Indonesian Parliament Passes New Labour Law Raising Severance Benefits; Employers Warn of Higher Labour Costs
JAKARTA — Indonesia's parliament passed a bill aimed at strengthening worker protections into law on Tuesday, October 6, providing higher severance benefits for terminated employees and unwinding some of the pro-business reforms introduced by the previous government. The bill was passed by a parliament overwhelmingly controlled by President Prabowo Subianto's coalition. Prabowo, approaching his second anniversary in office this month, has seen his approval rating fall sharply over public perceptions of a deteriorating economy.
The full text of the law has yet to be made public, but Manpower Minister Yassierli confirmed that severance allowances have been revised to the benefit of terminated workers and that employers could no longer 'easily' lay off workers on the grounds of cost efficiency. 'This bill reflects a balance between the protection of workers' fundamental rights and the sustainability of the business sector,' the minister told parliament after the vote. The new law also calls for a severance security programme to ensure companies have funds to pay allowances in the event of layoffs; local media reported the scheme would involve employers paying severance contributions to the state insurer BPJS.
Indonesia's economic growth has held above 5 percent, but its financial markets have been battered by capital outflows this year, with investors concerned about fiscal health as fuel subsidies surge and the government pushes ahead with Prabowo's costly populist programmes. Strengthening worker protections is part of the government's effort to make sure ordinary workers feel tangible improvements in income and security.
Employers have sounded a warning. The Indonesian Employers Association, which represents the business community in industrial relations, said in a statement late last month that the bill could deter formal hiring and hurt Indonesia's competitiveness because of higher labour costs; it did not immediately comment on the passage. For the many foreign and ethnic-Chinese businesses operating factories in Indonesia, the implementing rules — especially the rate and timetable of severance-security contributions — will be key to assessing labour costs ahead.
(Source: Compiled from Reuters reporting on)
Source: Reuters
Published by GSM · USA (original Chinese edition)
Photo: 印尼国会（人民代表会议）全体会议会场，Andylala Waluyo (VOA) 摄，公共领域（Wikimedia Commons）
