DISCUSSION O N C O N T R O V E R S I A L

C O N S T I T U T I O N A L NO.91/PUU-
XVIII/2020 A N D I T S P O T E N T I A L I M P A C T
O N I N V E S T M E N T IN I N D O N E S I A

D. Sasanti
J akarta, J anuary 2022
Brief over view CC Decision 91/2020
Nov 2020 End of Nov 2020 Feb 2021 Nov 2021 Nov 2023
The President of the The petition for The Indonesian On the 25th of November 2021, The Omnibus Law must be
Republic of Indonesia Omnibus Law’s judicial government has issued under the Constitutional Court corrected and amended within
signed and promulgated, review as stated in 51 implementing Decision No. 91/2020 the the Corrective Period, failing
Indonesian Constitutional Court
on 2nd November 2020, Constitutional Court regulations as a follow- which, it will be deemed as
(Mahkamah Konstitusi Republik
Law Number 11 of 2020 Decision No. 91 was up action for “Omnibus Indonesia) ruled on an application
“permanently unconstitutional”
concerning Job Creation brought by 6 Law”. The 51 for a judicial review of Law No. 11 from the expiry of the
(Law Number 11/2020), petitioners from various implementing regulations of 2020 on Job Creation Corrective Period (-> 25
also known asOmnibus Law backgrounds, including consist of 47 Government (commonly known as the November 2023).
a worker, a university Regulations (PP) and 4 “Omnibus Law”) with salient
student, a lecturer, a Presidential Regulations rulings affecting the
If this happens, all laws that
non-governmental (Perpres). constitutionality and validity of
were amended, repealed and/or
Law No. 11 of 2020 on Job
institution, and two superseded by Omnibus Law
Creation/Omnibus Law.
institutions relating to shall be automatically
adat communities Based on CC Decision 91/2020, reinstated and will again have
the Omnibus Law, which was full force and effect.
declared as “conditionally
unconstitutional”, will remain in
full force and effect during the
period of two years from its
issuance (the “Corrective
Period").
 W H A T IS O M N I B U S L A W ?
“Omnibus Law” is a general term that is used to describe any law that
seeks to amend or revoke several statutes in one bill.

Job Creation Law, is the actual title of the new Law No. 11 of 2020,
which happens to use the omnibus concept -> a law that seeks to
amend or revoke several statues at once.
 INDONESIA'S O M N I B U S L A W
The President of the Republic of Indonesia signed and promulgated, on 2nd November 2020, the Law Number 11of 2020 c onc erning Job Creation commonly known as the
Omnibus Law. The Omnibus Law consists of 11clusters:

The Indonesian government has issued 51 implementing regulations as a follow-up action for “Omnibus Law”. The 51 implementing regulations
consist of 47 Government Regulations (PP) and 4 Presidential Regulations (Perpres).
 INDONESIA'S O M N I B U S L A W
The Employment cluster of the Job Creation Law revises the 2003 Manpower Act and introduces significant changes to
rules around employment contracts, working hours and leave, wages and termination (among others). It specifically
revises articles or provisions in respect of :
Law No. 13/2003 on Employment
Law No.40/2004 on National Security Agency
Law No.18/2017 on Migrant Workers

All articles or provisions not revoked by Law 11of 2020 remain in force.

Subsequently, at the end of February 2021 , the Government issued four main employment related regulations to
accompany the employment cluster of the Omnibus Law (“Law 11/2020"):
1.The Government Regulation No. 34/2021 on the Utilization of Foreign Manpower ("GR No.34/2021")
2.The Government Regulation No. 35/2021 on Fixed Term Employment, Outsourcing,
Working Hours and Rest Times and termination ("GR 35/2021")
3.The Government Regulation No.36 /2021 on Wages ("GR 36/2021")
4.Government Regulation No.37/2021 on The Job Loss Security Program ("GR 37/2021")
Regulations Highlighted Provisions

GR 34/2021 a. Employers can hire foreign manpower who are still employed by other employers in the same position as (i) a director or commissioner or (ii) in the
the Utilization of Foreign vocational education and training, digital economy and oil and gas sectors (for the contractor under a cooperation agreement). The first employer must give
Manpower its consent to the second hiring.

b. All employers hiring foreigners must have an approved Foreign Manpower Utilization Plan (“RPTKA”), except for:
 members of the Board of Directors or Board of Commissioners who own a certain percentage of shares in the company;
 diplomatic and consular staff of a foreign state mission; and
 foreign manpower required for a production process which has halted due to an emergency situation, vocational programs, technology-based start-up
companies, business meetings or research for a certain time.

c. Foreign employees working for more than 6 months must be registered in the social security programs. Those working for less than 6 months must be
registered in an insurance program covering at least occupational accident risks.

d. Employers must appoint understudies for their foreign employees, except for foreigners who are (i) a director or commissioner, (ii) head of a representative
office, (iii) in the management, a patron or a supervisor of a foundation, or (iv) employed in a temporary position.

e. For failing to have an approved RPTKA, administrative sanctions may be imposed including a fine, a temporary suspension of the RPTKA approval, and the
revocation of the RPTKA approval. The amount of fine will be calculated per person per position per month. The fine will range from IDR6 million up to
IDR36 million.

f. GR 34/2021 will come into effect on 1 April 2021.

GR 35/2021 Fixed Term Contracts (“FTC”)

Fixed Term Employment,
Outsourc ing,W orkingHours a. FTCs are entered into:
and RestTimes and
termination 
for work the completion of which will not take very long, seasonal work, or work related to a new product, new activity or an additional product that is on
trial; or
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 Regulations Highlighted Provisions

 until the completion of certain work (work that is temporary in nature or one-off
GR 35/2021 work).

b. FTCs may be entered into for up to 5 years. FTC is extendable as long as the total term of the initial contract and its extension(s) will not exceed 5 years.

c. FTCs must be registered through the online system within 3 working days of signing. If the online system is not available yet, FTCs must be registered within
7 working days of signing.

d. Compensation must be provided to fixed term employees when their contracts end if they have worked for at least one month continuously. If an FTC is
extended, the compensation will be payable upon the termination or expiry of the extension of the FTC.

e. The formula for calculating the compensation depends on the term of the FTC, as follows:
 12 months continuously: 1 x the monthly salary
 1 month but less than 12 months: the service period/12 x the monthly salary
 more than 12 months: the service period/12 x the monthly salary

If one of the parties terminate the contract before the FTC expires, the employer must pay compensation calculated as above and the service period is
calculated as the period for which the employee has worked.

f. This compensation is not payable to foreign employees hired for a fixed term.

Outsourcing

a.The employment relationship between an outsourcing company and its employees is based on a written fixed term or permanent employment agreement.

b.The outsourcing company is responsible for the protection of its employees including their salaries, terms of work and any dispute arising out of the
employment agreement, company regulations, or collective labor agreement of the outsourcing company. This protection is provided for under the employment
agreement, company regulations or collective labor agreement.

c. FTCs between an outsourcing company and its employees must include a condition under which the employee’s continued employment is guaranteed in the
event of a change of outsourcing company so long as the outsourced work is still available. Otherwise, the outsourcing company will be responsible for
providing the employees’ entitlements, ie. compensation upon termination.

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 Regulations Highlighted Provisions

GR 35/2021
However, it remains unclear which outsourcing company will be responsible for providing the employees’ entitlement in the event of a change of outsourcing
company (ie. the original outsourcing company or the new outsourcing company even though it should be the employer).

d. An outsourcing company must be a legal entity and hold the relevant business license. The Indonesian government will set the requirements for the
business license under a further regulation.

Working Hours and Rest Periods

a.Working hours are 7 hours/day or 40 hours/week for a 6 working-day week or 8 hours/day or 40 hours/week for a 5 working-day week.

b.Companies in certain sectors may apply fewer working hours than the above, provided that:
 the work is completed within less than 7 hours/day or less than 35 hours/week;
 the working hours are flexible; or
 the work can be performed outside the work location.

The Ministry of Manpower (“MOM”) will issue further regulations on the above.

c. Overtime on normal working days can be performed for up to 4 hours/day or up to 18 hours/week. This does not apply to companies in certain sectors (eg.
oil and gas, mining companies).

Termination of Employment

a. Employers must make every effort to prevent termination, but if it is unavoidable, the intention and grounds for the termination must be conveyed to the
employee and/or to the labor union (if he/she is a member).

b. The notification of the termination and grounds must be delivered in writing at least 14 working days before the date of the termination of employment. If an
employee is terminated during his/her probationary period, the notification must be delivered at least 7 working days before the date of termination.

c. Upon receipt of the notification, if the employee accepts the termination, the employer must notify the relevant MOM office.

d. If the employee does not accept his/her termination, he/she must convey his/her reasons in writing within 7 working days of receipt of the notification.
e. If a dispute between the parties ensues, the industrial dispute settlement procedure must be followed.

f. Notification is not mandatory for employees terminated for urgent reasons.

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Regulations Highlighted Provisions

a.Salaries for part time employees can be paid by the hour. The formula for calculating the minimum hourly rate is: the monthly salary/126.
GR 36/2021 GR 36/2021 is silent on how the monthly salary is calculated.
Wages b.If the salary is calculated per day, the formula is the following:
 if the employee works for 6 days a week: the monthly salary/25
 if the employee works for 5 days a week: the monthly salary/21
c.The minimum wage only applies to employees who work less than a year. The salaries of employees who work for a year or more
should be determined according to the wage scale and structure applicable in the company.
d.There are two types of minimum wage, the provincial minimum wage and the regional/municipal minimum wage. The regional/municipal
minimum wage may be determined with certain conditions, in which regional/municipal minimum wage may be higher than the
provincial minimum wage. Further, the sectoral minimum wage is no longer recognized.
e. Deductions may be made from an employee’s salary for: (i) the payment of fines,
(ii) damages, (iii) salaries paid upfront, (iv) house/property rent rented by the employer for the employee, (v) the employee’s debt/ debt
payment installments, or (vi) salary overpayment. A deduction may be made for a salary overpayment without the employee’s
agreement, while for other deductions the employee’s written agreement is mandatory.

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Regulations Highlighted Provisions

a. Employers must register their employees in the Job Loss Security Program (JKP/Jaminan Kehilangan Pekerjaan)
GR 37/2021
The Job Loss Security b. Employees who are registered in the existing social security programs (eg. the occupational accident and old age security programs)
Program are automatically registered as of the issuance of GR 37/2021 on 2 February 2021. Employers must register new employees in the Job
Loss Security Program as well as other existing social security programs.

c. To be registered in the Job Loss Security Program employees must (i) be Indonesian citizens (ii) not have reached the age of 54
when registered, and (iii) have an employment relationship with the employer.

d. The contribution to the Job Loss Security Program is 0.46% of the monthly salary paid by the Indonesian Government and the Job
Loss Security Program funding resources (sourced from recompositing the occupational accident and death security contribution
which are paid by the employers). The current maximum amount of the salary for calculating the contribution is IDR5 million.

e. The benefits of the program comprise hard cash, access to job market information, and job training.

f. The benefits of the program will be provided when the employee is terminated, provided that the benefits have been paid for at least
12 months in the last 24 months and the contributions have been paid for at least 6 months into the BPJS Manpower security
programs before the termination of employment.

g. Employers who have failed to register their employees in the Job Loss Security Program when the employees are terminated must
provide the employees the hard cash benefits (ie 6x the monthly salary, with IDR5 million as the current capped salary) and the job
training benefits.

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Regulations Highlighted Provisions

h. Employees who are terminated due to their resignation, permanent disability, retirement or passing away cannot access
the benefits.
i. Employees’ entitlement to the access the benefits will dissolve if the employees :
(i) do not claim the benefits within 3 months of termination,
(ii) have new employment, or
(iii) pass away.

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K E Y P O I N T S O F C C DECISION NO.91/2020

Law No 12/ 2011 on the Fornation of Laws and Regulations as amended by Law
No. 15 of 2019 on same subject (the “Law No.12/2011”) provides that for a law
and/or regulation to be enacted, it must cumulatively fulfill all the principles set
out in the Law No 12/2011. The key problems considered by the Court in its

Formal Flaws in Ruling include, among others:

(i) the uncertainty of whether the Omnibus Law is new, amending or
revoking legislation under Law No. 12/2011;
the Drafting (ii) the significant changes to the substance of the Omnibus Law after the
joint approval of the House of Representatives (Dewan Perwakilan Rakyat)

Process and the President; and

(iii) the lack of the maximum possible and meaningful public participation in
the formation of the Omnibus Law.
K E Y P O I N T S O F C C DECISION NO.91/2020

The Constitutional Court decided that Law No. 11 of

2020 is conditionally unconstitutional. Due to the
process of its creation being contrary to the principles
“Conditionally of good legislation, the law is unconstitutional.

Unconstitutional”
However, this unconstitutional status is temporary.
This status is subject to the condition that the
Government must remedy the procedural flaws
within two years (“Corrective Period”). If this is done,
the law will be constitutional.
 K E Y P O I N T S O F C C DECISION NO.91/2020

To prevent legal uncertainties, the Constitutional Court also stated

that the government’s strategic actions and/or policies arising
from the Job Creation Law should be postponed/suspended
during the Corrective Period.
“Prevention of Legal
CC Decision 91/2020 also restricts the enactment of new
Uncertainties" implementing regulations of the Job Creation Law.
 The issues of CC Decision 91/2020

 Will the Job Creation Law (and its  What will the “suspension of
strategic actions/policies with broad impact”
implementing regulations issued prior to C C
as mandated by CC Decision 91/2020 entail?
Decision91/2020) remain valid?

 CC Decision 91/2020 does not expressly define

 In practice, Law no 11/2020 is remain
valid and will continue to be in force as
well as its implementing regulations. The
Constitutional Court did not revoke this
Law.
or qualify the term “strategic actions/policies
with broad impact”, and the implementation of
their suspension largely remains uncertain.
 The issues of CC Decision 91/2020
What is the consequence of the restriction
of the issuance of new implementing
regulations to the Job Creation Law
presumably, until the necessary revisions
have been made?
The restrictions to issue new implementing
regulations may cause a legal vacuum in the
implementation and practical application of
the Omnibus Law, which consequently may
affect future investments in Indonesia.
What happens to licenses that have
been issued if the government does not
make corrective amendments within the
Corrective Period ?
CC Decision 91/2020 does not state that
licenses issued based on the Job Creation
Law should be revoked based solely on CC
Decision 91/2020 due to its nature of
being declared conditionally
unconstitutional during the Corrective
Period. However, adjustments to these
licenses or approvals may be required.
In this case, it may be assumed that the
cancellation of licenses or approvals would
follow normal procedures.
 The issues of CC Decision 91/2020
The possibility of the amendment and/or revocation of some
provisions under the Job Creation Law in the course of the
corrective amendments to be made by regulators?.
It is possible that the other amendments (include substantial ones)
may be made in the Job Creation Law/ Omnibus Law, as the
corrected process would involve public participants (i.e., labor
unions, workers, academics, etc.)
Is the CC Decision 91/2020also affect business decision made under
the Job Creation Law/Omnibus Law , including involving foregin
restrictions, manpower, general tax aspects, etc?
During the Corrective Period the Job Creation Law/Omnibus Law and
the implementing regulations shall remain valid. Therefore, business
decisions made under the purview of Job Creation Law which regulate
foreign restrictions, Manpower (including on severance payments),
general tax aspects, and others, should remain in effect.
In the event that the Job Creation Law is declared
“permanently unconstitutional” – the company/business actor
need to adjust the company's actions or policies going
forward, in order to comply with the regulations that will
prevail at that time.
The issues of CC Decision 91/2020

What is the latest update?

The President of the Republic of Indonesia, Mr.

Joko Widodo, has promptly assured the business
community that the Indonesian government and himself
will respect and follow the mandates of CC
Decision 91/2020.
The government and the parliament have stated in the news
that they respect the Ruling and will adjust the Omnibus Law
accordingly. Notably, this agenda has been included in
the list of 40 Prioritized National Legislation
Program (Program Legislasi Nasional Prioritas) for
2022 as agreed on 7 December 2021.
Conclusion
The formation of the Omnibus Law was not perfect and the Government clearly needs to do
their homework in fixing the formalities necessary to ensure that the Omnibus Law is issued
properly.

The political and business communities seem to view CC Decision 91/2020 in a positive
light, with President Joko Widodo stating that the Indonesian Government would fulfill its
commitment for structural reform, deregulation, and de-bureaucratization. He also ensured
the public that the Indonesian government will continue to support the security and certainty
of investments made in Indonesia.

To date, the business community also seems to be optimistic that CC Decision 91/2020 would
not have a material adverse impact to the economy as it does not revoke the Job Creation
Law and its substantial provisions remain in effect.

As mentioned, seems that the regulators will make the necessary corrective amendments on
the Job Creation Law within the Corrective Period.