Stakeholder Engagement to Support Sound Industrial Relations

The relationship between stakeholder engagement and sound industrial relations is closely intertwined. When a company engages effectively with its stakeholders, it creates an environment of trust, collaboration, and mutual understanding. This can support good industrial relations by promoting open communication, identifying and addressing issues proactively, and fostering a culture of respect and fairness.

Stakeholder engagement refers to the involvement of individuals and groups inside and outside a company, such as employees, customers, suppliers, investors, and community members, in the company’s decision-making and operations. The importance of stakeholder engagement has only increased in recent years as businesses face growing pressure to operate in a socially responsible and ethical manner. Media research and case analysis show that many industrial dispute issues were caused by a lack of effective stakeholder engagement strategy because stakeholders, particularly employees and labor unions, often feel excluded or ignored in the decision-making process. This can lead to a breakdown in communication, a lack of trust, and, ultimately, industrial disputes. 

When stakeholders are not engaged effectively, they may feel that their concerns and needs are not being taken into account, which can lead to resentment and opposition to company policies or practices. For example, if a company implements a new policy without consulting its employees or their representatives, employees may feel that their opinions and needs were not considered. Employees likely feel undervalued and disengaged, resulting in decreased productivity, increased absenteeism, and even strikes or other industrial action.

On the other hand, effective stakeholder engagement can help prevent industrial disputes by ensuring that stakeholders are informed and involved in the decision-making process. This can increase trust and improve communication and outcomes for all parties involved. By listening to the concerns and needs of stakeholders, companies can make informed decisions that consider the perspectives of all parties, which can lead to a more collaborative and harmonious workplace.

To establish a robust stakeholder engagement strategy that supports sound industrial relations, the following steps can be taken:

  1. Identify stakeholders: The first step is identifying the stakeholders relevant to the company’s industrial relations. This includes employees, unions, suppliers, customers, government agencies, and local communities. The company should understand each stakeholder’s needs, interests, and concerns.
  2. Develop a communication plan: A communication plan should ensure stakeholders are informed about the company’s industrial relations policies and practices. The plan should identify the methods of communication, the frequency of communication, and the stakeholders who will receive the communication.
  3. Build relationships: Building relationships with stakeholders is critical to establishing good industrial relations. The company should engage in dialogue with stakeholders and seek their input on policies and practices that affect them. This helps to build trust and mutual understanding.
  4. Establish a grievance mechanism: The company should establish a grievance mechanism allowing stakeholders to raise concerns or complaints about industrial relations. The instrument should be accessible, transparent, and effective in resolving issues.
  5. Monitor and evaluate: The company should regularly monitor and assess its stakeholder engagement strategy to ensure it effectively supports good industrial relations. This includes measuring stakeholder satisfaction, identifying areas for improvement, and making necessary changes.

Following these steps, a company can establish a robust stakeholder engagement strategy that supports good industrial relations. This can lead to improved productivity, better working conditions, and stronger stakeholder relationships.

Emergency Government Regulation (Government Regulation in lieu of Law) No. 2 of 2022

The Government of Indonesia enacted Government Regulation in Lieu of Law (Perpu) Number 2 of 2022 concerning Job Creation on December 30, 2022. The Government asserted the Regulations in question answered the urgent need to anticipate and mitigate global economy conditions: recession, rising inflation, then the threat of stagflation. Some argue that the urgent need is not in line with the fundamental principle of emergency regulations (regulations that substitute law enacted solely by the President) which is the event of a pressing emergency that hinder the House of Representative to propose and discuss bill (of law). Further, trade union/s assert that Perpu No 2 of 2022 hampers the spirit of dialogue and discussion in laws and the derivative regulations making process. Even though, related the Job Creation Act No. 11 of 2020, the decision of the Constitutional Court (MK) ordered the involvement of the community/civil society in the re-discussion of the Job Creation Law and its operational regulations.

Article 185 of the Perpu No. 2 of 2022 stipulates that with the enactment of this Regulations, Law Number 11 of 2020
regarding Job Creation (State Gazette of the Republic of Indonesia Year 2020 Number 245, Supplement to the State Gazette Republic of Indonesia Number 6573), is revoked and declared as not applicable.

Indonesia Provincial Minimum Wage of 2023

All regional governments in Indonesia have announced the provincial minimum wage (UMP) for 2023. The 2023 UMP calculation refers to the Minister of Manpower Regulation (Permenaker) No. 18/2022 concerning the Minimum Wage Setting. The Permenaker stipulates a new formulation for the 2023 UMP calculation with a maximum increase of 10%, factoring in inflation, economic growth, and the variable α (alpha).

Following are the details of the 2023 UMP in all Indonesian provinces:

  1. Nanggroe Aceh Darussalam (NAD)
    UMP 2022: IDR 3,166,460
    UMP 2023: IDR 3,413,666 (7.8 percent increase)
  2. North Sumatra
    UMP 2022: IDR 2,522,609
    UMP 2023: IDR 2,710,493 (7.45 percent increase)
  3. West Sumatra
    UMP 2022: IDR 2,512,539
    UMP 2023: IDR 2,742,476 (9.15 percent increase)
  4. Riau
    UMP 2022: IDR 2,938,564
    UMP 2023: IDR 3,191,662 (8.61 percent increase)
  5. Jambi
    UMP 2022: IDR 2,649,034
    UMP 2023: IDR 2,943,000 (9.04 percent increase)
  6. South Sumatra
    UMP 2022: IDR 3,144,446
    UMP 2023: IDR 3,404,177 (8.26 percent increase)
  7. Bengkulu
    UMP 2022: IDR 2,238,094
    UMP 2023: IDR 2,418,280 (8.1 percent increase)
  8. Lampung
    UMP 2022: IDR 2,440,486
    UMP 2023: IDR 2,633,284 (7.89 percent increase)
  9. Bangka Belitung
    UMP 2022: IDR 3,264,884
    UMP 2023: IDR 3,498,479 (7.15 percent increase)
  10. Riau Islands
    UMP 2022: IDR 3,050,172
    UMP 2023: IDR 3,279,194 (7.51 percent increase)
  11. DKI Jakarta
    UMP 2022: IDR 4,641,854
    UMP 2023: IDR 4,901,798 (5.6 percent increase)
  12. Banten
    UMP 2022: IDR 2,501,203
    UMP 2023: IDR 2,661,280 (6.4 percent increase)
  13. West Java
    UMP 2022: IDR 1,841,487
    UMP 2023: IDR 1,986,670.17 (7.88 percent increase)
  14. Central Java
    UMP 2022: IDR 1,812,935
    UMP 2023: IDR 1,958,169 (8.01 percent increase)
  15. DI Yogyakarta
    UMP 2022: IDR 1,840,915
    UMP 2023: IDR 1,981,782 (7.65 percent increase)
  16. East Java
    UMP 2022: IDR 1,891,567
    UMP 2023: IDR 2,040,244 (7.8 percent increase)
  17. Bali
    UMP 2022: IDR 2,516,971
    UMP 2023: IDR 2,713,672 (7.81 percent increase)
  18. West Nusa Tenggara
    UMP 2022: IDR 2,207,212
    UMP 2023: IDR 2,371,407 (7.44 percent increase)
  19. East Nusa Tenggara
    UMP 2022: IDR 1,975,000
    UMP 2023: IDR 2,123,994 (7.54 percent increase)
  20. West Kalimantan
    UMP 2022: IDR 2,434,328
    UMP 2023: IDR 2,608,601.75 (7.16 percent increase)
  21. Central Kalimantan
    UMP 2022: IDR 2,922,516
    UMP 2023: IDR 3,181,013 (8.845 percent increase)
  22. South Kalimantan
    UMP 2022: IDR 2,906,473
    UMP 2023: IDR IDR 3,149,977 (8.3 percent increase)
  23. East Kalimantan
    UMP 2022: IDR 3,014,497
    UMP 2023: IDR 3,201,396 (6.2 percent increase)
  24. North Kalimantan
    UMP 2022: IDR 3,016,738
    UMP 2023: IDR 3,251,702.67 (7.79 percent increase)
  25. North Sulawesi
    UMP 2022: IDR 3,310,723
    UMP 2023: IDR 3,485,000 (5.24 percent increase)
  26. Central Sulawesi
    UMP 2022: IDR 2,390,739
    UMP 2023: IDR 2,599,546 (8.73 percent increase)
  27. South Sulawesi
    UMP 2022: IDR 3,165,876
    UMP 2023: IDR 3,385,145 (6.9 percent increase)
  28. Southeast Sulawesi
    UMP 2022: IDR 2,576,016
    UMP 2023: IDR 2,758,948 (7.10 percent increase)
  29. Gorontalo
    UMP 2022: IDR 2,800,580
    UMP 2023: IDR 2,989,350 (6.74 percent increase)
  30. West Sulawesi
    UMP 2022: IDR 2,678,863
    UMP 2023: IDR 2,871,794 (7.20 percent increase)
  31. Maluku
    UMP 2022: IDR 2,619,312
    UMP 2023: IDR 2,812,827 (7.39 percent increase)
  32. North Maluku
    UMP 2022: IDR 2,862,231
    UMP 2023: IDR 2,976,720 (4 percent increase)
  33. West Papua
    UMP 2022: IDR 3,200,000
    UMP 2023: IDR 3,282,000 (2.56 percent increase)
  34. Papua
    UMP 2022: IDR 3,561,932
    UMP 2023: IDR 3,864,696 (8.5 percent increase)

Why Does Distinction between Working Children and Child Labor May Put More Children at Risk?

About 160 million children ages 5 to 17 worldwide are engaged in work. In general, although it is difficult to pinpoint one single cause, poverty is one of the key drivers that pushes children to the world of work, paid or unpaid. By comparing the global poverty rate of 9.2% in 2021 with 8.6% in 2018, it is safe to assume that more children will be pushed to work as many families face financial challenges or uncertainty due to the COVID-19 pandemic. The International Labor Organization and UNICEF forecast that by 2022 the increase in poverty associated with the global pandemic will likely increase child labor by 8.9 million. In 2021, it was estimated that approximately 4.05 million children work in Indonesia. Of this figure, 1.76 million are deemed to be child labor.

Not all working children are considered child labor. According to the International Labor Organization, child labor is often defined as work depriving children of their childhood, potential, and dignity, harming their physical and mental development. Whether or not particular forms of work can be called child labor depends on the child’s age, the type and hours of work performed, the conditions under which it is performed and the objectives pursued by individual countries. Thus the distinction between child labor and working children is that child labor refers to work that is harmful to children. It is work that is mentally or physically dangerous and interferes with their ability to go to school, which can affect their income-earning potential as adults.

The distinction might stop in the theoretical or regulatory terminology only. Unlike household chores, which many experts assert are beneficial for children because it helps children learn responsibility and self-reliance, any structured and scheduled paid work is likely harmful physically and mentally to children. Typical workplace and/or work tools are designed for adults without reasonable accommodation for children. Some employers likely undervalue the children’s contribution to the workplace. As children have the lowest bargaining position in the world of work, if not non-existence, a person under 15 (or 18 in Indonesia) would not receive suitable payment and benefits for their effort. Over time, working children may put more interest in the material side of work, which can deter them from studying at school.

Moreover, it is safe to assume that working children constantly socialize with non-family-member adults in supervisory-subordinate relationships or as co-workers. Children’s interactions with adults are vertical interactions or interactions with more powerful others. Vertical interactions are likely to lead to a heteronomous morality, a morality oriented by the ideas of fear, obedience, and unilateral respect. Continuous vertical interaction may be detrimental to children’s development as they likely grow into adults deprived of equality, cooperation, and mutual respect, which ideas are usually obtained in horizontal interactions with their peers.

To conclude, children are somewhat at risk of harm from their workplace, although the type of work they perform falls into non-hazardous light work. Tacking the root causes that drive children to enter the paid work sphere without being tied to different definitions is crucial in deterring children from performing paid work. A comprehensive government policy to increase awareness, eradicate poverty, and provide quality public education that includes vocational/skills training may dissuade children from entering the workforce. Engaging many stakeholders may also help to make a sustainable change over time.

Why do trade union/s oppose Act No. 13 of 2022 concerning the Second Amendment of the Establishment of Legislation Act No. 12 of 2011?

The President of the Republic of Indonesia has officially signed Act No. 13 of 2022 concerning the Second Amendment to Act No. 12 of 2011 concerning the Establishment of Legislations. The Act, signed on Thursday, June 16, 2022, regulates the formation of rules through the universal method or omnibus. This revision was published in response to the Decision of the Constitutional Court (MK) No. 91/PUU-XVIII/2020, which annulled the Job Creation Act due to formality as the omnibus law method was not regulated in the Indonesia Establishment of Regulations system.

Amendments are made by adding a new article and article paragraph, namely Article 42A and paragraph 1 points a and b of Article 64.

Article 42A of the Act No. 13 of 2022 states:

“The use of the omnibus method in the preparation of a Draft Legislation must be specified in the planning document.”

Further, Article 64, paragraph 1 a and b explains:

“(1a) The preparation of the Draft Legislation, as referred to in paragraph (1), may use the omnibus method.

(1b) The omnibus method, as referred to in paragraph (1a), is a method of preparing laws and regulations by:

a. addibg new content material;

b. changing the content material that has relevance and/or legal requirements regulated in various laws and regulations of the same type and hierarchy; and/or

c. revoking laws and regulations of the same type and hierarchy by combining them into one legislation to achieve specific goals.”

Aside from deciding that the establishment of Act No. 11 of 2020 concerning Job Creation does not meet the formal requirements of the establishment of laws, the Constitutional Court, in the Decision No. 91/PUU-XVIII/2020 Paragraph 5, orders the legislators to improve (of Act No. 11 of 2020) within a maximum period of 2 (two) years since the Decision is pronounced (November 25, 2021), and if within that time limit no corrections are made, as consequence Act No. 11 of 2020 concerning Job Creation becomes permanently unconstitutional.

Legislators (House of Representatives and Government) interpreted the Constitutional Court’s Decision as an order to revise the formal requirements for the formation of laws and regulations instead of amending the materiality of Law no. 11 of 2020 or revoking Law no. 11 of 2020, in particular the Employment Chapter. 

Meanwhile, trade unions construe the Constitutional Decision as not merely covering a formality defect but also a materiality defect (thus, the Court orders a time-bound revision). Trade unions view the amendment effort as a formality justification for the omnibus law (method) to be regulated in the Indonesian legislative system. The main objective of the revision is that the contents of the Job Creation Act would remain effective without material content amended as per the Court order. Thus, trade union/s claimed that they would submit a formal and material judicial review of Act No. 13 of 2022 concerning the Second Amendment to Law Number 12 of 2011 concerning the Establishment of Legislations to the Constitutional Court. 

What needs to be considered is whether the amendment contains the principle of non-retroactive. The right not to be prosecuted based on retroactive law is a human right that cannot be reduced under any circumstances, as stipulated in Article 28I paragraph (1) of the 1945 Constitution (“UUD 1945”). This principle is known as the non-retroactive principle, which prohibits the retroactive application of laws.

Number 155 of the Annex to Act No. 12 of 2011 states that the entry into force of laws and regulations cannot be determined earlier than the time when they are promulgated.

If there is a strong rationale for enacting laws and regulations earlier than when they were promulgated (retroactive), the following should be noted (number 156 of the Annex to Act No. 12 of 2011):

a. new provisions relating to criminal matters, whether their type, weight, nature, or classification, shall not be applied retroactively;
b. details regarding the effect of the retroactive provisions on legal actions, legal relations, and inevitable legal consequences that already exist are contained in the transitional provisions;
c. the beginning of the entry into force of the Laws and Regulations is determined not earlier than when the draft Laws and Regulations become known to the public, for example, when the draft Laws and Regulations are listed in Prolegnas, Prolegda, and other draft Laws and Regulations.

Perhaps non-recroactive principle would be one the subject matters that the Constitutional Court would consider further when conducting a judicial review of trade union submission in question. Until the Constitutional Court makes its Decision, there is a lot of uncertainty regarding employment law reform and its implementation. What is almost certain is that the Job Creation Act saga continues.