BackgroundTo support its constituents in the garment sector in responding to the impact of the COVID-19 pandemic, the ILO has developed a global development cooperation project with activities to be implemented in Bangladesh, Cambodia, Ethiopia, Indonesia, Lao PDR, Madagascar and Vietnam. Funded by the German Federal Ministry for Economic Cooperation and Development (BMZ), the project will introduce and implement a wage subsidy scheme for workers in enterprises enrolled in the Better Work Indonesia (BWI) programme.
According to BWI data, by mid-April 2020, in its 64 out of around 220 member factories more than 110,000 workers are affected with 50 percent on reduced wages, 30 percent on a “’no work no pay”’ scheme, 10 percent on mass annual leave and 10 percent on lay off. This will be the key focus of the project in Indonesia.
By providing payment of a wage subsidy for approximately 100,000 workers in BWI factories, the project aims to contribute to employment retention and business sustainability during the crisis. Furthermore, by implementing such intervention that is in line with the principles enshrined in international social security standards, it can serve as the basis for development of a public wage subsidy scheme in the social security system of Indonesia.
The project puts social dialogue as one of the qualifying conditions to enroll in the programme. To be eligible, factories must enter into social dialogue and reach an agreement with their workers on level and duration of the reduced wage. A set of criteria and operational procedures for enrollment to the programme and submission of claim in accordance with certain international social security standards have been developed.
The project is being managed by the ILO Country Office for Indonesia and Timor-Leste in collaboration with the ILO’s Social Protection (SOCPRO) department and the ILO's Better Work Indonesia (BWI) programme. The ILO’s BWI programme has been operating in Indonesia since 2011 and works with 215 garment and footwear export factories employing almost 400,000 workers.
The project focuses on two objectives:
- Strengthening occupational safety and health (OSH) measures to facilitate return to work in acceptable conditions of safety and health after COVID 19 lockdown; and
- Cushioning enterprises against immediate employment and income losses and compensate workers for the loss of income due to COVID 19 by providing wage subsidies and other cash transfers; and to facilitate “back to normality” by maintaining an employment relationship.
The objective is to provide ad-hoc complementary income for approximately 109,500 workers from BWI factories through subsidizing part of reduced wages paid by the factories to the workers.
In this regard, implementation of the intervention should ensure effective delivery of the wage subsidy to the targeted beneficiaries through the factories according to implementation guidelines of the wage subsidy programme and to the financial and administrative rules of the International Labour Office (ILO).
Programme StrategyILO has developed a detailed design for the wage subsidy scheme. Only factories and workers that have entered into collective bargaining agreements that determine the duration of temporary work stoppage, employees affected, and amount or method of wage payment will be eligible for the scheme.
Employers will be obliged to follow the collective agreements and make wage payments according to the agreement. The project will validate whether employers comply with the collective agreements and payed wages in accordance. The project will reimburse part of the amount of wages paid by employers to employees based on the collective agreement, in the last payroll cycle.
As a complement to this, the ILO will set in place a grievance system that workers or those affected by the project can use to raise issues or alert about irregularities. The grievance system will be managed directly by the ILO to ensure a proper distribution of roles, accountability mechanism and avoid conflict of interests.