Ridwan Max Sijabat, Jakarta – With the Constitutional Court (MK) having recently banned all outsourcing practices, companies that make money by supplying workers to others now have an obligation to ensure the rights of the workers as guaranteed in their labor contracts.
The Manpower and Transmigration Ministry's industrial relations and social security affairs director general, Myra M. Hanartani, said on Monday that the court's ruling would provide legal certainty to all workers employed under an outsourcing system.
Normally, a company hires workers on a two-year contract. Based on the court's ruling, companies can only extend the contract for one more two-year term at the longest. By the end of the contract extension, the workers will receive an allowance or be offered permanent employment.
"The new ruling is effective for those contracts that don't stipulate the rights of workers, while companies that have inserted workers' rights into their contracts must revise them," she said.
Until now, companies receiving jobs or supplying workers to other companies under the outsourcing system have unilaterally terminated workers' contracts without offering any compensation, and then recruited them again for the same jobs with the same remuneration.
The ruling on temporary employment (PKWT) contracts states that companies under the outsourcing system must decide whether to terminate a contract with their workers and, if so, offer severance pay, or sign a new contract under permanent employment (PKWTT) regulations and respect each worker's rights in accordance with their respective periods of employment.
"Workers whose temporary employment contracts are terminated have the right to receive severance pay in accordance with the law, while those signing the non-temporary [continuous and supporting] contract must be treated like permanent workers. The latter have the right to receive increases in monthly salaries, allowances and social security benefits," said Myra.
She said she feared that many outsourcing companies would cease operations or dismiss workers who had been employed for four years to avoid paying them higher wages.
The Constitutional Court recently annulled Chapters 64-66 on outsourcing from the 2003 Labor Law, which it said contravened the Constitution, which mandates the protection of workers' rights as well as the improvement of their social welfare and human dignity. It also affirmed Chapter 59 pertaining to PKWT contracts, which that can be terminated within three years.
The court concluded the three chapters on outsourcing were not binding and could no longer be implemented because industrial relations between outsourcing companies and their workers were based on labor contracts rather than workers' rights, as stipulated in the Labor Law.
The court made the decision at the request of a trade unionist in Surabaya, East Java, who complained about job insecurity since many companies under the outsourcing system terminated labor contracts without offering any compensation to workers but then a month later, would rehire the workers on new contracts but only pay them the minimum wage.
Myra said that with support from the Manpower and Transmigration Ministry, she has delivered a circular to all provincial and regional manpower offices to disseminate the court's ruling and its implications for companies nationwide.
"Both regional officials and employers have to understand the spirit of the Constitutional Court's decision for the protection of contract-based workers," she said.
She added that the government would speed up the proposed revision of the Labor Law or issue a new regulation or ministerial decree on the implementation of the court's judgement in the field to avoid any confusion among employers and contract-based workers.
The law mandates a ministerial decree on industrial relations, labor contracts and workers' rights in implementing the outsourcing system in detail, but so far the decree has not been issued.