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New "Worker Rights" law in Indonesia should be concerning for companies sourcing from the country

On October 5th, the Indonesian President, Joko Widodo, signed the Omnibus Bill on Job Creation into law, boosting that it would increase the ease of doing business in the country and attract foreign investment, leading to more jobs and economic growth. Doing business in Indonesia has for a long time been comparatively difficult, leading foreign manufacturers to set up shop in neighboring countries like Vietnam. While this bill has been praised by business leaders and foreign investors, as it eases some challenges, international companies with outsourced suppliers in Indonesia should be concerned about the human rights impact of the new law.

Labor groups and unions, who were left out of the consultation process, have been protesting the law en-masse, saying that the bill reduces worker rights, remuneration and job security. The law has attracted international attention as well, the American Apparel and Footwear Association, amfori, Fair Wear, Fair Trade Association and other industry leaders wrote a letter of concern to President Widodo on September 30th, stating many of the provisions "raise serious concerns regarding the continued protection of rights."


In the midst of a global pandemic, many retailers have suffered and canceled orders to Indonesian manufacturers, resulting in more and more employers laying off workers to make ends meet. Leading many to worry that the Omnibus Bill's drastic reduction in severance payments, will lead to the economic demise of workers and their communities. For those who are laid off, the new bill also revokes a worker's right to file a lawsuit for unfair termination, increasing worker risk. Many are surprised that despite COVID, the law, which was drafted before the pandemic, was still signed into law, "it is staggering that… the government would seek to further destabilize people's lives and ruin their livelihoods, so that foreign companies can extract wealth for the company," wrote the International Trade Union Confederation.

Regional minimum wage and certain paid leave requirements have also been scrapped for labor-intensive industries like manufacturing, which may result in in workers in some regions earning less than a living wage.

The bill also reduces outsourcing requirements, allowing employers to have significantly more contractors and keep workers on temporary on contracts for an indefinite period of time. The increase in contracted and temporary workers, who legally have far fewer rights, will result in the reduction of rights and leverage of formal employees and could pave the way for exploitative working environments.

Observers and experts believe the law will impact nearly every Indonesian. Indonesian workers in every supply chain will certainly be impacted and made increasingly vulnerable.

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