Many businesses have been profoundly impacted by the coronavirus (COVID-19) outbreak in Indonesia. Even though it may be challenging to maintain business continuity during this difficult time, every business needs to put in the best effort to find ways to keep the business running as usual in order to be able to pay the employees’ salaries on time.
In order to sustain business and protect employees amid the COVID-19 crisis, the Indonesian government has applied several measures that are stated in Circular Letter No. M/3/HK.04/III/2020, issued in March.
Following the currently implemented measures, the best way for the company is to find strategies that work for both the business and the employees.
Employees are eligible to receive full salary payment, despite their inability to work either from the office or from home, if they meet one of the following criteria:
- Contracting the coronavirus and based on the statement from the doctor, the employee is ordered to be in quarantine or isolation for 14 days
- The employee is officially under supervision (Orang dalam Pengawasan – ODP) for 14 days or more
If after the stated quarantine or isolation period, the employee is still unable to perform his/her duties, then his/her salary may be subject to adjustment.
Companies are required to pay full salaries to their employees if they are absence due to the above-mentioned conditions during the first four months. If the employees are still absent from work during the next five to eight months, their salaries will be reduced by 25 percent to receive only 75 percent of their salary amount. Another 25 percent reduction applies during the next nine to twelve months of being absent. Finally, if the employees remain absent for more than one year (12 months), they are only entitled only to 25 percent of their total salary amount.
Before getting into employee termination, you need to first figure out whether the employees you are going to, unfortunately, terminate are working under seasonal contracts, temporary employment contracts or permanent employment contracts.
If the employees are under seasonal contracts or temporary employment contracts, it would be best not to extend their contracts, especially when they are about to expire. If the expiry date is still months to go and you wish to terminate their contracts now, you are required to comply with what is stated in the seasonal contract and pay what needs to be paid.
The compensations for employees terminated under permanent employment contracts are more various. In short, the compensations can be categorised into the following:
- Severance pay: a compensation to employees due to employment termination
- Long service pay: a compensation to employees as a reward for their years of service
- Compensation rights pay: a compensation to employees for their unused annual leave, maternity leave, travel expenses to their workplace, medical, housing, etc.
- Separation pay: a compensation to employees as a voluntarily reward for their services
For more information about termination of employment in Indonesia, read through this article in the form of questions and answers.
Terminating foreign employees in Indonesia
Under Manpower Law 13/2003, foreigners are only allowed to work under fixed-term or temporary contracts. In other words, it means that foreigners are not able to work permanently in Indonesia.
As such, expatriates are not entitled to the termination compensations stated above.
If you wish to terminate your foreign employees, they can enjoy the termination benefits stated solely in their fixed-term contracts in Indonesia.
How Cekindo can Assist
As a leading consulting company in Indonesia, Cekindo, with its team of business consultants and legal specialists, is always ready to provide guidance and advisory on employment and your business in Indonesia, especially during this difficult situation.
Furthermore, we can also provide employee-related services, such as drafting special employment contract and termination contract amid the coronavirus situation.
Discuss your needs with us. Fill in the form below.