Employment Policies Comparison and What We Can Learn From Other Countries
Since March 11, 2020 WHO has declared the COVID-19 outbreak as a global pandemic considering that it has infected more than 160 countries or 80% of the total 195 countries in the world. Compared to the SARS / MERS pandemic that occurred in 2002 to 2003, the rates of transmission and mortality number caused by COVID-19 are much higher. Concerns that the pandemic has become out of control has led many countries to adopt various protocols to limit movements and activities of the people in an effort to stop further spread of the COVID-19. Most countries apply regional quarantine or lockdown such as China, the United States, Italy, Spain, India, New Zealand. There are also countries which choose semi/partial lockdown like Indonesia through the Large Scale Social Restriction (PSBB Policy).
As long as people activities and movements are still restricted, business activities will not be able to run normally. This condition if last too long will certainly result in the business to collapse. The government certainly continues the efforts to prevent business closures from leading to large-scale layoffs, through introduction of various policy packages specifically aimed to deal with the adverse impacts arising from the COVID-19 pandemic. This newsletter is discussing about comparison between Indonesia and other countries on the policy approach in tackling employment issues arising from the COVID-19 pandemic.
Various countries have prepared economic stimulus to maintain the stability of their country's economy. In Indonesia, through Perppu No. 1/2020, the Government has re-focused the APBN budget for health to encounter COVID-19 and the national economic recovery program. The Government of Indonesia provided an economic stimulus with a total value of 431 trillion Rupiah or equivalent to 2.5% of Gross Domestic Product with portion for stimulus in employment sector around 5% or 20 trillion Rupiah.
As a comparison with other countries, the Italian Government provides a stimulus with a total value of 25 billion Euros or equivalent to 1.4% of Gross Domestic Product, with 40% portion of stimulus for the employment sector which is around 10.3 billion Euros.
The United States Government provides economic stimulus in the amount of USD 2.3 trillion or equivalent to 11% of Gross Domestic Product, with 11% portion of stimulus for employment sector in the amount of USD 250 billion.
The Government of Singapore provides the largest economic stimulus amongst countries in the Southeast Asia, amounting to USD 42 billion or equivalent to 12% of Gross Domestic Product, with a stimulus portion for employment at 8.5%, which is around USD 3.6 billion.
The Malaysian government injected 23 billion USD economic stimulus or equivalent to 10% of the Gross Domestic Product however it is unknown the size of stimulus for the employment sector.
The amount of economic stimulus determined in each country will certainly depend on the ability and the needs of the respective countries. However, there are similarities where all the countries mentioned above put the employment sector as one of the government attentions.
Policies to Support Employers and Employees
In Indonesia, SE Menaker 3/2020 provides policies related to wage protection for employees related to COVID-19, in which the companies are required to continue to pay full wages to employees who cannot work because they are suspected of being infected with COVID-19. If the company is forced to limit the business activities due to government policies to prevent and overcome COVID-19 in the working environment, the company may change the nominal wages and payment methods of employees wages for the sake of business continuity based on the agreement between the employee and the company. Similar policies can also be found in the following countries.
In Malaysia, companies are not allowed to force employees to take unpaid leave for those who cannot work for reasons related to the COVID-19. In addition, employers must continue to pay employees with full wages for those who cannot work for reasons related to COVID-19. This policy is accompanied by several kinds of supports from the government to businesses in Malaysia. Based on the news, the Malaysian government has prepared a third economic package in the form of subsidies to companies amounting to 7.9 billion Ringgit and a special grant to Small Medium Enterprises amounting to 2.1 billion Ringgit. In addition, since 1 April 2020 the Malaysian government has exempted companies in all sectors from paying the Human Resources Development Fund, which is a training fund that companies must pay for employee skills development and retraining.
In the United States, there is a policy whereby the government requires companies to provide full wages to employees who do not work under sick leave for a maximum of 2 weeks for some reason related to the COVID-19. If there are employees who do not work under sick leave for a maximum of 12 weeks due to taking care of family members for certain reasons related to COVID-19, then the company may provide partial wages to employees. This policy is accompanied by Government’s support to companies in the form of reimbursement through refundable tax credits as administered by the Department of the Treasury.
In the United Kingdom, the British government applies a "reclaim" or "reimbursement" scheme for "statutory sick pay", which is the obligation for employers to pay wages to employees who are sick for 4 consecutive months. As a result of the COVID19 pandemic, businesses can reclaim statutory sick pay obligations to the government. In addition, direct cash aid is also given to freelancers in the amount of 80% of the profit generated up to a maximum of 2,500 pounds sterling per month.
In Italy, the Italian government provides financial support to companies to pay wages in the form of additional wage compensation funds; benefits to professionals, entrepreneurs, and seasonal workers in the tourism sector, agriculture and entertainment in the form of benefits; and financial support to employees and entrepreneurs who have stopped, reduced or suspended the employment as a result of the COVID-19 pandemic.
In Korea, the Korean government allows companies to temporarily close or suspend the business activities as prevention to COVID-19 and allows companies who experience a decrease in income to pay employees at least 70% of average wages, without requiring the consent from the employees. In addition, the Korean government provides financial support to companies amounting to three-quarters of the total cost of wages paid by companies to employees and provides financial support to companies who need to pay the Family Care Leave to their employees.
The government of India issues an Order which contains the following items: (i) all employers must ensure the continuity of remuneration without wage reduction; (ii) local governments are obliged to ensure the availability of clothing, food and shelter for the poor and people in need, including migrant workers who are stranded as a result of the lockdown; (iii) since the lockdown is in effect, the landlord should not charge rent fee to workers for a period of one month; (iv) if a landlord expels students / workers who live in his place, the landlord will be subject to sanctions in accordance with the provisions in the Disaster Management Act. Furthermore, the Indian government amended the 1952 Employees Provident Funds Scheme, specifically Article 66H by adding assistance relating to the disease pandemic. The form of assistance is the provision of 75% of the employees’ wages for a total of 3 months and provides additional health insurance in the amount USD 66,019.70 to medical workers.
The German government offers a short work time scheme (kurzabeit) where employers can pay part of the wages based on the agreement between employers and employees to give room for businesses to maintain the healthy condition of their business. The German government once implemented this scheme during the financial crisis in 2008-2009.
The similarities between the countries mentioned above are, employees on one side, receive wage protection from the government, while employers on the other side employers receive financial support from the government. What about Indonesia? Whether obligation to employers in terms of wages is also backed up with certain supports from the government?
Perppu No. 1/2020 regulates the National Economic Recovery Program (Pemulihan Ekonomi Nasional - PEN). Through this program, the Indonesian Government may engage in State Capital Participation (Penanaman Modal Negara), Government fund placement, Government investment, and/or Government guarantee for businesses in the real sector and financial sector in order to maintain their business continuity. The news stated that the government has planned to provide an injection of funds in the near future to several state companies experiencing financial difficulties with a total value of 32.65 trillion Rupiah, namely PT Garuda Indonesia (Persero) Tbk in the amount of 8.5 trillion Rupiah; PT Krakatau Steel (Persero) Tbk in the amount of 3 trillion Rupiah, PT Kereta Api Indonesia (Persero) in the amount of 3.5 trillion Rupiah, in the State Logistics Agency in the amount of 13 trillion Rupiah, PTPN in the amount of 4.0 trillion Rupiah, and in the Perum in the Housing sector in the amount of 650 billion Rupiah.
The Indonesian Government shall also need to pay special attention to private companies, including Small Medium Enterprises. In reference to the data of the Ministry of Cooperatives and Small and Medium Enterprises, 98% business in Indonesia comprises of Small Medium Enterprises with workforce absorption reaches 97%. This shows that Small Medium Enterprises have an important role in the national economic system. Similar to Indonesia, 98% of business in Malaysia is filled by Small Medium Enterprises. Understanding the significance of Small Medium Enterprises in the Malaysian economy, the Malaysian Government will provide funding support for Small Medium Enterprises in the amount of 2.1 billion Ringgit.
Policies Related to Layoffs in Other Countries
In Italy, the Italian Government regulates the simplification of procedures for filing layoffs according to its category, namely Ordinary Layoff, Extraordinary Layoff, or Layoff in Derogation. Ordinary Layoff basically simplifies the procedure for all submissions with a maximum period of 9 weeks. Under Extraordinary Layoffs, companies that are supposed to carry out Extraordinary Layoffs may file Ordinary Layoffs. As to Layoff in Derogation, the Policy set out in Law Decree No. 18 of 2020 on Cura Italia Decree applies to companies that only have less than 5 workers and companies that previously did not get access to the Solidarity Funds. In addition, companies may terminate the working relationship in derogation (Layoff in Derogation), which is to terminate employment by excluding the applicable laws and regulations.
Different from Italy which accommodates the employers condition in this difficult situation, the South Korean government does not allow companies to terminate employees who cannot work for reasons related to COVID-19.
Policies Related to Job Seekers and Victims of Employment Termination
During the COVID-19 pandemic, the Indonesian Government did not issue any specific policies related to layoffs. Regulations related to layoffs in Indonesia still refer to the provisions under the Manpower Act. However, to protect job seekers and those who are victims of layoffs, Indonesian government launched the Pre-Employment Card Program as stipulated in Perpres 36/2020.
In essence, the Indonesian Government provides training cost and incentives with a total value around 3.5 million Rupiah for each participant of the Pre-Employment Card Program. The purpose of the Pre-Employment Card Program is to develop workforce competencies and improve labor force productivity and competitiveness; support job seekers and workers affected by termination of employment due to the COVID-19 pandemic; improve existing skills or to gain new skills in new fields; and increase purchasing power and reduce the burden of living costs for employees who have decreased income and/or lost their jobs; and entrepreneurs who have experienced business difficulties due to the COVID-19 pandemic.
Those who opposed with to this program argued that the budget amounting to 20 trillion Rupiah is better utilized for direct cash assistance (Bantuan Langsung Tunai - BLT) during this difficult time. If we look at the provisions of Perpres 36/2020, the government is designing the Pre-Employment Card Program for productivity purpose. During this difficult situation it is important for jobs seekers especially victims of layoffs to maintain their existing skills until getting a new job, or even develop new skills to open up more job opportunities in other sectors which are still surviving and/or not affected by the COVID-19 hardship. This program serves mutual benefit for both of the job seekers and training institutions as the training fund spent by the participants of the Pre-Employment Card Program enables trainers/instructors to earn income.
Other countries also implement similar policies that support the job seekers. In the UK, the government provides general loans and tax incentives worth USD 19 million to more than 4 million families. Another example, the Chinese government has the Unemployment Insurance Program. Participants who join the program can submit these claims during the COVID-19 pandemic.
Based on the explanation above, it can be understood that the employment sector is one of the government’s concerns during the COVID-19 pandemic. The government is trying to anticipate the adverse effects of COVID-19 pandemic to employment sector by issuing various policy packages. Through Perppu No. 1/2020, the APBN is refocused for the health budget and the economic recovery budget.
Government Dilemma Between Saving People Life and Saving the Country from Bankruptcy
Our government will not be able to provide continuous funding as government’s aid is only temporary measure. The wheel of the economy must immediately be moving again. From the news, more than 2 million workers had been laid off and entrepreneurs members of Apindo have warned that they can only survive until June.
President Jokowi released an interesting statement that “we must make peace with the COVID-19”. Jokowi's statement is reasonable considering there is no certainty yet when the COVID19 pandemic will end. Various predictions regarding the end of the COVID-19 infection in Indonesia have missed for several times. The news even reported that there would be the second pandemic wave.
Which one should our government prioritize? Health or the Economy? Even big countries with strong budget like the United States and the United Kingdom are in dilemma as this COVID-19 pandemic has been happening for months and depleting their national reserve. President Trump stated that to release the lockdown will be the biggest decision ever made. In the UK, the news reported that the Prime Minister Boris Johnson has opted to gradually relax the lockdown to enable the people become productive again.
The fact that there is no certainty on the end of the COVID-19 pandemic and the fact that our government cannot afford the needs for economic stimulus in the long run, have left the government in a very difficult position. The Large-Scale Social Restriction has significantly reduced the productivity of the people and in turn it has led to economic downturn. The revocation of the Large-Scale Social Restriction cannot wait until the COVID-19 spread in Indonesia ends. The government may relax the Large Scale Social Restriction in stages with periodic evaluations. This bold move definitely needs to be coupled with strict supervision from the government and discipline from the people. People shall get use to with the “new normal” as part of everyday life, namely keeping the distance, maintaining cleanliness, and using masks in public places.