Layoffs down dramatically in Indonesia as employers look for alternative ways to cut costs

Author: PM editorial | Date: 19 Oct 2016

Number of people made redundant this year on target to be less than half of 2015

The number of layoffs in Indonesia has fallen dramatically this year, according to figures from the Manpower Ministry.
 
From January to August, only 8,733 employees were let go by their employer. Compare that to the 77,787 laid off in 2014, and 48,843 more in 2015, and it’s apparent that 2016 is on target for less than half the layoffs of last year.
 
While the economy has picked up a little, organisations exploring alternative cost-saving measures are being heralded as the reason more Indonesians are keeping their jobs. In particular, cement producer Semen Indonesia has started using natural waste – husks and shells from tobacco, cashew and coconuts that would otherwise become landfill – to replace coal and make a big saving in its operational costs.
 
“Our energy-related costs hovered around 60 per cent of overall costs so we prioritised making them more efficient,” Agung Wiharto, corporate secretary of Semen Indonesia, told the Jakarta Post. Saving money on energy costs meant there was no need to let staff go and lose production capacity.
 
Improvements in renewable energy are just one way that organisations can save money without making staff redundant. Training people with diverse skills so they can take on different types of work and making use of new digital technologies in the production process have also been effective for Indonesian employers.
 
“The number one objective should not be reducing the workforce but improving productivity,” Yulius Yulius, partner and managing director of Boston Consulting Group’s Indonesian operation, told the Jakarta Post. “To improve productivity, you need operational improvements. Disruptive technology should be seen as an opportunity to improve the workforce’s skills.”
 
Earlier this year, a study by Willis Towers Watson showed base salaries in Indonesia were up to 44 per cent lower than China, the most expensive labour market in the ASEAN. While this means Indonesian workers being paid less than their Chinese counterparts, it also means the lower labour costs attract more investment and more job creation.