Monday, January 22, 2007

Govt, employers, workers closer to dismissal benefits scheme

Ridwan Max Sijabat, The Jakarta Post, Jakarta

Employers will be able to breathe easier, the government can hope for more investors in the future and workers need no longer be quite so worried about being laid off once an independent institution to determine severance pay for dismissed workers is established.

The three sides are still discussing the shape of the new scheme -- the severance benefits program -- and which institution will be designated to manage it.

Vice President Jusuf Kalla said the government would issue a regulation on the new scheme, which is expected to help reduce the financial burden on employers, improve the investment climate, create better industrial relations and provide more security for workers.

"The President (Susilo Bambang Yudhoyono) has ordered Manpower and Transmigration Minister Erman Suparno to prepare the new scheme and wants him, along with the employers and labor unions, to finalize it within three months," Kalla said after addressing a meeting Friday with officials from the Manpower and Transmigration Ministry.

"The government could offer the new program through a public tender or seek the approval of workers and employers to appoint (state-owned insurance firm) Jamsostek to take charge of it," he added.

The agreement was reached after prolonged deadlock between the employers and government on the one side, and workers and labor unions on the other, over the proposed revision of the 2003 Labor Law, which requires employers to cough up huge sums in severance and long-service payments to dismissed workers, including white-collar employees.

The legislation has made overseas investors reluctant to invest in Indonesia and, since its enactment in 2003, Indonesia has seen very little growth in foreign direct investment.

In support of the government, employers have prepared a draft law that requires employers to provide long-service and severance payments to workers on gross monthly wages of Rp 1 million (US$110) or less, and allows employers to hire part-time workers for their core operations.

The draft law was greeted by massive labor rallies -- which reached their peak last May Day -- demanding that the government drop it and seek an alternative solution so as to ensure job security. The unions blamed the unconducive business climate on the high cost of doing business here, and the absence of security and legal certainty for investments in Indonesia.

In response, the government asked four state universities to evaluate the 2003 legislation and identify the problems hindering investment growth. The universities' recommendations did not propose a review of the labor legislation, but instead recommended that the government improve the country's infrastructure, issue a new investment law, review the tax legislation and reform the bureaucracy.

The government's proposal to review the labor legislation was part of a series of proposed actions designed to improve the investment climate, as stipulated in Presidential Decree No. 6/2006.

Separately, labor unions and employers confirmed the tripartite agreement, but were still at odds over who would pay for the scheme and what its ceiling would be.

Three major unions -- the Confederation of All-Indonesian Workers Unions (KSPSI), the Indonesian Prosperous Labor Union (KSBSI), and the Free Trade Union (ICTU) -- are demanding that the employers pay for the scheme and that it should cover all workers on monthly wages of up to Rp 15 million. Meanwhile, the employers have proposed that the premium be shared, and that the scheme only cover blue-collar workers, or those earning less than Rp 2 million per month.

The secretary-general of the Indonesian Employers Association, Djimanto, said that despite the differences, both sides have agreed that the scheme would be degressive in nature.

"The less the workers are paid, the more they will receive in severance payments when they are dismissed. Also, we want workers to pay less in premiums, as they do in the case of the four social security programs run by Jamsostek," he said.

He said he was optimistic that the three sides would soon reach an agreement on the scheme's ceiling and its financing so that it could be put into effect by June of this year.



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