In the post–Covid-19 period, the Russia–Ukraine conflict in Europe, the Israel–Palestine conflict, the emergence of new economic blocs such as BRICS (Brazil, Russia, India, China, South Africa), and the economic downturn—including inflation experienced by several developed nations such as Greece and Argentina—have collectively delivered significant economic shocks across countries. These impacts include a decline in consumer purchasing power, rising raw material costs, and other disruptions.
The same pressures have been felt by Foreign Investment Companies (PMA) and Domestic Investment Companies (PMDN), particularly those that rely on imported raw materials and/or operate under production licenses for export-oriented goods (especially for European and American markets). Several companies have ceased operations entirely, while others have survived by undertaking fundamental corporate restructuring measures, including workforce downsizing, wage scale adjustments, accelerated technological transformation—from labor-intensive to modern operations—relocation to regions with lower minimum wages and/or new industrial zones, and other strategies.
From 2019 to 2024, we have assisted numerous companies in adopting various restructuring formats to preserve business continuity. We have also represented many workers in securing the best possible settlements in employment disputes and/or terminations resulting from restructuring or company closures.
The Indonesian Government’s efforts to boost the national economy—through investment facilitation initiatives under Law No. 11 of 2020 on Job Creation and its subsequent regulatory developments—were met with strong resistance from the labor community. Workers argued that the Job Creation Law undermines labor rights, benefits large corporations, facilitates unilateral termination of employment (PHK), increases the risk of lower minimum wages, and opens the possibility of perpetual contract work (without clear pathways to permanent employment).
Following the Constitutional Court Decision No. 168/PUU-XXI/2023 on the judicial review of several provisions of Law No. 6 of 2023 (which ratified Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation), several articles were granted conditionally constitutional status with constitutional interpretations. These include Article 42(4) in Article 81 point 4 of Law No. 6 of 2023: emphasizing the prioritization of Indonesian workers in the employment of foreign workers. Article 56(3) in Article 81 point 12 of Law No. 6 of 2023: clarifying that the completion period for a specific job under a Fixed-Term Employment Agreement (PKWT) cannot exceed 5 (five) years, including extensions.
This decision is viewed as restoring legal certainty and providing new hope for workers regarding employment contracts, prioritization of Indonesian labor, and fair wages. Given the dynamic regulatory landscape in Indonesia, professional attention is essential. Our experienced advocates provide comprehensive legal protection for both companies and employees in the field of employment law. Our team has in-depth knowledge of the legal requirements applicable to human resource management, employer–employee relations, and engagement with labor unions, aiming to minimize conflict between employers and workers. Our advocates are available for consultation in both Indonesian and English.
We are well positioned to provide holistic solutions for all your Employment Law needs.