Golden Handshake Program in Indonesia

Selasa, 30 Agustus 2016 | 11:53 WIB oleh Tiara Ika Winarni

A.      Introduction

The slowing growth of economy these past few years have inflicted significant effect to the performance of companies, globally or domestically. As for the 3,1%  economic growth in 2015 is still lower than the economic growth in 2014, which is 3,4%.[1] The dynamics of global economy and financial market have affected significantly to Indonesia due to less diversification of economic structure and high dependency on external funding. Export structure in Indonesia is based on natural resources, therefore the derivation of commodity prices will result on export performance and later will affect on deceleration of performance in various economic sectors. Besides, the high dependency of imports for export commodities will result on the low optimization of rupiah depreciation in order to upgrade the export performance. On the other hand, lacking of progress in financing sources of domestic financial market induce the high dependency on overseas funding sources and overseas private loans which susceptible of exchange rate fluctuation.

The combination of global and domestic economic fluctuation give effect to the business dynamics, which resulting the companies to carry out adjustment in term of finance, operational, or organization in order to survive in the global or domestic business competition. The form of adjustment may be carried out through company restructuring.

 

B.      Company Restructuring Strategy Through Employees Rationalization

Realization of organization and management restructuring implemented through rationalization strategy. Employment Law does not stipulate rationalization, however industrial relation acknowledge it as efficiency. The efficiency practice for employee what is later to be executed through golden handshake program.

 

1. The Relation Between Rationalization And Restructuring

Company restructuring is a measure carried out by the entities in order to maintain the company existence, company development and empowerment in national or global activities, also in order to overcome the difficulties that the company encounter. Once and for all, restructuring is a revamping or fundamental renovation of the whole company’s business link with the aim to generate competitive advantage and competition of the company.[2] A comprehensive restructuring according to ADL Institute USA consist of Business Restructuring, Management & Organizational Restructuring, and Financial Restructuring. Management and Organizational Restructuring specifically may occur in a form of downsizing or delayering, which involve reduction within the company in manpower, working units or division, or position level in the organization structure of the company.[3]

In practice, realization of management and organization restructuring implemented through the rationalization strategy. Rationalization in the context of employment according to Maximilian Weber can be defined as organizing number of the employees with an appropriate ratio to the service provided.[4] According to the explanation, rationalization can be defined either as employees reduction or downsizing or replenishment of employees, as well as to rearrange and redistribute the employees.

 2. Form of Employees Rationalization in the Company

Rationalization in brief aimed to obtain the number of employees with the appropriate ratio to duties and functions performed by the institution. Employment Law itself does not stipulate regarding rationalization, however in the industrial relation rationalization can be acknowledged as efficiency. Company’s efficiency in the event of downsizing or employees reduction can be performed through employment termination due to efficiency or Golden Handshakes Program.

  1. Employment Termination Due To Efficiency

     Employment termination according to the Article 1 Employment Law is the termination of employment due to the issues which result on the expiration of rights and duties between the employees and the employer. Employment termination can be divided into 3 categorizes, namely termination due to the will of employer, termination due to the will of employees, and termination due to deceased. Employment termination due to efficiency can be categorized into employment termination due to the will of employer. According to the Article 164 paragraph (3) of Employment Law, employer may carry out employment termination to the employees/workers because the company is closing down due to efficiency, and not due to loss 2 (two) times consecutively or not due to force majeure, therefore the said employees/workers are entitled to severance pay with the amount of 2 (two) times of the value stipulated under Article 156 paragraph (2), a reward for years of service pay with the amount of 1 (one) time of the value stipulated under the Article 156 paragraph (3) and compensation in accordance with the provision of Article 156 paragraph (4). Furthermore, the Article 156 obtained an elucidation through the Constitutional Court Decision No. 19/PUU-IX/2011 which stated that efficiency referred to a company which permanently closed.

  2. Golden Handshakes Program

    Basically, golden handshake program categorized as Voluntary Retirement Scheme. The term voluntary retirement scheme itself  is being used by the trade union, meanwhile the government called it as unstated exit policy. A well-known term within the employees community is the golden handshakes. Golden handshake is a contractual clause which provides guarantee to the employees, especially those in the executive level, to obtain the severance pay after they quit from their job due to company restructuring or retirement. Golden handshakes program aimed to support the performance optimization and company development in term of human resources quantity and quality adjustment into the working efficiency and productivity. The upside of this program is the working termination facility in a sensible way which gives benefits to both the employees and the company. This program is not acknowledged by the Employment Law, because basically the laws only regulate normative or minimum matters. Golden handshakes program is a practice usually performed by the companies in term of management strategy.

C.      Golden Handshakes Program As Solution For Employees Rationalization In Company

Article 151 Employment Law instructed the employers, employees, trade union and the government on preventing the occurrence of employment termination. However, in reality there are several conditions that require the company to carry out employees efficiency, eventhough the company is not under the state of closing down. Therefore, in practice company efficiency through downsizing usually performed by companies using the golden handshakes program namely an offer for the employees to retired voluntary from their job prior to the expiration of actual working period. This program sought to prevent the company from executing employment termination in formal juridical as instructed by the Article 151 of Employment Law. This program is applied when the company is on the risk of conducting an unilateral employment termination due to efficiency and also is in the condition to reduce the existed employees, yet remains to prevent the employment termination to the employees. This program is performed by giving out incentives to the employees who are willing to retired prior to the normal retirement age, hence basically the employees are voluntary retiring and not being terminated by the company.

 Practice of golden handshakes program is recognized by different terms in each companies. For instance, PT Telkom refer this program as Early Retirement (Pensiun Dini/Pendi), while Bank BRI has the term of Voluntary Retirement (Pengunduran Diri Sukarela/PDS).

There are several important aspects regarding voluntary retirement using golden handshakes program that companies should notice, inter alia:

  1. Company must possess firm reason to enforce the golden handshakes program. For instance, the company is undergo efficiency or restructuring.
  2. Carry out manpower planning by analysing the required quantity and competency of existing human resources to optimizing the implementation of golden handshakes program.
  3. Planning the reduction of employees number also the implementation period of the program according to the manpower planning.
  4. Carry out explicit communication to the employees or employees representatives regarding the planning for the program also the reorganization scheme that will occur after the program applied. This measure is carried out to prevent mazy issues within the employees.
  5. Involving and communicating the planning and consideration for the golden handshakes program to the employees.

In establishing the mechanism of golden handshakes program, company including these aspects below in program implementation:

  1. Requirements for the employees who are allowed to enrol for the golden handshakes program. For instance, requirements of productivity level, working quality, and etc.
  2. Criteria for the employees who are allowed to enrol the golden handshakes program. For instance, criteria of age, position or education level.
  3. The amount and scheme of compensation that will be received by the qualified employees. The amount of compensation that will be received by the employees who enrolled the golden handshakes program will be greater than the amount stipulated by the Employment Law, with addition of compensation provided by the company. This addition aimed to attract the employees to enrol for golden handshakes program.
  4. Procedures to register the golden handshakes program. During this process, the company is expected to carry out communication to the employees, employees/trade union representatives, or head of divisions in order to the whole employees acknowledge and understand the procedure to register the program.
  5. The prior and post announcement of golden handshakes program.
  6. Procedures to pay the compensation.

The components in the compensation that will be received by the employees who enrol for golden handshakes program inter alia:

No.

ACCORDING TO MANPOWER LAW

COMPANY POLICIES

1.

Severence Pay

Compensation Pay for the Remainder of Service Pay

2.

Reward for Service of Years Pay

Reward According to Level

3.

Compensation

Compensation for Religious Allowance

4.

Detachment Money

Leave Compensation for Unperformed Leave

5.

Old Age Benefits

Other compensation according to the company policies

The company may stipulate the requirements for the golden handshakes program participants as follows:

  1. Incompetent

    Incompetency of an employee can be judged by working appraisal carried out by the company and with the head of working units recommendation.

  2. Illnes

    The employees who suffer from a long-drawn illness hence the said employees are unable to perform the job under their responsibility.

  3. Undergo process of disciplinary punishment

    The employee who is undergo disciplinary punishment by the company due to violating company rules or the prevailing laws.

  4. Age Limit

    In executing golden handshakes program, the company may determine the employees who are allowed to enrol the program based on their age limit. For example, employees with maximum age of 55 years old are allowed to enrol for the program.

  5. Working Period

    Aside from the age limit, the company may also determine the employees who are allowed to enrol the program based on their working period. For example, employees with the working period of minimum 5 years are allowed to enrol for the program.

  6. Level and Position

    This criteria is in line with employees rationalization for level or divison with exceeded employees. For example, the employees who are allowed to enrol the program are employees of marketing division with the level of manager to staff.

  7. Education Level

    This criteria is in connection with the required employees qualification after company restructuring. For instance, the company has determined that the minimum education level for the employees is Diploma, therefore employees with the education level below of the minimum level will have to enrol for the golden handshakes program. However, the employees with education level of Diploma may also enrol for the program.

In performing the process of voluntary retirement through golden handshakes program, the company is expected to carry out correspondence with the trade union (if exist) because trade union holds an essential role in implementation for this program. Trade union acting as a bridge between the company and employees in distributing the information regarding golden handshakes program which the company plans to execute. Trade union can also affect the numbers of employees who are going to sign up for the program, it depends on the approach and communication carried out by the trade union. Besides, the trade union is also entitled to acknowledge the current condition of the company when the discourse of golden handshakes program arises.

 

 D. Conclusion

         In business terrain, dynamics of the economy both domestically and globally will give a significant effect to the performance and competition level of a company. Therefore, the company must enforce an adjustment in order to restore the performance and competition level of the company in order to remain competing in the global or domestic market. The adjustment can be performed by carry out company restructuring with focus on management and organization restructuring. The enforcement of management and organization restructuring performed by enacting the employees rationalization which executed through golden handshakes program.

         Through this program, the company will be able to provide the voluntary retirement option for the employees by giving compensation and benefits hence the company will prevent the normative employment termination which may cause an opposition from employees due to injustice and unattractive offers. On the other hand, this program is also aimed as an appreciation for the employees who are willing to retired. This program can be considered as a humane and fair option for both parties, which are the company itself and the employees.



[1] Bank Indonesia, “Bersinergi Mengawali Stabilitas, Mewujudkan Reformasi Struktural”, Indonesian Economic Report, 2015, page 3.

[2] Endang Ratnaningsih, “Restrukturisasi Pada Masa Krisis Ekonomi Global Tahun 2008 dalam Hubungannya terhadap Turnover Intention Karyawan dengan Job Insecurity sebagai Variable Pemoderasi”, Yogyakarta: 2008, page 2.

[3] Ibid., page 3.

[4] Rogers Brubaker, The Limits of Rationality: An Essay on the Social and Moral Thought of Max Weber, 1984, London: Allen and Unwin.