The Government Guideline for the Implementation of Employment Practices during COVID-19 Pandemic

During the Covid-19 pandemic, the Indonesian government has established various policies including restrictions of public activities in several regions to prevent the spread of Covid-19. The pandemic has affected core aspects in the manpower sector, mainly the employment relationship and workers protection. On 13 August 2021, the Minister of Manpower (“MoM”) issued a new guideline on the Implementation of Employment Practices during COVID-19 Pandemic in the form of MoM Decree No. 104 of 2021 (“MoM Decree 104 of 2021”).

Key Points of the Guideline: MoM Decree 104 of 2021 stipulates a guideline that mainly covers three scopes of practices:

1. Arrangement of Work from Office (“WFO”) and Work from Home (“WFH”) Policy

Companies have to make the WFO – WFH arrangements for their total employees by referring to the government policy regarding the Implementation of Community Activity Restrictions (Pemberlakukan Pembatasan Kegiatan Masyarakat or “PPKM”) applicable to specific sectors of the employers’ businesses. For instance, PPKM policy of WFO-WFH arrangement applicable to a company in manufacturing industry is a maximum 50% of WFO employees and a maximum 10% of WFO employees of office administration. The remaining employees must remain to WFH. To ensure effective business operation in such capacity limitation, companies may implement a rotation schedule whereby the employees may alternate between WFO and WFH within a month.

Furthermore, employers may also reduce the working hours, rearrange the working time into shifts, as well as make temporary layoffs as efforts to prevent employee terminations.

2. Remuneration and Other Rights of the Employees

MoM Decree 104 of 2021 emphasises that companies currently facing financial instability due the pandemic and unable to pay the employees may renegotiate with their employees on adjusting the wages/remuneration (“Adjustment Agreement”). In this instance, an Adjustment Agreement shall, at least, covers: (i) the amount of agreed adjusted wage; (ii) the payment method that may be done in stages; and (iii) the validity period of the Adjustment Agreement. It is important to note that the basis for the calculation of other rights (e.g., social security benefits, severance pay, etc.) shall refer to the relevant employees’ initial wages, before the Adjustment Agreement becomes effective. Furthermore, the employers are required to communicate the Adjustment Agreement to the relevant employees and submit reports on the same to the relevant manpower offices at the provincial level, through online means.

3. Employment Termination Prevention Measures

All the relevant parties (the employers, employees, government, and labour union) need to work on dialogues to find the best solutions to maintain the employment relationship and continuity, and only allow employee terminations as their last resort. To prevent such terminations, employers are suggested to take the following actions:

a) workplace adjustments, where the employees are strongly encouraged to implement WFH whenever possible;

b) worktime adjustments, which include but not limited to arranging work shifts, eliminating or limiting overtime, and reducing working days;

c) providing leaves of absence by implementing temporary layoffs;

d) providing remuneration adjustments and the relevant payment methods;

e) gradually adjusting the facilities and/or allowances of the employees;

f) preventing any extension of expiring employment agreement; and/or

g) retiring employees who have fulfilled the company’s terms, and/or offering them early retirement plans.

Mechanism for the Implementation of Alternative Measures: The enforcement of the alternatives as explained above requires the employees’ consent (i.e., through bipartite dialogues or discussions), thus cannot be made unilaterally by the employers. To make them effectively binding, these measures must obtain prior legitimate consent of both parties (i.e., the employees and employers).

The above article was prepared by Marshall S. Situmorang (Partner) and Audria Putri (Senior Associate)

Disclaimer: The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.