Constitutional Court Rules Against Outsourcing

The Indonesian Constitutional Courts recently made an important ruling that could improve the working conditions of contract workers throughout the country by annulling parts of the 2003 Labor Law that allowed companies to subcontract work in order to avoid paying benefits to workers.

From The Jakarta Post:

Millions of contract-based and outsourced workers will regain their rights, including monthly salaries, allowances, severance pay and social security benefits after the Constitutional Court annulled rulings on temporary workers (PKWT) and outsourcing set out in the 2003 Labor Law.

The Court’s panel of judges decided unanimously on Tuesday that all chapters on contract workers and outsourcing in the Labor Law were no longer effective because they contravened the Constitution, which assures the protection of workers and their rights.

The Constitutional Court annulled Chapters 59, 64-66 of the Labor Law at the request of Didi Supriyadi, chairman of the Power Meter Readers Union, who was outsourced by a partner company of the state-owned power company PT PLN in Surabaya, East Java.

Since the Labor Law’s enforcement in 2003, many small companies have employed contract-based workers in construction projects and plantations and many others outsourced a part of their work, such as security and cleaning services, to other companies to avoid providing health, meal and transportation allowances and social security benefits to cut labor costs.

Chapter 59 stipulates that labor contracts can be made for temporary work that can be finished within three months at the most while Chapters 64-66 allow companies to outsource parts of their work not included in their core business to other companies.

Separately, the director general for industrial relations at the Manpower and Transmigration Ministry, Myra Maria Hanartani said the ministry was preparing a circular to be disseminated soon to all companies, foundations and other institutions employing workers to comply with the Constitutional Court’s decision until the Labor Law was reviewed.

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