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Trade Union says 25% wage cut in labour intensive industries won't stop sackings

Kompas.com - March 20, 2023

Ade Miranti Karunia, Jakarta – All Indonesia Workers Organisation (OPSI) Secretary General Timboel Siregar says that the recently issued Labour Minister Regulation (Permenaker) Number 5/2023 will not have an impact on the sacking (PHK) of workers.

The Permenaker regulates the adjustment of work times and wages in labor-intensive export orientated industries. According to Siregar, making such an adjustment will not prevent companies from carrying out sackings.

"I believe that the maximum wage cut of 25 percent in the Permenaker Number 5/2023 won't cause a decline in sackings. Currently, right, the majority of workers in labour-intensive companies, including export orientated ones, are contract workers (PKWT) or outsourced", he said in a press release on Monday March 20.

So, said Siregar, it is still easy to sack contract and outsourced workers. He said that the regulation just legitimises a cut in workers' wages and the payment of wages less than the stipulated minimum wage.

"I strongly suspect that Permenaker Number 5/2023 is compensation for the issuance of Permenaker Number 18/2022. I suspect there is a transaction of regulations being manipulated here", he said.

Siregar explained that Permenaker Number 18/2022 stipulates the formula for setting annual minimum wage increases and that this is different from the formula applied under the earlier Government Regulation (PP) Number 36/2021, and results in a higher average increase of more than 5 percent.

Setting the minimum wage increase using the formula in Government Regulation Number 36/2021 meanwhile, results in an average increase of only around 1-2 percent.

Then, the global inflation rate, said Siregar, is coming under control and the threat of a recession has already started to recede. This means that overseas demand for products from Indonesia will recover and grow until exports return to normal.

"So there are no cash-flow difficulties for export orientated companies. Moreover foreign currencies such as the American dollar continue to strengthen. This means that the amount obtained by foreign currencies is bigger and if exchanged for rupiah the amount in rupiah will be even higher", he explained.

On March 7, Labour Minister Ida Fauziyah signed Permenaker Number 5/2023 on Adjusting Work Times and Wages in Labour Intensive Export Orientated Industries Impacted Upon by Global Economic Changes.

Under this regulation it states that labour intensive industries have permission to pay workers only 75 percent of their wages. The regulation is effective for six months and is directed at five export industry criteria.

[Translated by James Balowski. The original title of the article was "Buruh: Permenaker Pemotongan Upah Tak Akan Berdampak pada Penurunan PHK".]

Source: https://money.kompas.com/read/2023/03/20/131100826/buruh–permenaker-pemotongan-upah-tak-akan-berdampak-pada-penurunan-ph