In response to a judicial review of Law Number 6 of 2023 on the Enactment of Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation into Law (“Law 6/2023), the Constitutional Court (“MK”) issued Decision Number 168/PUU-XII/2023 (“Decision 168/2023”) on December 1st, 2023, following a petition filed by a group of petitioners (“Petitioners”).
In its final decision, the Constitutional Court partially granted the Petitioner’s request, declaring 21 articles of Law No. 13 of 2003 conditionally unconstitutional. In this 8th Edition of SWILU, we will focus on matters related to wages and minimum wages, specifically the Right of Workers to Enjoy a Decent Standard of Living, the Policy on Wage Structures and Scales, and the Thresholds for the Determination of Wage Policy.
The Right of Workers to Enjoy a Decent Standard of Living
Previously, Article 88 (1) of Law Number 13 of 2003 stipulated that every worker has the right to receive an income that ensures a decent standard of living. This was further elaborated as income or wages sufficient to meet the reasonable needs of the worker and their family, including food and drink, clothing, housing, education, healthcare, recreation, and retirement security.
However, under Law Number 6 of 2023, this elaboration was removed. According to the Petitioners, the previous description highlighted the crucial role of the government in guaranteeing the right to employment and a decent livelihood, as well as the right to fair and equal treatment in employment relations. With the removal of this elaboration under Law Number 6 of 2023, the Petitioners argued that there is a risk of diminishing the state’s responsibility to actively fulfill the constitutional rights of its citizens and/or individuals.
In response, the government argued that removing the explanation does not eliminate labor protection guarantees, as a decent standard of living is not only achieved through income but also through social security and welfare programs. Ultimately, the Constitutional Court ruled in favor of the Petitioners and ordered the reinstatement of the elaboration in Article 88 (1) of Law Number 13 of 2003. The Court reasoned that the article remains essential as a manifestation of workers’ welfare, derived from their own efforts, and is also crucial in defining the essence of what constitutes a “Decent Standard of Living.”
Wage Policy
Article 88 paragraph (3) part (b) Law Number 6/2023 on wage policy essentially states that wage structure and scale are key components of the overall wage policy. In its considerations in Decision 168/2023, the Constitutional Court decided to add the phrase “that is proportional” to the Article. This addition aims to provide guidance for employers in determining wages, ultimately promoting greater wage certainty and reducing disparities between the lowest and highest wages for each worker.
Thresholds for the Determination of Wage Policy
Pursuant to Article 92 paragraph (1) of Law Number 13/2003, employers are required to establish wage policies considering various factors, such as classification, position, work experience, education, and employee competence. However, with the enactment of Law Number 6 of 2023, these factors were removed, shifting the focus of wage policy considerations to the company’s capacity and productivity.
Regarding the removal of these factors, the Petitioners argued that Law Number 6 of 2023 ultimately weakens workers’ bargaining power against employers, further destabilizing and creating an imbalance in the employer-worker relationship. Moreover, the absence of these components implies a lack of recognition of workers’ competencies in their respective fields.
In response, the Constitutional Court acknowledged that the absence of factors such as classification, position, work experience, education, and employee competence indicates that wage criteria are unilaterally determined by employers without requiring specific indicators or parameters related to workers. This situation results in an imbalance in employer-worker relations. Consequently, the Court ruled that the aspects of classification, position, work experience, education, and employee competence must be reinstated.
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