T

he Manpower and Transmigration Ministry is preparing a new decree that will make it difficult for companies to conduct outsourcing practices — a move that will affect 14 million workers and faces challenges from the private sector.

Manpower and Transmigration Minister Muhaimin Iskandar said that the government would only allow outsourcing for a small number of jobs, a move that employers said would be a violation of the labor law.

“Companies are not allowed to outsource their core business and outsourcing will be limited to five types of jobs; cleaning services, security, driving and supportive services on mining sites,” he said on Monday, after a meeting with representatives from labor unions that organized a national strike against outsourcing earlier this month.

Muhaimin took the initiative to hold the dialogue with the labor unions following an unsuccessful tripartite meeting over the issues of outsourcing, cheap labor and national social security programs.

He said the ministerial decree, which would be issued on Friday, requires all companies that provide outsourced services to comply with the 2003 Labor Law in their industrial relations.

“The decree will allow a transition period, of between six and 12 months, for all companies to make adjustments in line with the decree. There should no longer be companies that outsource their core business nor workers who are employed under a contract basis for a long time.”

Chairman of the Confederation of Indonesian Workers Union (KSPI) Said Iqbal and chairman of the Confederation of Indonesian Prosperous Labor Union (KSBSI) Mudhofir confirmed that a joint agreement had been made over the three crucial issues, including the planned issuance of the ministerial decree on outsourcing.

Neither considered the decree a victory for workers.

“With the planned ministerial decree, more than 1,300 outsourcing companies must make adjustments and more than 14 million workers now employed under the outsourcing practice will now face uncertainty over their status and will no longer be paid according to the local minimum wages,” Said said.

Indonesia faces continuing high levels of unemployment, with more than 15 percent of the workforce counted among the underemployed.

On the issue of wages, Muhaimin said that the government would stick to the newly issued ministerial decree on 60 wage components.

“With the adoption of 60 wage components, the provincial minimum wages [for 2013] will be based on the so-called minimum physical needs [KHL] of a single, unmarried worker. We will see a significant increase in the minimum wages,” he said.

Representatives from labor unions said they could accept the minister’s decision because during bipartite negotiations, employers and workers agreed to abide by the 60 wage components, which would likely translate into an increase of the minimum wage by early next year.

The new ministerial decree, issued in August, added 14 new components. Labor unions had previously demanded 80 components to be included.

Representatives from the unions said that they would continue to advocate the 80-component standard.

“We will fight for the use of the 80 wage components next year for the 2014 minimum wages,” said Mudhofir, adding that Muhaimin and labor unions agreed to increase the minimum wages to meet, at least, the minimum physical needs in industrial areas.

In the meeting, Muhaimin said he would hold a meeting with all governors, regents and mayors who oversee industrial estates to decide on the 2013 wage increase percentage.

He said that the minimum wage in Jakarta, in some of the industrial estates, could increase to at least Rp 2.4 million (US$252) in 2013 from the current Rp 1.5 million.

Contacted separately, employers rejected the government’s plan to tighten outsourcing regulations and raise the minimum wage.

Chairman of the Indonesian Employers’ Association (Apindo) Sofjan Wanandi said that by issuing the decree, the minister would violate the 2003 Labor Law that does not cap outsourcing.

“Several companies have threatened to file lawsuits against the minister at the Jakarta Administrative Court once the new decree is issued,” Sofjan told The Jakarta Post.

Sofjan said that Muhaimin’s plan was politically motivated and that the decision was made to improve his standing among workers.

He said that Muhaimin should have remained neutral in the dispute between employers and workers and that his partisanship would hurt the country’s investment climate.

“The government should facilitate dialogues that seek a solution to the wage issue through the tripartite wage commission,” he said.