The letter reverses last year’s decision that allowed pandemic-hit businesses to either pay the bonus in installments or delay payments altogether. Under the new letter, companies must pay bonuses no later than a week before a religious holiday, most pressingly Idul Fitri, which is expected to fall on May 12.

Pandemic-hit businesses unable to pay within the timeframe have to prove their inability by disclosing financial statements and must negotiate new payment terms with employees but are, nevertheless, required to pay no later than a day before the religious holiday.

“THR is an obligation that employers must pay to their workers,” Manpower Minister Ida Fauziyah was quoted as saying in a press release on Monday. 

“Particularly during this economic recovery phase, THR can clearly stimulate spending, which can drive economic growth.”

Indonesia’s household spending shrank last year as 29.12 million workers saw reduced incomes under the economic crunch. Of them, 2.56 million were unemployed, 760,000 pushed out of the workforce, 1.77 million furloughed and 24.03 million faced shorter working hours, Statistics Indonesia (BPS) found in August last year.

Read also: Unemployment surges to decade high as COVID-19 causes millions to lose jobs

The pandemic also led to a 5.4 percent decrease in average labor wages to Rp 2.75 million (US$188.67) in August last year from the same month a year earlier, similar data show.

With the pandemic also battering employers, Ida said the ministry was alerted about 410 companies that were unable to pay the bonuses last year. Of the figure, only 307 of them have been resolved. The government is still keeping an eye on the remaining 103 companies.

She added that the ministry would fine employers for late payments of the bonuses. The fine, which would amount to 5 percent of each company’s total THR expense, would not excuse employers from completing THR payment.

Nining Elitos, the chairwoman of the Congress Alliance of Indonesian Labor Unions (KASBI), said that, last year, at least 10 companies across various industries replaced the THR with goods such as shoes and sandals while many others did not give anything. More than 4,000 union members experienced such policies.

While full time employees facing bonus-related problems, contract and outsourced workers were the most vulnerable, added Nining. Many employers used the pandemic as an excuse to avoid paying their dues.

“This is a problem. The majority of businesses are not transparent,” Nining told The Jakarta Post in a phone interview on Monday. “It is quite difficult to assess whether companies are abusing this current situation as an excuse [to avoid paying their dues].”

Read also: Labor groups demand financial transparency after government allows holiday bonus delay

While the new letter provided a guarantee for workers, it was not expected to increase overall spending because declining spending was also due to low consumer confidence and ongoing mobility restrictions, according to Piter Abdullah, the research director at the Center for Reform on Economics (CORE) Indonesia.

“The THR will help some people and spur their spending but we need to keep in mind that spending, as a whole, comes more from the upper-middle class, who are not impacted by THR,” Piter told the Post in a phone interview on Monday.

Bank Indonesia reported on April 9 that the country’s consumer confidence index, based on a survey on 4,600 households in 18 cities, improved to 93.37 in March from 85.8 in February, although overall sentiment remained pessimistic. Only consumers with incomes above Rp 5 million were optimistic.

Indonesian Employer Association (APINDO) deputy chairwoman Shinta Kamdani said the new letter was “prudent” as it better guaranteed workers’ bonuses while granting employers’ some degree of flexibility.

Shinta said the association did not have data on how many companies were expected to face difficulty in complying with the letter but estimated the number to be fewer than last year, given the uptick in the economy this year.

“It may not be ideal for workers but we need to understand that all economic data show the national economy has not recovered at all,” Shinta told the Post via text message on Monday. 

“If companies still under pressure are forced to pay the THR before the holiday, we fear there will be more companies going under or laying off workers after the holiday as their entire financial resources are mobilized for THR.”