Update: Elaboration from Vichi Lestari about Indonesian labor law and whether companies are obliged to follow it.
Singapore startup TheMobileGamer (TMG) is going through a shake-up, and this was confirmed by CEO and co-founder Alvin Yap last week when he gave a talk at a Founder Institute Singapore event where media were invited. He said that the company, which distributes mobile games to emerging markets, had recently fired 40 percent of its workforce.
While startups often have to downsize due to unpredictable market conditions, this incident was unusual in how ex-employees ventured online to anonymously talk about TMG.
Former TMGers recount what happened
Tech in Asia spoke to three ex-employees on the condition of anonymity to verify the series of events. Their identities have been kept hidden for their protection.
In total, around 12 employees in Indonesia and between five to ten staff in Singapore were let go. Several other employees had resigned before the firings occurred.
One employee, who left the company voluntarily, did so because of his disappointment with TMG management. “I resigned because it is very hard to continue working with this situation.”
Prior to the termination, affected employees did not receive any notice and were in the middle of several company projects. We were told that there were no clear reasons given for the layoffs at that point in time, although the management had stated that they were done for “efficiency”.
Terminated employees were then given two to three days to pack their stuff and leave the office once their redundancy was made known. The management allegedly decided on the compensation package of two months’ salary and paid leave without any discussion with employees.
Affected individuals were then supposedly asked to gather on September 11, one day after Alvin spoke at the recent Founders Institute event in Singapore. That day, a “resignation” letter was shown to the fired staff. They were told that they must sign it in order to receive a compensation package and a recommendation letter for future employers.
One by one, terminated employees met Alvin and two other individuals in a conference room. They were told that the firing decisions were made in accordance with Singapore regulations because employees were contracted to a Singapore company.
Amongst other grievances, a common theme that emerged among ex-employees was the anger they felt at having to bear responsibility for the management’s alleged missteps.
“It all points to [Alvin’s] initial decisions. At some point, TMG was losing its direction,” says one employee.
TMG’s CEO responds
In an official statement made to Tech in Asia by CEO Alvin Yap (full statement below), after the ex-employees’ claims were made known to him, he points out that the content of his routine sharing at the event was not meant to generate publicity nor was it an official statement towards TMG’s activities.
Explaining the rationale behind the firings, Yap says:
TMG is a startup and we are always learning. We recently had to undergo a major re-organization to focus on key projects while reducing investment in some low-impact ones; this unfortunately meant that some staff had to be laid off. This decision was difficult but necessary for TMG to fulfill its full potential.
Yap says that he understands and is “sorry for all who have been hurt by this decision,” adding that compensation has been given to affected individuals beyond the company’s legal obligations and to the best of its abilities.
“We are more than willing to help wherever we can to support them in securing new opportunities,” he says, “As the CEO of a startup, we often have to make unpopular and tough decisions like this. I am grateful to everybody who continues to believe and contribute to our vision. We will learn from this painful lesson to become better leaders and a better company.”
The sequence of events as narrated by ex-employees and Yap still leaves several questions unanswered.
According to Indonesian labor laws, employers and employees must meet to reach an amicable termination settlement.
If negotiations fail, employers may only fire staff after seeking approval from the labor courts, unless the employee was still under probation, or the employee has submitted a resignation request in writing under his or her own accord without any conditions.
There’s also the matter of appropriate compensation that companies should give to terminated employees. While the law clearly stipulates a time-based structure for payout, the situation is not clear-cut. It is also important to note that in the startup world, giving compensation to fired employees is uncommon.
According to Vichi Lestari, lawyer and partner at Jakarta-based Trias Consultant, regardless of whether foreign companies are registered in Indonesia or not, they are still bound by the country’s labor laws. However, she asks:
What kind of contract does the employee have with the company, and also what is the policy of the company itself? This will determine the basis of the rights of the employee.
Vichi points out that there are two kinds of employee arrangements: Permanent, and contractual basis with limited time frame. While permanent arrangements come with unpaid leave and severance package in accordance with Indonesian labor law, contractual ones do not have that guarantee.
Company policy also comes into play. Employees must observe whether a Singapore-based company, for example, has decided to abide by Singapore’s labor law, which does not guarantee severance payment. It is a norm for companies to follow the employment policy of its company of origin.
(Editing by Willis Wee, Steven Millward, and Paul Bischoff)
Unedited full statement from Alvin Yap:
I understand the contents of my routine sharing intended for a group of 50+ would-be entrepreneurs from Founder Institute has generated much comments and I’ll like to clarify that it was not meant to generate publicity nor is it an official statement towards any TMG activities.
TMG is a startup and we are always learning. We recently had to undergo a major re-org to focus on key projects while reducing investment in some low-impact ones; this unfortunately meant that some staff had to be laid off. This decision was difficult but necessary for TMG to fulfill its full potential.
I understand and am sorry for all who have been hurt by this decision. As a company we have compensated them beyond our legal obligations and to the best of our abilities; we are more than willing to help wherever we can to support them in securing new opportunities.
As CEO of a startup we often have to make unpopular and tough decisions like this. I am grateful to everybody who continues to believe and contribute to our vision. We will learn from this painful lesson to become better leaders and a better company.