Ririn Radiawati Kusuma & Anugrah Rasita – Indonesian companies said on Thursday that they now had no choice but to brace themselves for higher labor costs in the wake of the Constitutional Court ruling that declared outsourcing against the Constitution.

"This would create more friction, but because this is a [Constitutional Court] ruling, we can't do anything. We will just have to be prepared," Hariyadi B. Sukamdani, a deputy at the Indonesian Chamber of Commerce and Industry (Kadin), said on Thursday.

The ruling issued on Tuesday by Constitutional Court Chief Mahfud MD was based on a judicial review request challenging the section of the 2003 Labor Law allowing outsourcing filed by Didi Supriyadi, the chairman of the Electricity Meter Reader Officers Alliance (AP2ML).

Mahfud said on Tuesday that chapters in the law governing temporary work and outsourcing conditions created uncertainty over the faith of workers. The court ruled that these were against the 1945 Constitution that said workers in Indonesia had "the right to a decent job and a decent life," which should be the basis of the Labor Law.

In the wake of the ruling, the government and the legislature have to revise the Labor Law.

Worker unions have for years been clamoring for the revocation of the outsourcing system, which effectively allowed contract-based work that did not include benefits such as social security, health insurance and other allowances. An estimated 60 percent to 90 percent of the labor market is outsourced.

Helman Sembiring, the former managing director of a shipping company, Samudera Indonesia, said businesses needed the outsourcing system to cut the cost of hiring workers in areas that are not part of its core business. "We have been outsourcing workers around 5 years ago, specifically for cleaning services, security, and truck operator," he said.

Helman said that implementation of the ruling would result in companies being disadvantaged, as "there will be a tendency where the workers will no longer preserve the value of productivity and will not work as optimal as they did when they were only a contract-based outsourcing workers."