Employee Demotions due to Missing Target

PERTANYAAN

I work in cooperation (a worker cooperative). Because I did not meet the sales target, my position was demoted and my salary was also reduced. Is that allowed?

INTISARI JAWABAN

An employee demotion briefly means to downgrade or to demote an employee position. Basically, there is no law that prohibits the demotion of employees along with the reduction of their wages. However, employers need to prove compelling reasons when undertaking demotions. What is the legal basis?

Please read the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Demosi Karyawan karena Target Tidak Tercapai which was written by Dian Dwi Jayanti, S.H., and was published on Monday, 27 February 2023.

This article below is an update of the article entitled Downgrading of Employee Position due to Target Not Achieved/ Missing Target (Penurunan Jabatan Karyawan karena Target Tidak Tercapai) which was first written by Tri Jata Ayu Pramesti, S.H., and was first published on Monday, 9 December 2013. 

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The Meaning of Employee Demotion and the Provisions

Before answering your question, let us first explain the meaning of employee demotion. According to the KBBI or the official dictionary of the Indonesian language, demotion is the transfer of a position to a lower position. In short, an employee's demotion is the reduction of an employee's position.

According to our research, there are no laws and regulations which prohibit demotion. In essence, the demotion is equivalent to the decrease in salary/wages. This is in accordance with Article 81 number 33 Perppu 2/2022 which amends Article 92 section (1) Law 13/2003, namely:

Employers are required to formulate wage structures and scales within companies by taking into account the company's capabilities and productivity.

Furthermore, salary or wage is the right of the workers/laborers which is received and expressed in the form of money as a reward from the entrepreneurs or employers to the workers/laborers determined and paid according to an employment agreement, agreement, or laws and regulations, including allowances for the workers/laborers and their families, for the work and/or services that have been or will be performed.[1]

Employers conduct wage reviews on a regular basis by taking into account the company's capabilities and productivity.[2] The review of said wages is to adjust the prices of the necessities of life, work performance, developments, and company capabilities.[3]

Therefore, the level of position is directly proportional to the wage. If the position drops/is down, then the wage is adjusted to the position of the concerned worker/employee.

Then, in answer to your question, if the unattainable target affects the cooperative's ability to provide wages to you and results in your demotion, then employers may do so. In other words, the unattainable fulfillment of your cooperative's targets may be the reason for employers to lower your position and wages.

In addition, based on the formulation of the provisions above, your work performance may also be taken into consideration by the company in the review of wages. If your performance decreases, the company may reduce your salary.

Furthermore, there are other legal aspects that are important to be considered here, namely the provision of wages. Referring to the wage definition we provided above, it is said that wages are paid by employers in accordance with an employment agreement, agreement, or laws and regulations.

If it has previously been regulated in an employment agreement or agreement between you and the employer that demotions and employee wages may be carried out if the sales target is not achieved, then what the employer has done to you does not violate the law.

However, in practice, in order to undertake a demotion, an employer must be able to prove with strong supporting evidence that the performance of an employee/worker is not in accordance with the target set based on his/her position. Because if the company does not have strong evidence, the decision of the demotion is threatened to be annulled.

Study Case

For example, you can read the Decision of the District Court of Samarinda Number 56/PDT.SUS-PHI/2017. In the lawsuit, the plaintiff who was an employee who occupied the position of warehouse head was demoted to the administrative staff and salary deductions by the defendant due to the reduction of employees or efficiency (p. 2).

Upon consideration of the abovementioned decision, the Panel of Judges is of the opinion that the demotion letter dated January 21^st, 2016, against the plaintiff is declared invalid (pages 25-26). Thus, in the decision, the Panel of Judges ordered the defendant to re-employ the plaintiff as the head of the warehouse at the CV.SAC Bersaudara Branch Office in Sangata, East Kutai, East Kalimantan (p. 27).

These are the answers we can provide, we hope you will find them useful.

Legal Basis:

1. Law Number 13 of 2003 on Manpower;
2. Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation;

Court Decision:

Decision of the District Court of Samarinda Number 56/PDT.SUS-PHI/2017.

Reference:

KBBI, accessed on Friday, 24 February 2023, at 17.59 West Indonesian Time (zone).

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[1] Article 1 number 30 Law Number 13 of 2003 on Manpower (“Law 13/2003”).

[2] Article 81 number 34 Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation (“Perppu 2/2022”) which contains new provision of Article 92A Law 13/2003.

[3] Elucidation to Article 81 number 34 Perppu 2/2022  which contains new provision of Elucidation to Article 92A Law 13/2003.