26 November 2020

Law No.11 of 2020 on Job Creation, commonly known as the Omnibus Law on Job Creation (“Omnibus Law”), was signed by the Indonesia’s President and promulgated on 2 November 2020.

One of the key ideas underpinning the Omnibus Law is that by reducing the many administrative and procedural obstacles that have become deterrents to investment in Indonesia (and foreign investment, in particular), there will be a significant boost in employment opportunities for Indonesian citizens. The Omnibus Law deregulates, streamlines, and simplifies many laws impacting investment, including Law No.13 of 2003 on Employment (“Employment Law”). The Employment Law has long been regarded as overly employee-friendly to the detriment of employers, and out of step with Indonesia’s competitor markets, making them more attractive investment destinations.

The Employment Law provides for an impressive number of employee benefits and entitlements that have, in turn, made the Employment Law less advantageous to employers, particularly due to its extremely generous and partly unregulated termination provisions. Although the Omnibus Law may have reduced the employer’s burden in certain areas, including the termination provisions, the high expectations of a significantly more employer-friendly Employment Law may ultimately not be met, depending on the contents of the many, as yet unpassed, implementing regulations. This article elaborates.

This is an extract of an article by Soemadipradja & Taher, an Indonesian law firm with which Allen & Gledhill has a strategic alliance. To read the full article, please click here.