The
demonstrations on the 3rd October 2012 by labour unions in rejection of
outsourcing have paralyzed large parts of Indonesian industry and caused
countless losses. Outsourcing accounts for an estimated 16 million people or
40% of Indonesia’s total workforce yet it has become a taboo topic as the abuse
of the practice is symptomatic of the problems related to Indonesia’s rigid
labour laws. Therefore, the elimination of outsourcing will not solve the issue
of improving the welfare of labourers. Also, it does not tackle the issues of
corruption, hidden costs and infrastructure which cause high costs for
employers. Indonesia’s entrepreneurs and the private sector are also concerned
with the welfare of the people and want to be an engine of growth which creates
jobs and also provides protection for workers.
Firstly,
it is necessary to understand why some jobs are outsourced to third parties
which includes advantages such as improved efficiency and enabling a company to
focus on its core business. This method is already a global trend as it
provides solutions for dynamic, fast moving businesses. In countries such as
India and China business outsourcing is a common practice; the Philippines is
ranked the first provider of outsourced employment worldwide. In Indonesia,
outsourcing has only been implemented on a small scale but it provides
significant opportunities to secure work from overseas. The key is therefore
for responsible bodies such as the relevant ambassador and chamber of commerce
officials to seek out work that can be carried out in Indonesia such as within
data input, information technology and administrative processes.
The
demand that outsourced workers’ rights should be protected is fair and
justified. It is true that the perception of outsourcing by many Indonesians is
negative as the government has not been forthcoming in implementing outsourcing
regulations. The number of job opportunities compared to the amount of labour
available is also limited which is coupled with a lack of qualified workers so
the bargaining position of workers is weak. This situation is exacerbated by
certain businesses that are not concerned with workers rights and welfare in
their business practices. However, current labour laws (Manpower Law No. 13 of
2003) are also at the root of the problem as they provide both employers and
employees with little flexibility to end employment contracts and require high
levels of severance pay making it difficult to lay off staff which is why many
turn to outsourcing. The country’s unattractive labour laws also serve to put
off investors in key sectors such as manufacturing which the country needs to
create jobs and maintain GDP growth.
The
Constitutional Court decision 27/PUU/IX/2011 on Fixed Term Employment has added
to the complexity of the current outsourcing regime in Indonesia. The decision
deems parts of the Manpower Law unconstitutional as it does not include a
clause which protects the rights of workers if the company that engages the
outsourcing company which employs them decides to change suppliers. By
invalidating this article of the law, the court is effectively guaranteeing the
rights of workers through requiring a permanent employment agreement or by the
implementation of the Transfer Undertaking Protection of Employment (TUPE). The
TUPE serves to transfer the employment obligations of a worker to the successor
outsourcing company that chooses to use the worker in question.
The
government needs to take strict action against the illegal practices related to
outsourcing so that it may continue in a sustainable and fair way. The rules as
per the Manpower Law of 2003 which limit the implementation of outsourcing to
peripheral areas are clearly defined as cleaning, catering, security personnel,
support services in mining and petroleum industries and transportation; yet
many companies in Indonesia use outsourcing for core business areas to avoid
paying for fringe benefits. Therefore these rules need to be strictly enforced
by the government in all companies and without interpretation. The idea of
banning outsourcing is not necessary to tackle the issue and it should be
considered that if outsourcing was banned then upstream and downstream
activities would have to be undertaken by large companies which shuts out
smaller companies. Therefore, outsourcing actually has a role in encouraging
entrepreneurship and the development of local companies. It is also important
not to forget that outsourcing employs millions of people through mainly small
and medium enterprises.
In
conclusion, outsourcing must not be implemented with the goal of having lower
wages; rather it is to direct work towards competent third parties in order to
focus on a company’s core business. This focus allows a business to improve its
efficiency and productivity which has a positive impact on the welfare of its
employees. The government must ensure that outsourcing is implemented in such a
way that it does not pit the interests of workers against that of employers.
Without this, entrepreneurs may become reluctant to use local labour and prefer
to mechanise their processes which would have a detrimental effect on the
nation as a whole and especially on the youth.
The
Ministry of Manpower and Transmigration announced its plans on 10th October
2012 after the strikes to issue a new ministerial regulation regarding
outsourcing which take into account the demands of workers as well as
employers. The new regulation will ensure that outsourced workers receive
annual leave, holiday allowances and social security benefits. The regulation
will also limit the amount of time that outsourcing and labour supply companies
can hold a license from 5 years currently to 3 years. The licenses of such
companies will also now be subject to review every 6 months to ensure that they
are complying with the necessary laws and regulations.
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