Social dialogue helps industry tackle long-standing issue with workers’ contracts

4 December 2018.

Jakarta – A new set of guidelines to help govern the use of non-permanent employees in the garment industry has been published by Better Work Indonesia and the Ministry of Manpower.  The guidelines – the result of a Better Work-facilitated collaboration between employers, unions, brand partners and the government – aim to clarify understanding of existing legislation and reduce industry dependence on non-permanent contracts in Indonesia.

Better Work estimates that about half of the almost 400,000 workers employed in Indonesian garment factories are recruited using non-permanent work contracts. These type of contracts, known locally as ‘PWKTs,’ were originally conceived to support factories with seasonal or temporary work stemming from specialized production, business expansion plans and new product creations.

However, the implementation of non-permanent contracts was marred by widespread non-compliance, in part due to confusion around the laws and regulations.

For instance, contracts of this sort are, by law, limited to a maximum of two years with the option of extending, once only, for a period not exceeding one year. But, in many cases, factories ignored the limit on the number of times they are allowed to extend contracts. Different interpretations of how non-permanent contracts should function also led to violations of workers’ rights. “The idea of developing guidelines for the implementation of employment contracts in the garment sector came up during a series of discussions with the Ministry of Manpower that started last year,” says Albert Bonasahat, Better Work Indonesia’s Programme Officer. “Factories were asking us how long they could employ workers with non-permanent contracts, how many times they could renew them, and what these workers were entitled to in terms of benefits. We informed the ministry that we needed to clarify these issues.”

In creating guidelines to help factories navigate Indonesian regulations and laws on the matter it was vital to help strike a balance between the protection of workers and maintaining the competitiveness of the sector. A consultation process was put in place, beginning with a focus group discussion with tripartite stakeholders and international brand partner representatives in August of 2017. A number of subsequent writing workshops and focus group meetings resulted in a finalised document emerging in August of this year.

Bonasahat said the copies of the booklet, which are available in Bahasa Indonesia, English and Korean, will be used in the programme’s advisory sessions in factories and given to industry stakeholders, including Better Work brand partners. The Ministry of Manpower will also distribute it at local offices to reach officials across the country.

Reaction, so far, has been positive. “This book will help labour inspectors improve guidance and oversight of workplace relations, in line with existing laws and regulations, and will also be useful in upholding the normative industrial rights of workers alongside joint efforts to protect and develop the competitiveness of Indonesia’s export-oriented garment industry,” said Sugeng Priyanto, the Director General of Labour Inspection and Occupational Safety and Health at Indonesia’s Ministry of Manpower.

Haiyani Rumondang, the Director General of Industrial Relations and Social Security at Indonesia’s Ministry of Manpower, said he believes stakeholders will be able to understand the regulations surrounding employment contracts in Indonesia more easily, thanks to the booklet.

The guidelines are set to spur an important change in employment practices across the industry, shifting the industry towards great reliance on permanent contracts that better protect workers’ rights and conditions.  Some factories have shown the model both possible and profitable. A Better Work factory in Central Java, for instance, has less than 145 workers hired on non-permanent contracts, out of a workforce of 13,000.

Non-permanent workers in this factory are recruited for pleating, smocking and producing garments that require special sewing skills which machines cannot perform, or when garments are produced only for a limited time following fashion trends. Representatives of the factory say this choice is based on a long-term business approach, which sees the training of workers being pivotal to the overall success of the company.

Permanent contracts are better at providing job security to their workers, allowing for better concentration on the job itself, improved discipline, higher production output and timely fulfilment of orders. This, in turn, has a positive effect on meeting production targets, which eventually satisfies buyers.

But these cases remain limited across the country. Widespread transformation to improve employment practices and significantly reduce the number of non-permanently hired workers requires further work. Michiko Miyamoto, Director of ILO Office for Indonesia and Timor-Leste says there are practical questions surrounding the use of the non-permanent contracts that remain unanswered in the new guidelines.

Still, she says, the process underlying the documents’ development was an encouraging example of social dialogue at work. “The guidelines are a strong testament of the goodwill shown by all relevant parties in working together to improve the implementation of Indonesian labour law and regulations, for the interest of both workers and the industry.”