ContactPartner Area

Indonesian law aimed at attracting investment overturns labour rights

A step back in time

With the Job Creation Law passed by Parliament in Indonesia recently, the country is taking a step back in time when it comes to labour rights. The law is part of the Omnibus Law; which contains agreements aimed at making Indonesia more attractive to foreign investors. This unfortunately comes at the expense of labour rights and Freedom of Association, according to the impact study of CNV Internationaal and Mondiaal FNV. Meanwhile, the European Union is currently negotiating a free trade agreement with Indonesia (CEPA) . This is primarly aimed at securing access to crucial raw materials. CNV Internationaal and Mondiaal FNV together advocate for the EU to put labour rights high on its agenda.

The Omnibus legislation, which includes the Job Creation Law, was declared unconstitutional by the Indonesian Constitutional Court in 2021 because the proper legislative process had not been followed. For example, unions had not been consulted at all. In late 2022, however, this law was suddenly introduced as emergency legislation. The stated reason for this was the economic impact due to the war in Ukraine, among other things, and related inflation.

Daily wage

The partner unions of CNV and FNV in Indonesia have been concerned for years about the impact of this legislation on labour rights and the role of unions. Suzan Cornelissen, country coördinator of Indonesia:


The first impact of the law, was visible even before the law was actually introduced.


For example, the legal minimum wage is now set solely by inflation adjustment instead of through social dialogue between workers, employers and government at the provincial level. Thereby, the daily wage of workers on palm oil plantations can now be lower (6.50 Euros) than the formerly set minimum daily wage (9.60 Euros)."

CNV and FNV have also noticed that within collective bargaining agreements,  factory management is already anticipating the reduced labour rights from the Omnibus Act. 

For example, it is easier to dismiss workers, workers are more often not eligible for severance pay, lower severance payments are included in collective bargaining agreements, as well as the increase in the number of temporary contracts (from three to five).

European trade strategy

Cornelissen:"Our trade union partners in Indonesia have been speaking out against this legislation since it was announced in 2020. The trade union confederation KSBSI carried out resistance actions with all member federations in different regions in Indonesia. Lobbying activities were also undertaken towards the parliament, to gain support from people's representatives. Unfortunately in vain, it turned out last week."

CNV Internationaal and Mondiaal FNV also knocked on the European Commission's door on several occasions to share concerns about this new legislation with the Commission's negotiators, asking them to discuss these developments with Indonesian counterparts during the CEPA negotiations and demand improvements.  

Astrid Kaag, palm oil program coordinator Mondiaal FNV:  "Unfortunately, the European Commission negotiators have not yet heeded this. Unfortunately, gaining access to crucial raw materials also seems more important to the EU so far than labour rights."

However, respecting, implementing and complying with labour rights has gained importance in the new European trade strategy and will therefore be a standard issue in the sustainability chapters. 

We now hope for the support of the European Commission to still put pressure on Indonesia during the CEPA negotiations and review the new legislation.

Publication date 03 04 2023