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.
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