An Analysis on Employment Agreement, Collective Labor Agreement, and Company Regulation

Besides due to its natural resources, Indonesia is one of interesting country for investors in Asia due to the large number of inexpensive human resources available in this country. However, such human resources and so called labor, are deemed to be disadvantages. To overcome such situation, the development of law of labor were made. There are some differences in laws that governs concerning labor prior and after the reformation. Begin with Law No. 21 Year 1954 on Labor Agreement between Labor and Employer (Law No. 21/1954) which still have liberalism perspective. At that time, the treatment towards labor are still poor and regulated poorly. The labor or labor union for instance, cannot pursue their right freely. Until the enactment of Law No. 13 year 2003 on Law of Employment (Law No. 13/2003) which tried to develop the protection of employment in Indonesia.

This law was made on the basis on human empowerment. Human empower development deemed as an integral part of national development based on Pancasila and the Constitution of the Republic of Indonesia Year 1945, must be held in the framework of the development of whole Indonesian people and the development of Indonesian society to enhance the dignity of labor and to realize a prosperous society, fair, and equitable, both materially and spiritually. In order to make it happened some reformation of law conducted. The most basic thing which can be the gate to protect labor is the agreements that binds the labor itself with the employer. In this article we would analyze employment agreement, collective labor agreement and Company Regulation.

Analysis

1. The Characteristic of Employment Agreement, Collective Labor Agreement, and Company Regulation.

Each of those agreement and regulation has their own characteristic, to begin with, we have to understand the terminologies which will be provide as follows;

1. Employment Agreement pursuant to Article 1 (14) Law No 13 /2003 is an agreement between the workers / laborers with employers or employers that contains the terms of employment, rights and obligations of the parties.
2. Pursuant to Article 1 (21) Law No 13/2003 Collective Labor agreement defines as an agreement which is the result of negotiations between the union/labor union or unions/labor unions which such union/unions has been registered on the responsible government agency in the field of employment with the employer, or some employers or associations of entrepreneurs that specifies the terms of employment the rights and obligations of both parties.
3. While Company Regulation as regulated on Article 1 (20) of Law No. 13/2003 defines as rules, made in writing by the employer which contains the terms of employment and rules of the company.

The characteristic of those agreements pursuant to Law No. 13/2003 will be explained as follows;

No.	Characteristic	Employment Agreement	Collective Labor Agreement	Company Regulation
1.	The parties made	Article 51 stated that The working relationship occurs because of the employment agreement between employer and worker/labor. It means that the parties of employment agreement are labor and employer.	Article 116 (1) stated that Collective labor agreement made by the union/labor union or unions/labor unions that have been registered on the responsible government agency in the field of employment with the employer or multiple employers. It can be inferred that the parties of this agreement is the labor union or labor unions with the employer or multiple employers.	Pursuant to Article 109 Company Regulations prepared by the company and are the responsibility of the employer concerned. It means that this regulation is made by the company but bound both company and the employee or labor.
2.	The negotiation	Since its agreement basis both parties has the same chances to negotiate.	As Regulated under Article 116 (2) the negotiation process of this agreement must be conducted in consultation (musyawarah). Furthermore, Article 117 stated that In terms of consultation as referred to in Article 116 paragraph (2) do not reach agreement, it can be settlement through a labor dispute resolution procedures.	Pursuant to Article 110 Company regulation must be made under the consideration of the labor or employee representation.
3.	Form	Pursuant to Article 51 which stated that (1) an Employment agreement is made in writing or orally. (2) an employment agreement that must be in writing executed in accordance with the applicable legislation. Furthermore, Pursuant to Article 57 an employment agreement which determined the time period of the agreement must be stipulated in writing form	Article 116 (3) regulates that The collective labor agreement must be in written form and in Indonesian language.	Pursuant to the definition of Company regulation in Article 1 (20) the company regulation must be made in writing form.
4.	The validity	Article 52 regulates that The employment agreement was made on the basis of: a. agreement by both parties; b. the ability or competence to perform legal acts; c. the existence of job which has been agreed; and d. the agreed job of an agreement is not contrary to public order, morality, and the legislation in force. If we refer to such article, it can be inferred that employment agreement must fulfill the element of common agreement as stipulated in Article 1320 of Burgelijk Wetboek.	Besides it must fulfilled the element of agreement in article 1320 Burgelijk Wetboek, in Addition collective labor agreement as stated in Article 119 that the agreement must be made and negotiate with the labor union which has minimum 50 percent of the labor in such company. However, pursuant to Article 130 in case of renewal the requirement on article 119 is not necessary must be fulfilled. Furthermore, Article 132 (2) also requires collective labor agreement to be registered in state official employment institution.	Pursuant to Article 112 the Company Regulation must be approved by appointed ministry in 30 days. If more than 30 days the ministry do not give their feedback, the regulation is deemed approved. Whether the regulation is approved or not, the ministry must give feedback to the company. In case that the regulation is not approved, the company can submit the correction within 14 days.
5.	The contents	Pursuant to Article 54 (1) the content of this agreement (in written form) are; a. The name, address, and type of business; b. name, sex, age, and address of the worker/laborer; c. position or type of work; d. place of work; e. the amount of wages and method of payment; f. the conditions of work which includes the rights and obligations of employers and workers/laborers; g. start and validity period of employment agreement; h. place and date of employment agreement was made; and i. signature of the parties to the employment agreement. On the other hand for oral agreement pursuant to Article 63 the employer must give appointment letter which at least consist of a. the name and address of the worker / laborer; b. date started work; c. type of work; and d. the amount of wages.	Pursuant to Article 124 (1) Collective labor agreement shall at least contain: a. the rights and obligations of the employer; b. the rights and obligations of trade unions/labor unions and workers/laborers; c. period and the effective date of the collective agreement; and d. the signature of the maker of the collective bargaining parties.	Pursuant to Article 111 the company regulation must consist of; a. the rights and obligations of the employer; b. rights and obligations of workers / laborers; c. conditions of work; d. code of conduct of the company; and e. Period of validity of regulations.
6.	Signatory	As mentioned in Article 54 (1) alphabet (i) an employment agreement must be sign by both parties which are the labor and the employer.	As regulated in Article 124 (1) alphabet d, a collective labor agreement requires the signature of the maker of the collective bargaining parties.	-
7.	The validity period	Pursuant to Article 56 an employment agreement can be made with or without validity period. If it determines a validity period, it must be based on certain period of time or the completion of certain work. Furthermore, Article 59 (2) (3) and (4) stipulates that an employment agreement with validity period cannot be applied for permanent work, with maximum two years period of time. Such agreement can be renewed once for 1 year extension. The contract is terminated according to Article 61 on the basis of a. worker dies; b. expiry of labor agreement; c. court ruling and / or decision or determination of a labor dispute resolution institutions that already have permanent legal force; or d. their specific circumstances or events included in employment agreements, company regulations or collective agreements that can lead to termination of this agreement.	Article 123 regulates that the time period of collective labor agreement in maximum 2 years. It can be extended for maximum one year. In case of renewal, collective labor agreement must be negotiate for at least 3 month before the time period end.	Pursuant to Article 111 (1) alphabet d, the time period of company regulation must be mentioned on the regulation itself. Article 111 (3) stipulates that in maximum 2 years after the time period of company regulation ended, the renewal of company regulation must be made. Furthermore, such renewal also must be under the consideration of the labor representatives and approved by the Ministry as regulated under Article 113.
8.	Prioritization	-	Article 128 In terms of employment agreement does not contain the rules stipulated in the collective labor agreement, then collective labor agreement prevail.	Article 108 (2) stated that The obligation to have company regulations referred to in subsection (1) does not apply to companies that already have collective labor agreement
9.	Dispute Settlement	Industrial Court	Industrial Court	Industrial Court

2. The Comparison of Employment Agreement, Collective Labor Agreement, and Company Regulation.

The similarities;

1. Since both two agreements and the Company regulation was enacted based on negotiations and regulates about the rights and obligation of employers and the labors, it can be inferred that such agreement and regulation are considered regulates about industrial relation. Pursuant to Article 1 (17) of Law No. 2 year 2004 on Industrial Relation Dispute Settlement, the Industrial court has jurisdiction over the dispute relating industrial relation. Therefore, if there is a dispute over such agreements and regulation, it will be settled in industrial Court.
2. Between Collective Labor Agreement and Company Regulations there is similarities where both of them must be registered and approved by the official state institution concerning employment and the negotiation process of the agreement involve the labor or employee representative.
3. The character of both employment agreement and the collective labor agreement is reciprocal agreement.
4. Both agreement and the regulation conducted in written.

The differences;

No.	Differences	Employment Agreement	Collective Labor Agreement	Company Regulations
1.	Parties	2 parties (one-one/ employer and labor)	2 parties (employer/employers and labor or labor unions)	1 party (under the concern of representative of labor union)
2.	Character	reciprocal	reciprocal	regulate
	Registration	Not registered	Must be registered to state official institution concerning employment	Must be approved by ministry concerning employment
4.	Time period	Can be made with or without determined time period If it determines the time period, the time period must be in maximum 2 years and can be extended for 1 year.	Maximum 2 years time period can be extended for 1 year.	The time period of such regulation must be determined in the regulation
5.	Renewal	The renewal can be made in 30 days after the time period end for maximum once for 2 years.	The renewal can be started 3 months before the end of the time period	The renewal must be made maximum 2 years after the time period ended.