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Jakarta Post

COVID-19 forces restaurants, retailers to cut wages, furlough employees

  • Riska Rahman

    The Jakarta Post

Jakarta   /   Tue, April 28, 2020   /   04:06 pm
COVID-19 forces restaurants, retailers to cut wages, furlough employees Social distancing marks are seen on chairs at a KFC outlet in Hong Kong on March 27, 2020. (REUTERS/Tyrone Siu)

Indonesia's restaurant chains and retailers are struggling to fulfill their obligations to their employees while trying to keep their business afloat amid the COVID-19 pandemic.

Publicly listed PT Fast Food Indonesia, the operator of Kentucky Fried Chicken (KFC) chains in Indonesia, said in a statement last Friday that it closed 97 stores across the country as several shopping malls were forced to shut down operations due to the pandemic.

“Besides the stores inside the malls, our other stores are still operational, serving customers for takeaway, delivery and drive-thru services and closing dine-in services,” the company said in a statement published on the Indonesia Stock Exchange (IDX) website.

Fast Food Indonesia operated 689 KFC stores across Indonesia. Around 233 stores were located inside shopping malls, 41 in food courts and 210 were inline stores set up between the end caps of shopping centers.

The COVID-19 outbreak in the country has disrupted business activity and hit demand with customers staying at home following the government’s call to practice social distancing and the large-scale social restrictions (PSBB) implemented in several cities and provinces nationwide to contain the virus. As of Monday, more than 9,000 people contracted the disease in Indonesia with the death toll reaching at least 760, according to official data.

As a consequence of the stores closing, Fast Food Indonesia said it furloughed 450 employees in its stores across Java after trying its best to avoid layoffs. The company said the furloughed workers still received their wages albeit with adjustments.

As many as 2.8 million people have lost their jobs so far, according to data from the Manpower Ministry and the Workers Social Security Agency (BPJS Ketenagakerjaan). More than half were furloughed and placed on paid or unpaid leave.

“Based on the agreement with our labor union, we will adjust the wages of our employees who are still working as usual during the COVID-19 pandemic period,” it said in the statement, adding that the company would reduce wages with the biggest reduction seen in upper senior management salaries.

The company and the union also agreed to reduce and delay some employees’ Idul Fitri holiday bonuses (THR) this year with the biggest reduction applied to those at the upper senior management level.

Coordinating Economic Minister Airlangga Hartarto reminded businesses earlier this month that they were obligated pay out the THR to their employees despite the economic pressures caused by the pandemic.

The operator for the Pizza Hut restaurant chain in Indonesia, PT Sarimelati Kencana, was also doing its best not to dismiss employees even though the pandemic had forced it to close some stores, director Jeo Sasanto said.

“We’ve asked some of our employees who work in the closed-down stores to take paid leave, while we placed some others in operating outlets or our delivery services,” he told The Jakarta Post on Monday, adding that the publicly listed company had closed around 30 outlets across Indonesia with most of them located inside shopping malls.

When asked about employee wages, Jeo said the company had yet to determine the wages and holiday bonus adjustments for this year. “We are still having internal discussions on the matter,” he said.

The wave of wage cuts and furloughs also swept over the country’s retailers, including publicly listed companies PT Ramayana Lestari Sentosa and PT Matahari Department Store.

In a statement published on the IDX website on April 14, Ramayana said it had furloughed all of its employees at its store in Depok, West Java, on April 6 following a decision to temporarily close shop.

“After several meetings with the employees on furlough conditions failed to reach an agreement, we and the employees agreed to end the employment of all 84 of them and pay their severance payments as stipulated in the Labor Law,” Ramayana explained in the statement.

It also promised to re-hire the laid-off workers once the store begins operating again.

Ramayana said without specifying an amount that it had closed some of its stores. As of September 2019, the company operated 117 stores across Indonesia with a total area of 726,148 square meters.

Last month, publicly listed Matahari Department Store announced that it was reducing labor expenses to keep its business alive amid the pandemic.

“[…] we are reducing labor expenses through a combination of reduced working hours, unpaid leave and management salary cuts, with senior leaders taking the biggest reduction,” it said in a statement on March 31.