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Indonesia: The art of collective bargaining

Trade union rights have come a long way in Indonesia in the past six years. ILO online examines how a Labour Union leader in a Jakarta supermarket, with the help of an ILO programme, has set an example for dozens of other companies in Indonesia to create a productive workplace where not only workers but clients benefit.

Article | 22 October 2004

JAKARTA, Indonesia – Follow Mohammad Hakim around for a day and you might think the Hero Supermarket where he works is named after him. One minute he is checking the shelves. The next, he is making sure the check out is moving smoothly. Moments later, he is helping one of his co-workers stock the rapidly-emptying shelves.

At the Hero Market, Hakim is a hero to his co-workers – but it's not only the employees who turn to him in times of crisis. As the leader of the local labour union, he solves problems by negotiating with management, who are encouraging this kind of collective bargaining in all 222 of their retail outlets in Indonesia.

"When we have a problem with any of the workers or vice versa, we speak to Hakim, who helps us reach a peaceful and useful consensus", says Koeshanto, the Human Resource Director here.

Today, the success of the Hero supermarket symbolizes the cordial relations between management and workers. But just a few years ago the economic and political crisis was another story. Until 1998, the Indonesian government did not tolerate independent labour activists or trade unions, and often used the military to suppress industrial disputes.

Hakim thinks the economic crisis in 1998 exemplified the need for free and independent labour unions and lead to their creation after the ratification of ILO Convention No. 87 on freedom of association by the government the same year. The crisis lead to widespread recession during which riots demolished a few buildings in Jakarta (including some of Hero's outlets) prompting the closing of 22 Hero retail stores and enormous layoffs.

"There were no labour unions for the workers to turn to and with nearly 80 per cent inflation", says Hakim, "the rest of the workers found their wages were barely enough to survive. At that moment worker's eyes began to open and they demanded a solution. We tried gathering as many workers together as we could and discussed their problems with management and how they could be bridged."

Today, Hero's labour union and management hold regular and productive meetings. The ILO is training and working with labour leaders like Hakim and companies like Hero to find solutions as partners including topics as collective bargaining and negotiation skills, workplace cooperation for efficiency and equity between the social partners, gender equality and the implementation of the labour law reforms.

At Hero this partnership has yielded solutions like flexible working hours for women and overtime pay. In the past overtime was never paid – the extra hours were replaced by a day off.

Hero Supermarket highlights the trend of increasing and more effective labour unions in the backdrop of new, more amenable laws since 1998 which supported workers rights, the most recent ones being the ‘Manpower Act' and the ‘Industrial Dispute Settlement Act', endorsed by the Indonesian Parliament and enacted in March 2003 and January 2004 respectively. These acts rationalized matters like severance pay and strike activity, although some issues like fixed term labour and outsourcing remain controversial, and provided the basis for a modern system of labour dispute settlement.

Carmelo Noriel, Chief Advisor, ILO Technical Cooperation Project in Jakarta, thinks a growing number of workers and trade unionists as well as employers have improved understanding and appreciation of fundamental rights at work since 1998.

"The big change now is that you have more and more of what you may call real and genuine collective bargaining where workers bargain while enjoying their right to freedom of association and collective bargaining", he says, "and where employers also practice the same rights".

Meanwhile, demands for collective bargaining and better labour-management relations seem to be growing. Dozens of multi-national companies in Indonesia like Adidas, Coca-Cola, Nike and Unilever are turning to Hakim through the activities of the ILO project on the art of collective bargaining and try to find out how Hero keeps an increasing number of customers coming through its doors.