I

gnoring complaints from the business sector, the Manpower and Transmigration Ministry has issued a controversial decree that will limit the use of contract workers through the so-called outsourcing scheme.

Manpower and Transmigration Minister Muhaimin Iskandar said over the weekend that he had already signed on Thursday a revised decree on labor outsourcing and that it had been sent to the Law and Human Rights Ministry to be passed before its immediate enactment.

Under the decree, companies will be given six months to alter the status of their contract workers into permanent staff.

According to the planned decree, companies will not be permitted to outsource their core business, leaving outsourcing limited to five types of job: cleaning services, security, driving, support services on mining sites and catering.

“Businesses are required to comply with the Labor Law and respect workers’ normative rights on remuneration, allowances, annual leave and bonuses,” said Muhaimin.

“They are allowed only to subcontract their temporary jobs, such as building repairs, painting and card printing, which can be finished within several months,” he said.

Due to the inflexibility of the Labor Law, labor-intensive companies, such as footwear and textile firms, prefer to outsource their core work to third parties on a contract basis in order to avoid making them permanent employees.

Companies, meanwhile, argue that they employ contract workers to do core jobs because, under the existing Labor Law, it is costly and difficult to fire under-performing permanent staff.

According to a recent labor survey, conducted jointly by the Akatiga social research center, the Indonesian National Workers Union (SPNI) and the Friedrich Ebert Stiftung Foundation, around 20 million people are employed under the outsourcing scheme. The figure is higher than the 14 million workers registered by business lobby group, the Indonesian Employers Association (Apindo).

Most of the workers are concentrated around industrial estates in Banten, Batam, East Java, Riau
Islands and West Java.

The new decree will also prohibit companies from employing workers outsourced from third-party firms to undertake core jobs.

In response to the decree, chairman of the Confederation of Indonesian Workers Union (KSPI) Said Iqbal, and chairman of the Confederation of Indonesian Prosperous Labor Union (KSBSI) Mudhofir said the decree was a starting point toward improving the country’s poor labor conditions.

“The decree is not a victory for workers, but it is a major step toward repairing poor labor standards and conditions. Now, workers will be able to enjoy job security and their normative rights,” said Mudhofir.

The revision to the decree was drafted after the government bowed to pressure from unions following major rallies — some ending in violence — during the past couple of months in several industrial cities.

On several occasions, union organizers resorted to ransacking production facilities at firms that were not willing to allow their workers to join the rallies.

Due to the violence, a number of labor-intensive companies threatened to relocate their factories
overseas.

Aside from the outsourcing issue, the union members also demanded an increase of more than 35 percent to the minimum wage. All regencies and municipalities are currently drafting new minimum wages, which will come into force next year.

Apindo chairman Sofjan Wanandi said many firms that supplied manpower would challenge the decree at the Jakarta Administrative Court or the Supreme Court.

He also expressed his regret at Muhaimin’s decision to ignore employers’ aspirations during the National Tripartite Committee plenary session on Wednesday, when Apindo opposed the government’s plan to limit outsourcing jobs.

Businesses have repeatedly raised their concerns that the decree would increase the country’s unemployment and limit opportunities for people to work in the formal sector.

According to the Central Statistics Agency (BPS), around 41.4 million people, or 35 percent of the 118-million-strong workforce, are categorized as open or half-unemployed workers.