Important Points of the New Government Regulation in Lieu of Law on Job Creation


The new Government Regulation in Lieu of Law No. 2 of 2022 regarding Job Creation (Peraturan Pemerintah Pengganti Undang-Undang No. 2 tahun 2022 tentang Cipta Kerja, Perppu Ciptaker”) was officially enacted by the government on 30 December 2022. This regulation repeals Law No. 11 of 2022 regarding Job Creation (“Job Creation Law”). The Government provides that the Perppu Ciptaker was issued in anticipation of possible economic and geological challenges and therefore committed towards amending the Job Creation Law prior to November 2023, which was the deadline set in Constitutional Court Decision No. 91/PUU-XVIII/2020.

The Perppu Ciptaker amends all four laws regarding manpower, much like the original Job Creation Law. However, in today’s BILLawFact we will start a series going over a few important points regulated in the Perppu Ciptaker.

Short Term Employment Agreement (Perjanjian Kerja Waktu Tertentu, “PKWT”)

The Job Creation Perppu does not regulate the contract period. It is interesting to note that workers have voiced their rejection towards this, reasoning that this allows employers to repeatedly create short term employment agreements. On the other hand, Law No. 13 of 2003 regarding Manpower (“Manpower Law”)  regulates the contract period.

Severance Pay

The Perppu Ciptaker does not amend the provisions regarding severance pay. Workers or laborers who experience layoffs will still receive severance pay, long service pay, and also compensation money in accordance with statutory regulations. Victims of layoffs can receive severance pay depending on their length of service, with a maximum severance pay of 9 times their monthly wage.

Foreign Manpower

Article 42 paragraph (1) of the Perppu Ciptaker explains, every employer who employs foreign manpower is required to have a plan for using foreign workers which is approved by the Central Government. It should be noted that this faced rejection from the labor party and requested that there must be written permission from the minister or official appointed to be responsible for foreign manpower.

Minimum Wage

The Perppu Ciptaker, much like it’s preceding regulations the Law No.11 of 2020 regarding Job Creation (“Job Creation Law”) and the Law No. 13 of 2003 (“Manpower Law) as last amended by the Job Creation Law, prohibites employers from paying their employees below minimum wage.

Article 88E paragraph (1) of the Manpower Law as set out in the Perppu Ciptaker sets out that the aforementioned minimum wage shall apply for employees with a working period of less than 1 (one) year.

However, Perppu Ciptaker adds Article 88F which regulates that in certain instances the Government is able to set a formula for the calculation of minimum wage that is different from the formula set out in Article 88D paragraph (2) which considers the variables of economic growth,inflation, and certain indexes. A Article Pasal 88C paragraph (1) of the Perppu Ciptaker obliges governors to determine the provincial minimum wage. The governor can further also regulate a regency/city minimum wage; however this amount must be higher than the provincial minimum wage.

According to Article 185 of the Perppu Ciptaker, employers who pay workers wages below the minimum wage are subject to imprisonment for a minimum of 1 year and a maximum of 4 years and/or a fine of at least IDR 100,000,000 and a maximum of IDR 400,000,000.

One thing worth noting is that the Ministry of Manpower has expressed their intention to revise Government Regulation Number 36 of 2021 concerning Wages. This is de to the fact that the aforementioned government regulation makes reference to the Job Creation Law, which is rendered invalid with the issuance of Perppu Ciptaker. While the Director General of Industrial Relations and Social Security has noted that they will amend the formula for calculating minimum wage to a more adaptive formula, they have not yet provided further information regarding the details of the formula.

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