Recently, we have been surprised by several startup companies that have been busy laying off their employees. As we know, startup companies are an industry that has a global impact today. So that the effect will be that many companies will terminate their employment (PHK), go bankrupt or close their business.
In 2022 several Indonesian startup companies made a large number of layoffs. According to a report by The Information, Sea Ltd has reportedly laid off 7,000 of its employees over the last six months. This figure represents 10 percent of Sea's total employees. On the other hand, GoTo has downsized 1,300 employees, or around 12 percent of the total permanent employees. And recently JD.id laid off 30% of their employees or around 200 employees.
So, what does layoff mean? What causes layoffs for employees? Also, what can we do if we get affected by layoffs?
Definition of Layoff
In the corporate world, the term layoff has other terms, such as downsizing, rightsizing, or smartsizing. This layoff itself basically means an action taken by a company that suspends or lays off its employees, either temporarily or permanently.
Layoff is something that is often done by companies to their employees, this is done to cut costs because there is a decrease in demand for their products or services caused by the impact of the economic crisis. So, it can be concluded that a layoff is a permanent or temporary termination of employment by the company for reasons unrelated to employee performance.
Layoff, if translated into Indonesian, has the same meaning as Termination of Employment (PHK). As we generally know, layoffs mean that companies terminate their employees.
But in layoffs, there is still a possibility for employees to be called back to work. However, it is also possible if an employee who experiences layoff experiences permanent termination of employment. This happens when the condition of a company gets worse.
Causes and Impact of Layoff by The Company
1. Cost Reduction
Another reason the company laid off was the need to reduce the company's operating costs. This cost reduction is done by the company because it cannot make a profit. Other times, the company is unable to pay salaries to its employees because the company is deeply in debt.
2. There is a Merger Conducted by The Company
If there is a merger carried out by the company or purchased by another company, then several adjustments may occur, for example, related to the termination of employment or layoff. Where the new management usually has the type or criteria of employees who work.
3. Downsizing
Layoffs can also be caused by the fact that the company really wants to reduce the number of employees. There are several reasons for this staff reduction. For example, a department may no longer be effective because it has too many employees, or a reduction in staff may be necessary due to the need for coordination within the department.
4. Change of Work Location
Moving work locations can also impose layoffs on employees, where moving work locations from the old to the new place is considered to reduce employee performance so the company decides to lay off. Or the company has other reasons, such as the management of the company, which has just made adjustments to salaries and positions.
5. Project Cancellation Occurs
Companies may have large-scale recruitment. This is done to support large projects that companies are carrying out. However, if a major project is canceled, the company will have to lay off the employee.
6. The Company Closes Its Business
Another reason used by companies to lay off their employees is when the company continues to experience losses or failures in management in managing the company.
If this happens, the company can lay off its employees and leave the main employees to manage the company. However, if the company's condition worsens so that the company has to close its business, it is possible that employees may be laid off.
Rights Given by the Company to Employees Affected by Layoff
According to Article 156 paragraph 1 of Law 13 of 2003 concerning Manpower, it is explained that in the event of termination of employment, the employer is required to pay severance pay and/or long service pay and compensation money that should be received. So, according to this Article, if the employee is affected by the layoff or layoffs, then the company is obliged to provide its rights.
As for compensation for rights that must be received by employees in accordance with Article 156 paragraph (4) first, annual leave that has not been taken and has not been terminated. Second, costs or fees for returning workers and their families to the place where workers are accepted to work.
Third, housing replacement as well as treatment and care are set at 15% of severance pay and/or long service pay for those who meet the requirements. Finally, other matters stipulated in work agreements, company regulations, or collective labor agreements.
Conclusion
For Employers
We cannot deny that this cessation of employment is a way of resolution. Now it's just a matter of how best to calculate the rights to be paid to employees. Termination or Layoff cannot be done casually, because companies must consider various reasons for terminating work first. These considerations must be in accordance with Law No. 13 of 2003 which regulates manpower.
With our service, namely Payroll Management, we help our clients prepare their regular financial and tax statements in order to make sure that they are in compliance with Indonesian financial and tax regulations. With the convenience of this Payroll Management, you can pay every severance pay and other rights owned by employees.
Aurora proposes to provide the above services using award-winning Payroll Software which is used by more than 700,000 businesses worldwide. This system is user-friendly, powerful, and reliable. All data sent to the Client in relation to employee's information will be encrypted to protect the Client's confidentiality.
Pay severance and other entitlements for all your employees with the convenience of this payroll software. So you don't have to worry about having to calculate all salaries according to government regulations. Aurora's Payroll Management Service is easy to use.
For more information about the Payroll Management service of Aurora Consultancy Group, Please contact us at admin@auroragroup.id or contact another platform at Contact Us page. Our team will contact you back, as soon as possible.
For Employees Affected by Layoff
We’re sorry about the bad news for everyone impacted by recent layoffs. Do not get discouraged because this is not the end of everything. Better job opportunities await, We're here, and let us help you as much as we can. With us and Aurora Executive Placement Consultant, we’re still actively hiring for our progressive clients and we had dozens of vacancies for you.
If you or someone who is impacted by layoffs, let send us your CV to: resume@auroraepc.com and fill out this form on this link http://bit.ly/3FxjPtB to help us find the best-fit position for you.
Don’t forget to share this article or the information to help everyone who was impacted.
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