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Indonesia’s Omnibus Law was introduced and passed with good intentions. The purpose was to create jobs and increase foreign and domestic investments in the country. However, the law’s introduction was met with some discontent across Indonesia.
Protesters bemoaned that provisions in the law, such as those pertaining to minimum wage, favoured corporations rather than workers themselves. It also didn’t help that the Omnibus Law itself is a thousand-page document that’s overwhelming even for lawmakers themselves.
In order to better comprehend the Omnibus Law and its economic implications, Page Executive recently held an exclusive webinar specifically for business leaders in the manufacturing sector. However, even though the webinar covered a lot of grounds with regard to the Omnibus Law, there were questions left unanswered due to time constraints.
To tie up those loose ends, we have collated the most frequently asked questions about the Omnibus Law and tapped experts to answer those very questions.
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A: The Omnibus Law has already been approved and signed off by Joko Widodo, the President of Indonesia. At the time of writing, derivative laws have also been signed, which include 46 Government Regulations and four President Regulations. Since the Omnibus Law became effective upon the signing date, which was 2 November 2020, there is no waiting period planned.
A: The Omnibus Law is applicable for both new investors and existing companies.
A: Yes, but it only applies to startups with urgent need of expatriates and only for short-term stays that last no more than three months. Furthermore, this rule applies only to specific technology- and vocational-based sectors, business visits, as well as equipment installation. For longer-term hires of expatriates, an Expatriate Hiring Plan (RPTKA) is still required.
A: Yes, the Omnibus Law has already been signed by Joko Widodo, the President of Indonesia, and is now legitimate for implementation.
A: Yes, the Manpower Law No.13/2003 is still valid, unless it is revoked by the new law or the derivatives law. Several chapters within Law No.13 have been revoked or improved upon, but the rest remains the same.
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A: Base your severance pay calculations on the Omnibus Law (UU No.11 /2020) and its derivative law No.35/2021.
A: When a law is implemented, it becomes normative. In other words, what’s stated in the law becomes the expected minimum amount given to employees. However, if the company is able to afford better benefits, it is up to the company itself to do so.
A: Defer to the Omnibus Law for calculation and benefits. There is a specific derivative law that pertains to termination/retirement benefits.
A: The law states that all valid contracts must conclude before a new one can be renegotiated or resigned.
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A: We have not come across any company that has entered or invested in Indonesia specifically because of the Omnibus Law. With that said, there have definitely been more discussions around setting up businesses in Indonesia.
A: Automation requires further capital investments. Given the current pandemic, most manufacturing would rather make full use of the resources that they currently have.
A: We are indeed seeing a lot of movements specifically in the Chemical Manufacturing, Packaging and Logistics sectors. Most of these senior leaders, especially expatriates, are seeking new opportunities due to several reasons, such as restructuring and redundancies, as well as personal reasons to return to their home countries.
A: Yes, we believe that the Omnibus Law will replace the older, more inflexible labour rules that greatly disadvantaged employers. The amended provision will offer more flexibility when hiring contractors or outsourcing workers, which will in order help companies adapt to change.
A: We have not seen any drastic changes as of the time of writing. However, a growing trend on the Manufacturing and Logistics fronts is that Indonesian Managers and Directors are holding more regional roles that cover other Southeast Asian countries while being based in Indonesia. Previously, these roles would be based mainly in Singapore, Malaysia or Thailand.
Visit our management advice centre for more insights today.
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