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Indonesia to clamp down on outsourcing

Publication Date : 09-10-2012


Indonesia has decided on the heels of last week's labour protests to impose tighter restrictions on the employment of workers through outsourcing.

Speaking at a hearing with lawmakers yesterday, Irianto Simbolon, the director general for industrial relations and social security affairs, said a planned revision to existing regulations would ban outsourcing companies from hiring workers on a contract basis.

"Outsourced workers must be employed permanently by the company that provides the outsourcing service," Simbolon said.

He added that the revision would also require outsourcing companies to give their employees holiday bonuses, 12 days annual leave and health insurance.

Better monitoring of outsourcing companies should also emerge from the revision as the government plans to reduce the business-permit renewal period for this type of service from five years to three years.

"We'll reduce the period to three years so that it will be harder for outsourcing companies to renew their permits. Plus, every six months we will audit them and revoke their licenses should they break any rules," he said.

A meeting was scheduled on Thursday to allow for final input into the proposed revisions, Simbolon said.

The revision to outsourcing rules is a response to a nationwide labour strike last Wednesday, involving some 2.8 million workers in 16 provinces who demanded the elimination of outsourcing systems because of years of unfair practice and exploitation.

In Pulogadung industrial estate in East Jakarta, the strike halted production activities at around 400 factories with estimated losses of 400 billion rupiah (US$41.6 million) according to industry associations.

Another strike in Batam, Riau Islands, also paralyzed 24 industrial estates in the region, causing 90 billion rupiah in losses.

Manpower agencies in several provinces stepped up their monitoring of outsourcing companies following the industrial action, leading to two outsourcing firms, Graha Duta Sarana in Aceh, and Orsindo Sejahtera, having their licenses revoked.

Several local administrations have also halted approvals of new applications for outsourcing business permits.

Indra Musnawar, the leader of the Textile, Garment and Leather Workers Federation, said that the government's proposed revisions would not address the real problem of the outsourcing system in Indonesia.

"The law says that outsourcing is the transfer of non-core job positions inside a company to other parties for the sake of efficiency. At present, there are many outsourcing firms that serve as brokers for firms that need workers [for their core positions]," Musnawar said.

He said that the government should solve the issue by enforcing the 2003 Labour Law and ensuring that outsourcing could only apply to positions that did not directly relate to core production activities.

Hariyadi Sukamdani, the Indonesian Employers' Association (Apindo) wages and social security division head said that Apindo members would comply with the upcoming revisions.

"We will review our current contracts with outsourcing service providers, and if we really need workers in the areas of our core businesses, we will seek to hire workers directly instead of using outsourcing firms," he said.

Sukamdani said that the government's major task would be to supervise the implementation of the planned rule. "There are rampant violations because of the lack of supervision," he said.


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