WAVES OF LAYOFFS AMID COVID-19 PANDEMIC

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During the Corona Virus Disease-2019 (“COVID-19”) pandemic, almost all sectors of life were affected. The biggest impact was on the health sector and the economic sector. The transmission of COVID-19 was so fast and easy to every human being that it caused positive cases of COVID-19 to increase drastically every day so that the health sector was overwhelmed by this. The Indonesian Ministry of Health then implemented the Large-Scale Social Restrictions ("PSBB") policy as stated in the Minister of Health Regulation Number 09 of 2020 concerning Guidelines for Large-Scale Social Restrictions in Order to Accelerate Handling of Corona Virus Disease 2019 (COVID-19) ("Regulation 09/2020”), where the first PSBB was implemented in DKI Jakarta on 10-23 April 2020.

Article 13 paragraph (1) of Regulation 09/2020 states the scope of PSBB, including: school and workplace closing, restrictions on religious activities, restrictions on activities in public places or facilities, restrictions on social and cultural activities, restrictions on transportation, and restrictions on other activities specifically related to defense and security aspects. With the PSBB policy, all social activities were limited, especially if positive cases of COVID-19 were found in a residential area.

Regarding the affected business and economic sectors, it was commonplace that during the Covid-19 pandemic, many companies asked their workers to take unpaid leave or in other words, the workers were "furloughed" and even worse, the company laid off its workers. Of course, these things were done because the company's cash flow was in an unhealthy state as a result of the COVID-19 pandemic, where the funds owned by the company were no longer able to cover all the required expenses. If you look at the news in the mass media, the Indonesian Ministry of Manpower reported that the workforce affected by COVID-19 was around 3.05 million people (as of June 2, 2020) and estimated that additional unemployment could reach 5.23 million.

Basically, the government hoped that layoffs would be the last option that companies could do in dealing with the economic impact of the COVID-19 pandemic. There were often disputes between companies and workers as a result of layoffs that occurred during the COVID-19 pandemic. The dispute in question could be due to unilateral layoffs, disagreement with the amount of severance pay given by the company to workers, or other matters.

In a layoff, the company is obliged to pay workers' rights, including severance pay and/or reward for service pay and compensation pay which should be received by workers (in accordance with Article 156 paragraph (1) of Law Number 13 of 2003 concerning Manpower (“Law 13/2003”)). The amount of severance pay and reward for service pay depends on the length of service a person has in the company, where details regarding the amount of workers' rights can be seen in Article 156 paragraph (2) and paragraph (3) of Law 13/2003, while compensation pay can be seen in Article 156 paragraph (4) of Law 13/2003, which regulates, among others:

“The compensation pay that the dismissed worker/ labourer ought to have as referred to under subsection (1) shall include:

1. a.    Entitlements to paid annual leaves that have not expired and the worker/ labourer have not taken;
2. b.    Costs or expenses for transporting the worker/ labourer and his or her family back to the point of hire where he or she was recruited and accepted to work for the enterprise;
3. c.    Compensation for housing allowance, medical and health care allowance is determined at 15% (fifteen hundredth) of the severance pay and or reward for years of service pay for those who are eligible to receive such compensation;
4. d.    Other compensations that are stipulated under individual work agreements, enterprise rules and regulations or collective work agreements.”

Thus, in addition to being regulated in the Manpower Law, compensation pay can also be regulated in Work Agreements, Enterprise Rules, and Collective Work Agreements. Of course these things must be agreed upon between the workers and the company for the sake of creating legal transparency and maintaining a conducive working environment.

Furthermore, it should be noted that there is a formula that can be used for calculating the amount of workers' rights in accordance with laws and regulations. The formula is closely related to the company's reasons for laying off workers. The details are as follows:

'Wages' components used as the basis for calculating severance pay and reward for service pay are the basic wage and all forms of fixed allowances that are provided to workers / laborers and their families, including the purchase of buying ration provided to workers / laborers with subsidies, so wages are considered as the difference between the buying price and the price that must be paid by workers/laborers (referring to Article 157 paragraph (1) of Law 13/2003). Furthermore, Government Regulation Number 78 of 2015 concerning Wages (“Regulation 78/2015”) also regulates what is meant by “basic wage” and “fixed allowances”. The elucidation of Article 5 paragraph (2) of Regulation 78/2015 provides that Basic Wage is the basic compensation paid to Workers/Laborers according to the level or type of work, the amount of which is determined based on an agreement. Meanwhile, a fixed allowance is a payment to a Worker/Laborer which is made regularly and is not related to the attendance of the Worker/Laborer or certain work achievements.

Thus, hopefully readers can understand what rights can be received in the event of layoffs for each individual, because companies often look for ways to provide workers' rights with the smallest formula. On the other hand, workers often seek ways to obtain their rights with the largest formula. Of course, both of them cannot be justified if the formula is determined on the basis of absurd and baseless reasons. Because the law is made for the sake of creating justice and legal certainty, in this case the most fair/appropriate step is to refer to the provisions of Law 13/2003 (normatively) in determining the amount of workers' rights and the formula on the basis of honest and reliable reasons, and providing it according to their portion in terms of their rights and obligations.

Although layoffs can be used as an option or company policy to overcome the internal financial crisis as a result of the COVID-19 pandemic, it is important to remember that laying off employees requires a lot of funds. For companies that have relatively large reserve funds, layoffs are indeed the best choice for companies so that business can continue. Then what about the fate of companies that do not have reserve funds? Maybe not enough for paying just a few employees' monthly wages, let alone fulfilling the obligation to pay severance pay, reward for service pay, and compensation pay when the company does layoffs.

Also from the workers' side, being laid off by the company where they work is certainly not good news in the midst of the COVID-19 pandemic. When there are waves of layoffs everywhere, it must be difficult for workers to find new jobs. There is no other option for companies and/or workers other than complying with the applicable laws and regulations, especially these regulations governing manpower in order to avoid industrial relations disputes due to the COVID-19 pandemic.

Based on the author's experience, industrial relations disputes can be avoided as long as the company can build good communication with the workers. Whether the company will cut wages or do layoffs, as long as it is done through deliberation to reach a consensus in a negotiation, usually the workers will be able to accept all the company’s proposals or decisions compared with the company doing it unilaterally or arbitrarily. The parties must strive for the best solution in order to reach a "win win solution", without having to ignore their respective rights and obligations.

Jakarta, September 22, 2020

Steven Johan, S.H.

Paralegal at FWP Office Alam Sutera

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