire labor under contract or by outsourcing rather than by hiring full-time permanent employees. This way, Rekson said, employers could fire workers more easily, and worse still, without severance payments.
"They [employers] want lower severance payments; we also want some articles to be amended. So, both of us want this law to be amended. But we have not yet reached a compromise on how to amend the law," Rekson said.
To break the impasse, Sofjan Wanandi suggested that the government take the initiative to amend the labor law, which according to him, had created labor rigidities in the labor market.
Otherwise, he said, Indonesia will lose out in the era of free trade, especially with the coming-into-full-effect of the ASEAN-China Free Trade Agreement (ACFTA).
Manpower and Transmigration Minister Muhaimin Iskandar responded that the government would only initiate the drafting of the new labor bill when the employers and labor unions reached common ground on the amendment.
"If both parties can establish common ground, we are ready anytime to amend this law. Hopefully this year," he said during the celebration of Apindo's 58th anniversary, held at Apindo's new office in Kuningan.
To reach such common ground, Rekson suggested that both employers and labor unions should work together to hire a credible independent institution to make a thorough study of the law and its impacts on employment and business development in the country.
"What we have so far is that only one side makes its claims. Employers claim that this law has discouraged investment. But it's their point of view. We also have ours. So, let's have an independent institution make a thorough study and see what the real situation is," Rekson said.
Sofjan said that having an independent institution to make such a study should be acceptable to employers, but he noted that the problem lay with the fact that there was not enough mutual trust between labor and employers. Therefore, Sofjan said, Apindo under his leadership would try to help build trust with the unions and labor side.
"We employers cannot anymore treat labor merely as factors of production but more as our partners. This way, I hope we will build better trust with labor."