LEGAL ASPECT IN COMPENSATION Nike/PT Nikomas Case

Muhammad Luthfihadi K.(19009134)

Compensation

• Compensation is referring to all forms of financial returns and tangible services and benefits employee receive as part of an employment relationship. (Milkovich, G., Newman, J., 2008)

• Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required. (Heathfield, S., 2010)

The Legal Aspect

“Overtime Compensation” (Upah & Waktu Kerja Lembur)

The Law :•UU Republik Indonesia No. 13 Tentang Ketenagakerjaan•Nomor KEP.102/MEN/VI/2004 Tentang Waktu Kerja Lembur dan Upah Kerja Lembur

Overtime Compensation

“A compensation that paid to the labor/employee who doing their job on the outside time of their

normal work time, which based on the government rule and

employers contract.”

CASE STUDYNike/ PT Nikomas

Brief Profile• NIKE, Inc. (NIKE), incorporated in 1968, is engaged in design,

development and marketing of footwear, apparel, equipment and accessory products. NIKE is a seller of athletic footwear and athletic apparel in the world. The Company sells its products to retail accounts, through NIKE-owned retail stores, and Internet sales, and through a mix of independent distributors and licensees, in over 170 countries around the world.

• PT Nikomas subsidiary company of Pou Chen Group, a footwear manufacturer in Indonesia which produce many international brand of footwear, including Nike

Nike/ PT Nikomas Case (1)• Nike factory workers at PT Nikomas typically work from 7am-3pm.

This is followed by three hours of paid overtime.

• Following their regular shift and paid overtime hours, the factory workers are then told by their supervisors to punch out on the time clock. Once your workers are off the clock, they are forced by their supervisors to get back on the production line for one hour of unpaid overtime.

• This hour of forced, unpaid overtime happens primarily in the sewing divisions and includes approximately 6,633 Nike factory workers.

• Nike factory workers are being forced to work this unpaid hour 6 days a week.

• Has been happening for 18 years.

Nike/ PT Nikomas Case (2)

• Mr.Chen (Senior Manager of PT Nikomas), deny all of the allegation

• “There is no fourth hour (of) overtime.”

• Deny of practice “jam molor” had been happening for 18 years.

• “We abide by government labor law, and Nike CLS (Code Leadership Standards). “

Nike/ PT Nikomas Case (3)Reaction from Nike Headquarter :

After 5 months, from the early allegation Nike, finally conducting an investigation to PT. Nikomas, and finding out “a strong case” of workers unpaid overtime.

PT Nikomas Responding (Again)

Admitted receive an enormous complaints of unfair labor practices. Will following up by hiring independent 3rd party (Fair Labor Association) for auditing

Nike/ PT Nikomas Case (4)

Reaction from Serikat Pekerja Nasional (SPN)

Doesn’t trust PT Nikomas for hiring FLA for auditing their companyFeels only desperate step taken by the management team

Final Result• The Allegation start February 2011• The Decision & deal made in January 2012

• 4,437 Nike factory workers will be paid $1 million dollars or Rp9,1 billion for overtime they were forced to do without payment.

• The settlement between SPN and the factory management reflects 593,468 of unpaid overtime hours that workers put in sewing Nike sneakers at the plant during the past two years.

Critical Review (1)Undang-Undang Republik Indonesia No. 13 Tentang Ketenagakerjaan

1 hours more than the law allowed4 hours X 6 days = 24 hours overtime/week

(10 hours more than the law allowed)

Critical Review (2)Nomor KEP.102/MEN/VI/2004 Tentang Waktu Kerja Lembur dan Upah Kerja Lembur

Pasal 8Overtime compensation-> 1/173 X Rp1.285.000 = Rp7.427

Pasal 11Overtime hour 1 -> 1,5 X Rp7.427 = Rp11.140Overtime hour 2 -> 2 X Rp7.427 = Rp14.854Overtime hour 3 -> 2 X Rp7.427 = Rp14.854Overtime hour 4 -> 2 X Rp7.427 = Rp14.854

SuggestionFor NikeThey should have a representative in every continent, so they can look and monitor more closely. Because, I think 11 months of complaining until taking action is a really long time for a world class company to take action of wrongdoing in their sub-contract company.

For PT NikomasWhat I think is there should be a better communication with the employee as the complaint from SPN, ‘the wrongdoing’ has been lasted for 18 years means that, PT Nikomas not socializing the rights of their workers, including the overtime limit.

In other hand, some of the workers maybe will not complaining doing more extra hours than the law regulating, as long as the company as them. So, communication is the key

For WorkersAlways know your rights as a worker. How? It simply needs to read the government law, which will be very beneficial for the prospect the workers itself. So, they won’t be manipulated and cheated easily by their employers. Also, the union workers is is to make a bridge from workers to the Management people to communicate.

Conclusion• Can’t say the law is right or wrong

• However, what I can say is the law exist because some reason, and the reason is surely intended to give benefit to all parties.

• Will limit the power of both parties, to make balance

• Like it or not whoever we are we must obey the law so that the difference perspective at least can be minimalize

THANK YOU