EFFORTS TO REDUCE EMPLOYEE RELATED COSTS AT BADAK LNG BONTANG

• Main Author: Prijadi, Bambang
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/36925
• Institution: Institut Teknologi Bandung

Badak LNG is a world class energy company that produces Liquid Natural Gas (LNG) located in Bontang, East Kalimantan. In accordance with Collective Labour Agreement (CLA), the Company and Labor Union has the agreement to regulate the compensation package for employees that is categorized as employee related cost in financial report. Based on feed gas delivery forecast for 2019 – 2023 that will be processed becoming LNG showed that feed gas received by Badak LNG will significantly decrease. Total capacity of Plants or plants operated have been reduced from eight Plants to only now three running Plants and will be only maximum two Plants in short coming years. On the other hand, Badak LNG’s employee related costs and employee related costs per employee has showed significantly high. In the approved budget 2019, employee related costs is USD84,796,000 and employee related costs per employee is USD89,350 per employee. Those amount is high relative to the oil and gas market in Indonesia. Based on a salary survey participated by more than twenty oil and gas companies in Indonesia, Badak LNG’s employee compensation package is above the targeted market, that is percentile 50 and even most of position is above percentile 90. That means that Badak LNG’s employee related costs is already high. In addition, SKK MIGAS hardly commented that Badak LNG’s employee related costs is already high and shall have an efforts or program to reduce it. Therefore, by taking into the current and future plant capacity decrease and the high employee related cost, there should be a program to reduce the compensation package by still considering a social aspect such as not laying off employees. Based on the review, the main cause of high employee related costs would be from the compensation package given according to the Perjanjian Kerja Bersama (PKB). According to author’s analysis, there are two options to reduce the employee related costs, they are (a) to revise existing PKB with the additional incentive to compensate for lower compensation and benefits received in new PKB and (b) 2 to revise PKB without the additional incentive. Based on the analysis through a legal aspect and capital budgeting decision, the selected program is option (a) which is the implementation new PKB adopting Pertamina’s PKB plus the additional incentive.