Employment Termination during COVID-19 Pandemic

Employment termination during COVID-19 will become primary choice for some companies, because COVID-19 pandemic certainly caused many business entities (companies) cannot operate business activities due to fears of spreading of corona virus and also because of government policy related to implementation of PSBB (large-scale social restrictions).

To handle this situation, many companies are decide for employment termination during COVID-19 Pandemic, on the reason that the company has no income to pay employees or to operate production process because there are no profits or even no business activities.

The term of lay off (some says as unpaid leave) in this article mean that the company decided for employees to not work or not to come to office, in which practically there are several ways to implement this lay off depend on agreement between company and employees. Some company are not pay the salary because there is no working activities, but other company still pay the salary with some deduction such as transport allowance, meal allowance, attendance allowance, etc.

In this matter, company management needs to consider wisely and carefully for rights of employee and to decide for lay off (leave) employees or to conduct employment termination during COVID-19, because Law No. 13 of 2003 concerning Employment (“Employment Law”) has explicitly provided a process or guidance in relation to this matter.

Pursuant to Article 151 of Employment Law expressly regulates employment termination process through strict procedures which are as follows:

  1. Company, Employees, Labor Unions, and the Government, with all efforts must strive to avoid termination of employment.
  2. In the event that all efforts have been made, but termination of employment is unavoidable, the purpose of termination of employment must be negotiated by Company and Labor Union or by Employees if the said Employees is not a member of labor union.
  3. In the event that the negotiations as referred to in paragraph (2) do not result any consent, the Company can only terminate the employment relationship with the Employees after obtaining a decision from the industrial relations dispute resolution institution.

Furthermore, in detail regulation the procedure for laying off employees as stipulated in Circular Letter of Manpower Ministry No. SE-05/M/BW/1998, which basically states that the Company still remain to pay full wages in the form of basic wages and fixed allowance during laid off period, unless otherwise stipulated in Employment Contract, Company Regulation or Collective Labor Agreement. In addition, it was also stated that if the Company would pay the wages partially so that Company should negotiate with labor union and/or employees regarding the amount of wages during the lay off period.

In line with this, there is also Circular Letter of Manpower Ministry No. 907/MEN/PHI-PPHI/X/2004 concerning Prevention for Termination of Mass Employment, which basically for companies that are have difficulties for doing business, they should try not to terminate and need to take the following steps:

  1. Reducing wages and top-level employee facilities, for example manager and director levels;
  2. Reduce the shift hours
  3. To limit/eliminate overtime
  4. To reduce working hours
  5. To reduce working days
  6. To rotate the day off or lay off temporary
  7. To stop the contract for employees who have expired contract;
  8. Provide early retirement who have qualification.

These steps must also be negotiated with the labor union or employee’s representatives to reach bipartite agreement.

Although the Circular Letter have been issued in the past, but the implementation still relevant in the COVID-19 pandemic where many companies have difficulties and losses in doing business during the COVID-19 pandemic.

During the COVID-19 pandemic, the Ministry of Manpower has issued Circular Letter No.M/3/HK.04/III/2020 concerning Employee Protection and Business sustainability in order to Prevention and Control of COVID-19. In essence, the Circular Letter demand that each company has role in preventing the spread of COVID-19 and also may reduce the amount of wages and the payment method according to the agreement between the company and employees.

Based on the above explanation, the employment termination process and wage changes due to restrictions on business activities, each company needs to consider carefully to the legal steps that have been regulated in the Prevailing Law and technical regulations as stipulated in the Circular Letter. These steps are to lay off, reducing payments according to the agreement between company and employees, as well as the payment method for wages or any rights.

Author: wilopo husodo


Published by Husodo and Partners


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