Why the Omnibus law is controversial in Indonesia

The Omnibus law, also known as the job creation bill, was officially passed on 5th October 2020. It aims to create more jobs and raise foreign and domestic investments by reducing regulatory requirements for businesses. This means businesses can gain permits quicker and easier, and with that, hire locals faster. 

However, this law has not been well received by local workers, as they feel it will compromise their social security, income security, and job security even though it may boost foreign investments. 

Here’s a look at 6 things about the Omnibus law that has stirred protests, which in some cases, have led to riots, across the country: 

1. Sectoral minimum wage is abolished, leading to potentially lower incomes for workers

Image credit: @wind_business 

The Omnibus law abolished the sectoral minimum wage – a fixed wage given to workers in every district and city of a province – in favour of letting district governors set the minimum wage of the workers. 

Under the new directive, governors of each district are supposed to take into account the economic growth and cost of living of each district, even though they are in the same province, to come up with the new figure. 

Many workers who are against the Omnibus law – especially those working in districts with lower economic growth – say that this will result in them getting a lower wage compared to before the law was passed.

2. Workers’ job security may be compromised, as there are few to no sanctions for businesses

Image credit: @k_rnwn

Workers used to be able to file complaints against businesses that couldn’t pay them because of cited reasons such as financial troubles or bankruptcy claims. With the implementation of the Omnibus law, businesses will no longer face penalties for not paying their workers. 

Under the new rule, companies can also lay off workers and ask them to rejoin the company, giving them a minimum wage which is likely lower than their current salary, without getting penalized for it – this disadvantages workers who have been working for decades and who are likely getting higher wages. 

3. Reduced severance pay

For illustration purposes only
Image credit: hrpayrollsystems.net

Companies were previously required to provide severance pay of up to 32 months. But with the Omnibus law, they now only need to pay 19 months’ worth of salary if they let go of a worker. 

Employees who have been working for years or even decades feel shortchanged, as they will have a reduced severance pay compared to the number of months that they have worked for the company.

4. The rights for workers to terminate their employment are not specified

For illustration purposes only
Image credit: Careers in Poland

While companies are allowed to lay off employees for poor performance or financial issues, and employees have the right to quit their job for reasons stated in the contract, the Omnibus law doesn’t specify the criteria by which employees can terminate their employment. 

Workers say that this puts them in an unfavourable position, as the law doesn’t specify if they can terminate their contract for reasons such as not receiving their pay or being violated in any form.

5. Workers think that the religious holiday allowance should not be given in installments


Image credit: dreamstime.com 

Depending on the employee’s religious beliefs, they are given double the amount of their monthly salary as an allowance – also known as Tunjangan Hari Raya (THR) or religious holiday allowance – before a major religious holiday, such as Eid al-Fitr, or Christmas. 

While the rights to get this holiday allowance remain, many companies are giving it in installments due to financial issues caused by the pandemic. For employees, this is another inconvenience as it has been reported that many companies have not fully paid their employees THR from 2020. 

Without sanctions for businesses, workers are afraid that this may continue post-pandemic or even after the economy has recovered, and are requesting that companies show proof that they are still having financial troubles by providing financial statements.

6. Workers ask to wipe out the legalised Omnibus law

Image credit: @zulfahrain.yourstory 

Employees from across Indonesia are protesting for the Omnibus law to be wiped out completely, as it has been unfavourable for them. There have been many reports of employees who were not getting paid on time, asked to exit and rejoin the company for a lower wage, and getting terminated without receiving severance pay.  

Protests and riots to cancel the law have been ongoing since the law was passed back in October 2020 by the Supreme Court. Many have protested virtually by showing their disappointment on social media, while others have taken to the streets to express their disapproval.

Things to know about the Omnibus law 

While the Omnibus law may have been implemented to improve employment rates across the country, by bringing in foreign investments, local workers do see it as being more disadvantageous to them. That is why they have been protesting since the law was passed. 

The ability to change or wipe out the Omnibus law is now in the hands of the legislative body, and it seems unlikely that it will happen, so we can only hope that the government, companies, and employees can work together to reach a scenario that will be beneficial to all parties. 

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Cover image adapted from: @pieter4dprri and Make West Papua Safe 

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