Thursday, July 12, 2007

Dismissal benefits draft raises doubts, confusion

National News - May 30, 2007

Ridwan Max Sijabat, The Jakarta Post, Jakarta

A draft government regulation on labor dismissal benefits has been criticized by employers and labor unions alike for overlapping with existing regulations and reducing protection for dismissed workers.

Bambang Purwoko of the privately run Pancasila University told a seminar Tuesday that, from an academic perspective, severance payments regulated by Article 156 of the 2003 Labor Law were part of workers' normative rights and should not be included in social security programs.

"As it has been practiced worldwide, we know that only workers with post-employment benefits will receive (payments) after their employment or dismissal. This benefit is a guarantee and in order to ensure its payment, both workers and employers are required to create a funding system," he said during a seminar on severance payments, labor dismissal benefits and post-employment benefits.

The government prepared the draft labor dismissal benefits regulation to help employers better comply with the harsh labor law.

Employers initially proposed the draft regulation as an alternative solution following workers' opposition to a proposed amendment of the labor law. Though now, employers insist the draft further complicates the already entangled labor dismissal benefits landscape.

Labor unions recently rejected the draft regulation, which they said would impose uncertainty and reduce protection to dismissed workers.

Reliable sources said the draft regulation would require that employers pay 4 percent of their workers' monthly salaries in monthly premiums to finance a labor dismissal benefits program, which is scheduled to be vested to state-owned workers' insurance firm PT Jamsostek in addition to its existing social security programs.

Bambang warned Jamsostek against accepting the proposed program, inferring that it could cause serious financial difficulties for the insurer in the case of massive labor dismissals.

Secretary general of the Indonesian Employers' Association (Apindo), Djimanto, questioned the overlapping laws and social security programs for workers, which, in their implementation, have posed financial difficulties to employers.

"So far, employers have been required to pay post-employment benefits (JHT) under the 1992 Social Security Law, severance and service payments under the labor law and pension benefits under the 1992 Pension Law," he said.

"We have also been confused by the 2004 National Social Security System Law, which has yet to take effect."

Jamsostek president Hotbonar Sinaga said the insurer would be prepared to run the additional program only if employers pooled their funds for the scheme. He said his company would provide labor dismissal benefits in accordance with the amount of funds pooled.

"Or, as an alternative solution, employers could hike their payroll to the post-employment benefit program so that dismissed workers could claim the funds in case of their dismissal," he said.

Questioned on the limited financial capacity of many employers, Bambang called for bureaucratic reform and the elimination of the high-cost economy to allow employers to improve wages and contribute more to social security programs.

"Despite the numerous social security benefits and labor dismissal and service payments, workers have remained less protected because most are paid less and labor costs are pressed to cover the high-cost economy," he said.


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