The Impact of COVID-19 towards business in Indonesia – Manpower Law Perspective

Indonesia is now striving with COVID-19 pandemic and the cases has been rapidly increase since early March 2020. The Indonesian Ministry of Health has declared COVID-19 as an infectious outbreak under Ministry of Health Decision No. HK.01.07/MENKES/104/2020 on Determination of Corona Virus Infection as an Outbreak Disease and its Mitigation. As the outbreak has given significant impact to business in Indonesia that potentially causing financial crisis for many business, consequently, companies are encouraged to review the business plan in order to strive the business continuity.

The government has advised to all companies to take preventive measures related to the risk of COVID-19 pandemic to send their employees to work at home according to Department of Manpower, Transmigration and Energy Circular Letter No. 14/SE/2020. If there is any sick employee who has symptoms of COVID-19 disease, they must immediately visit the health facilities and the employer must report any suspect and/or positive case of COVID-19 disease at workplace to relevant government agencies, as stipulated under Ministry of Manpower Circular Letter No. 5/193/A5.02.02/III/2020 on Preparation in Overcoming the Spread of COVID-19 at Workplace.

In that circumstance, Law No. 13 of 2003 on Manpower (“Manpower Law”) requires the employer to fully pay the employees’ salary. The government of Indonesia, under Ministry of Manpower Circular Letter No. M/3/HK.04/III/2020 on Workers and Business Continuity Protection in Preventing and Overcoming the COVID-19, further encouraged that all companies to implement wage protection to employees due to COVID-19 outbreak, as set out below:

 i.               For employees categorized as Monitored Persons (ODP) of COVID-19 disease according to doctor's statement rendering them unable to go to work for maximum 14 (fourteen) days or according to Ministry of Health standards, their wages shall remain fully paid.

ii.      For employees categorized as suspects of the COVID-19 and being quarantined/isolated according to doctor's statement, their wages shall remain fully paid during the quarantine/isolation period.

iii.                         For workers who are absent from work due to the COVID-19 illness and proven by doctor's statement, their wages shall paid according to statutory regulations. This provision allows the companies not to fully pay the sick employees who are absent from work due to continuous illness, but such amount of payment may decrease gradually in parallel with number of employees’ absent days in accordance with Article 93 paragraph (3) of Manpower Law.

iv.             The changes of amount and manner of payment of the employees’ wages considering the business continuity are determined in accordance with the mutual consent between the company and employees. This provision applies for the company that curb its business activities due to government policies in their respective regions for the preventive measure of COVID-19, which causes several or all workers are absent from work.


Downsizing due to Force Majeure or Re-negotiate the agreement?

The situation of COVID-19 pandemic may cause difficulties for the companies to gain stable income, instead, some business are dealing with huge losses due to enormous lack of revenue. The companies need to review their business plan and some of them may choose downsizing on the basis of Force Majeure. There is no explanation as to what Force Majeure is under Manpower Law, but generally force majeure is an act of God beyond human control which includes epidemic.

Article 164 paragraph (1) of Manpower Law allows termination due to force majeure or if the employer suffers losses for 2 (two) consecutive years. The employees will then receive severance entitlement according to Manpower Law. Nonetheless, termination option is unlikely to overcome the immediate losses caused by COVID-19 pandemic, considering cash flow issues. Alternatively, the other option is to negotiate the amendment of employment agreement until further notice from the government. The changes of amount and manner of payment of the employees’ wages considering the business continuity must be determined in accordance with the mutual consent between the company and employees. Manpower Law further regulates that such wage arrangement cannot be lower than the wage provisions stipulated under prevailing laws, such as Regional Minimum Wage. Disobedient of this provision would render the agreement to be null and void and the company must pay the employees’ wages in compliance with the prevailing laws.

Written by: Threeas Novayanti 

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