LEGAL UPDATES BY BEPARTNERS
Employment
Religious Holiday Allowances Postponement

Now or Later?

18 May 2020
In our previous article titled ‘Impact of Covid-19 upon Employment Sector’, there was discussions on the obligations and responsibilities of companies in providing Religious Holiday Allowances (Tunjangan Hari Raya or “THR”) as stipulated in the Minister of Manpower Regulation No. 6 of 2016 concerning Religious Holiday Benefits for Workers/Labor in the Company. THR is a non-wage income paid to employees by companies, of which must be paid at the latest 7 days prior to religious holidays by the company. However, this Covid-19 pandemic has heavily impacted the economy and affected companies’ financial capability to meet its obligations such as THR allowances to employees.

With Eid al-Fitr fast approaching, the government has issued a new policy in the form of Circular Letter of Minister of Manpower No. M/6/HI.00.01/V/2020 concerning Implementation of 2020 Religious Holiday Allowances (THR) in the Company during the 2019 Corona Virus Disease Pandemic Period (Covid-19) (“SE THR 2020”) in ensuring that employees rightfully receive their THR payments. SE THR 2020 includes provisions and mechanisms for paying THR to employees if the company is unable to pay its obligations fully and on time. In such extreme circumstances, there are questions posed, such as where does the balance of company finances and employees THR rights lay? What is to be prioritized?
 
Mechanism for Providing THR by the Company to Employees

Companies are now faced with difficult choices. On the one hand, if companies choose to pay the THR of employees, companies risk being faced with the possibility of having to close the company because of deteriorating financial standings causing inability to continue operations of the company. While on the other hand, if the company fails to pay the employee's THR rights as agreed in the work contract, the company may face claims and lawsuits through the Industrial Relations Dispute Settlement as regulated in Law No. 2 of 2004 concerning Industrial Relations Dispute Settlement.

In order to protect the rights and welfare of employees whilst still ensuring business continuity of the company, the government issued this policy containing other alternatives that may be taken by companies that have obstacles in giving THR to employees during this situation. Article 2 sub-sections a and b stipulate the following:

a. THR payment in stages for companies that cannot afford to pay full THR at the time specified in the legislation;
b. Postponement of the THR payment until the agreed period for the company that is not able to pay the THR at all at a time determined by the law.

Regardless, all THR payments must still be paid in 2020.

The alternative which is then agreed to by the company and employees as a method of awarding THR must be stated in the form of an agreement which must also contain:

• the time and method of THR payment.
• the time and method of imposing fines for late payment of the THR. The Minister of Manpower in an interview stated that the penalty to be borne by the company if it was too late to give a THR was 5 percent[1].
 
To reach this agreement, the company must initiate an open dialogue with employees. This open dialogue must be based on the following conditions:

• based on the principle of kinship;
• based on transparent company financial statements; and
• based on good faith.

The next important step that must be taken by the company after an agreement is reached with its employees is to register the bipartite agreement with the Manpower Agencies Office where the company is domiciled.

Employees who are entitled to receive THR are employees who are in accordance with the following provisions[2]:

1. employees who has a working relationship with an employer based on an unspecified time, employment agreement or a specified time employment agreement;

2. employees who have worked for 1 (one) month continuously or more;

3. employees who have worked 12 (twelve) months continuously or more are given 1 (one) month’s wage;

4. employees who have 1 (one) year work period continuously but less than 12 months, are given proportionally according to the work period with the calculation of work period divided by 12 times one wage;

5. employees whose employment is based on an unspecified time work agreement and have been laid off 30 days prior to the religious holiday are entitled to religious THR;

6. employees who work under casual daily work agreements, one month's wages are calculated based on:

a. employees who have worked for 12 months or more, one month's wages are calculated based on the average wages received in the last 12 months before the religious holiday.
b. employees who have a work period of less than 12 months, one month's wages are calculated based on the average wage received each month during the work period.
 
Government's Role

In terms of granting THR, The Ministry of Manpower (“MoM”) maintains economic stability through policies by previously having held a dialogue with the Indonesian Employers' Association (Asosiasi Pengusaha Indonesia or “Apindo”) and Labor Unions. The MoM has also collaborated with the National Tripartite Cooperation Institute (Lembaga Kerja Sama Tripartit Nasional or “LKS Tripnas”) to add Company-level Financial Statements in the preparation of THR implementation by considering economic conditions due to the Covid-19 pandemic[3]. In addition, the role of the Manpower Office is also needed to record the bipartite agreement that has been made by the company and employees as mentioned above.

The SE THR 2020 also mandates the Governor to provide a THR Complaints Command Post (Pos Komando or “Posko”). These posts are established in any manpower agencies in every province, district and city throughout Indonesia to receive reports from the public, receive complaints, monitor the implementation of religious THR awards, provide consultation and law enforcement services in accordance with the provisions[4].
 
Closing Remarks

Recovery of the economy is unknown. To see companies resume their normal business activities and for customers to regain their purchasing power again is a far-sighted scene. However, what must continue to be certain is the government, employers and employees willpower and compromise to work together in maintaining the sustainability of the economy. Accommodating and understand each party's position is key in order to efficiently collaborate in difficult times.

The legal effectiveness of SE THR 2020 is still being debated as it is in the form of a Circular Letter acting as guidelines, thus not entirely binding on the public. SE THR 2020 does however guarantee the company's obligation to fully pay the 2020 THR grant to its employees. It is entirely plausible that a company decides to pay 50% of the THR allowance in May and 50% later in the year, subject to mutual understanding with the employees. What must be ensured by companies is that by the end of 2020, all employees entire THR allowance is fully compensated.

SE THR 2020 can be the basis between Employers and Employees to have new commitments regarding the provision of THR in addition to those that have been regulated by the Law and which are agreed to through Employment Contracts, Collective Agreements and Company Regulations.
 
If there are any queries with regards to how this may affect your business, please contact us for further legal consultation.

This information does not, and is not intended to, constitute as legal advice; instead, all information, content, and materials are for general information only.
©2020. BE Partners. All Rights Reserved

[1] Rully R. Ramli and Sakina Rakhma Diah Setiawan, 'Menaker: THR Wajib Dibayarkan Paling Lambat H-7 Lebaran' (KOMPAS.com, 2020) [Online] accessed through <https://money.kompas.com/read/2020/05/11/191200626/menaker-thr-wajib-dibayarkan-paling-lambat-h-7-lebaran>.

[2] Minister of Manpower Regulation No. 6 of 2016 concerning Religious Holiday Benefits for Workers/Labor in the Company

[3]Tira Santia, ‘Menaker Ida: Gubernur Harus Pastikan Perusahaan Bayar THR Buruh’ [Online] accessed through https://www.liputan6.com/bisnis/read/4250026/menaker-ida-gubernur-harus-pastikan-perusahaan-bayar-thr-buruh

[4] Tita Salsabila, ‘Pastikan THR Diberikan Perusahaan, Menaker Buat Posko Pengaduan THR Keagamaan 2020’, [Online] accessed through https://www.pikiran-rakyat.com/nasional/pr-01381387/pastikan-thr-diberikan-perusahaan-menaker-buat-posko-pengaduan-thr-keagamaan-2020