Omnibus Law Implementing Regulations: A Mixed Bag of Labour Reforms

With the Omnibus Law becoming effective on 2 November 2020, the Indonesian government has issued a series of regulations to guide its implementation, including what we consider to be a mixed bag of labour reforms. We highlight the key changes under these labour reforms that employers need to consider.

Since Law No. 11 of 2020 (the Omnibus Law) came into effect on 2 November 2020, the Indonesian government has issued a series of regulations to guide its implementation. The key implementing regulations covering labour are:

• Government Regulation No. 34 of 2021 on foreign manpower (GR 34), effective from 1 April 2021;
• Government Regulation No. 35 of 2021 on fixed-term employment, outsourcing, hours of work and termination of employment (GR 35), effective from 2 February 2021;
• Government Regulation No. 36 of 2021 on wages (GR 36), effective from 2 February 2021; and 
• Government Regulation No. 37 of 2021 on unemployment insurance benefits (GR 37), effective from 2 February 2021. 

Broadly speaking, the implementing regulations (at least labour aspects) make clear that the Omnibus Law is indeed a mixed bag. On the one hand, employers would be glad to know that a fixed term contract (FTC) may now be entered into for a longer initial term. Additionally, payment for early termination of an FTC and severance payments for certain termination grounds are considerably reduced. 

On the other hand, the Omnibus Law retains the complexities surrounding the termination process and even adds a further layer of difficulty relating to the exceptions for overtime payment. In addition, the expected relaxation of work permit requirements (ie RPTKA) for foreign employees is less significant than many had predicted. 

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