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Replacement of the Previous Job Creation Law in Indonesia

Law Number 11 of 2020 on Job Creation (“Law 11/2020”) was ratified on 2nd November 2020 as the applicable regulation in Indonesia. However, the implementation of Law 11/2020 became ineffective right after Indonesian Constitutional Court (“MK”), through MK Decision Number 91/PUU-XVIII/2020, deemed Law 11/2020 as conditionally unconstitutional. To tackle this concern, Indonesia’s government contrived Indonesia Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation (“GR 2/2022”). With the enactment of GR 2/2022, Law 11/2020 is revoked. GR 2/2022 provides legal certainty regarding the continuation of Law 11/2020, thus providing confidence and reliance when it comes to investing in Indonesia.

GR 2/2022 is ratified under several considerations, of which the main consideration is the implementation of MK Decision Number 91/PUU-XVIII/2020 and the threats of economic slowdown and inflation. There are special requirements to enact a Government Regulation in Lieu of Law, in accordance with MK Decision Number 138/PUU-VII/2009, the enactment of a Government Regulation in Lieu of Law must meet these stated requirements:

  1. The urgent need to solve a legal matter rapidly;
  2. The law needed has not been enacted or has been enacted but it is inadequate;
  3. There is a legal vacuum which cannot be overcome by enacting a law using the usual procedure, which takes a long time, while the urgent matter needs to be solved.

GR 2/2022 also complements several Law 11/2020 provisions, of which those provisions include a minimum wage provision, outsourcing, water resources and the adjustment to Law Number 7 of 2021 on Harmonization of Tax Regulations and Law Number 1 of 2022 on Financial Relation between Central Government and Local Government. GR 2/2022 shall have an impact on foreign investment in Indonesia. Despite the current uproar by the public regarding certain provisions stipulated under GR 2/2022, this Government Regulation in Lieu of Law must first be ratified by the House of Representatives.

If you, a prospective client, have further inquiries about the topic explained above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled a lot of similar matters, with many experienced and professional civil lawyers and dispute lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author: Suryani Lim

Schinder Consultant London Ltd.


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