This publication is part of our series focusing on workforce management in consideration of the COVID-19 outbreak in Southeast Asian countries.
DFDL, in exclusive association with Mataram Partners, has been serving the needs of domestic and foreign investors in Indonesia since 2011.
The number of Coronavirus (COVID-19) cases have greatly increased over the past few weeks since the first case in Indonesia was reported on 2 March 2020. We see that the outbreak poses significant threats and risks to which employers are being forced to adapt. Given the rapidly developing situation, we identify lawful options for employers to reduce the risk of employee exposure while keeping their business afloat.
Law No. 13 of 2003 on Manpower (“Indonesian Manpower Law”) stipulates that a company is required to have a Safety and Health Management System (“SMK3”) in place. SMK3 is part of a company’s management system concerning risk control of work activities. The aim is to create a safe, efficient and productive workplace in line with the requirements of each business sector. As a first step, each company can use and refer to their respective SMK3 to be followed in situations like this, during the COVID-19 outbreak.
Employers may apply the work-from-home policy, if it is deemed necessary. This may be carried out for all employees at a specific period, or through a rotation system where some work at the office and others work from home. By implementing this arrangement, it is expected that employers may continue to carry out their business activities with minimum interruption. Employees generally have to be paid their full salary and benefits during implementation of this arrangement, unless both parties agree otherwise.
Circular Letter of the Minister of Manpower Number M/3/HK.04/III/2020 of 2020 on Manpower/Labor Protection and Business Continuity for the Prevention and Mitigation of COVID-19 (“SE Kemenaker 3/2020”) was issued on 17 March 2020. This circular letter, among other things, stipulates that:
SE Kemenaker 3/2020 does not provide any further explanation on the above provisions or other possible measurements that may be taken by the employer to reduce compensation costs. Until now, no other regulations regarding this matter have been issued. However, we note that the Government understands the difficulty that employers may face during this period by offering a possibility to modify the amount or payment method of employees’ salaries, office hours or leave arrangements. However, these measures can only be implemented with the agreement of the employees because any amendments to the provisions of the employment agreement cannot be conducted without the parties’ mutual consent. In the event of changes to the salary amount, please be advised that the Indonesian Manpower Law also requires that the salary shall not be less than the minimum salary applicable in the relevant area.
In the event that rendering normal business activities becomes impossible, employers may opt to temporarily suspend the business in whole or in part. The employers still have to pay for employees’ salary and benefits in full during the suspension period, unless both parties agree otherwise. Please also refer to our note on SE Kemenaker 3/2020 above.
In principle, under the Indonesian Employment Law, employers are not allowed to determine the timing at which employees must use their leave. Any annual and unpaid leave shall be requested or agreed by the employees. However, employers may still encourage employees to take annual or unpaid leave at specified periods on the basis of an explanation relating to the best interests of the business and protection of employees in the company.
Nevertheless, this option cannot be applied to employees who are categorized as people under supervision/orang dalam pemantauan, patients under surveillance/pasien dalam pengawasan, or persons infected with COVID-19, as they are entitled to receive their salary and benefits in full, depending on each context.
As mentioned above, the law requires all related parties to use their best endeavors to avoid termination of the employment relationship. If the termination is inevitable, redundancy based on efficiency or force majeure grounds is allowed under the Indonesian Manpower Law. Termination of the employment relationship must be in compliance with the procedures prescribed by law, including severance payments being made to employees in accordance with their terms of service with the company.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
Partner, Head of the India Desk, Head of the Regional Banking and Finance Practice Group & Head of the Indonesia Practice Group