Minimum Wage in Indonesia – frequently Asked Questions
Is there a separate legislation relating to minimum wages in Indonesia?
Indonesia only have one legislation for minimum wage (MW) as stipulated under Labour Law Act No. 13 Year 2003 article No. 88, 89 and 90.
Meanwhile, specialized regulation concerning Minimum Wage implementation is not yet launched. But, according to the previous Ministerial Decree No. 236/2000 concerning Minimum Wage describe that Minimum Wage can be determined both at province and district level. The Minimum Wage that is determined by the governor based on inputs of the Wage Council at province level is for the province.
On the other hand, the minimum wage determined based on the inputs from the wage council of District or City Mayor for is for the district level. The Governor usually determines Minimum Wage once a year by issuing the governor decision letter.
Does one or more minimum wage/s exist that is/are determined by law?
Yes, there are more than one minimum wages determined by law. Based on Minimum Wage regulation there are Minimum Wage (MW) which is determined both at province and district level. At the province level there might be both Minimum Wage Province (MWP) and Minimum Wage Sectoral Province (MWSP). While at the district/City level there are also might be Minimum Wage District or City (MWD/City) and Minimum Wage Sectoral District/City (MWSD/City).
However, in principal, only one of these Minimum Wages is stipulated for a worker and that depends on a district and sector where they work. For example, if someone works in certain district within a province, but the district does not have a Minimum Wage district yet. In such a case the Minimum Wage for the worker is based on the Minimum Wage Province. If, for example, the Minimum Wage exists in their district, then the Minimum Wage has to be as per Minimum Wage District. Similarly, if someone is working in certain sector within certain district and the district has determined Minimum Wage Sectoral District, then the minimum wage paid will be the MW Sectoral District.
In case of more than one minimum wage, at what level are these minimum wages determined?
In Indonesia, minimum wages is determined at Province level, District level and Occupational level. According to Article 89 of Labour Law Act, each region is given the power to frame their own minimum wages at provincial level and district level/city based. Provincial minimum wage rates are set in several provinces on the basis of agreements between corporate organizations and worker unions/labour federations.
On the other hand, Sectoral Minimum wages at province and district level is the result of negotiations between employer and trade union in certain sector and is determined by the governor. Similarly, in certain city mostly in biggest province like Jakarta, Surabaya, and Medan minimum wages is also determined at occupational level.
On what basis is minimum wage calculated?
Minimum Wages is calculated on monthly basis. However, for daily workers minimum wages can be paid on daily or weekly basis.
In case of weekly/monthly minimum age, are they based on any fixed number of hours?
Minimum wage is calculated as per 40 hours per week. These are regulated on Labour Act No. 13/2003 article 77: under subsection (2) as described in following: a.) 7 hours a day and 40 hours a week for 6 workdays a week or b.) 8 hours a day and 40 hours a week for 5 workdays a week.
Are governmental bodies, employer and/or trade union representatives involved in minimum wages setting?
The Governor of each province decides the minimum wage rates based on recommendation and proposal from the Wages Provincial Council in order to determine Provincial Minimum Wages; and from the Mayor of District/City and or from District Wages Council to determine District/City Minimum Wages.
The recommendations and proposal of the wage are based on the result of survey and meeting of this Wage Council. The wage council consists of government, employers, and trade union representatives. Additionally, government bodies like National Statistics Body, Regional Planning body, Ministry of Manpower, Ministry of Industries, Ministry of Trade, Ministry of Agriculture, Ministry of Forestry, Ministry of Transport at regional Office are also involved in minimum wage setting. Employer organization that is involved in wage setting is APINDO (Employers Association) and three Trade Unions confederation involved are K-SBSI, K-SPSI and KSPI (including federations/Sectors Union which affiliate to one of the 3 confederation). Universities and experts are also involved in wage setting in Indonesia.
How are upratings (adjustments) of minimum wages decided upon?
Adjustment are conducted officially by the governor after they get inputs from the wage council (Trade union, employer and government representatives) both at province level for Province Minimum Wage (PMW) and district level For District Minimum Wages (DMW).
Which are the components of minimum wage in Indonesia?
All minimum wage components are fixed as under regulation of Manpower Ministry regulation No. 17/MEN/VIII/2005. These components consist of food & beverage, household, clothes, education, health, Transportation, recreation & savings.
How frequently is the fixed component of minimum wage updated?
Based on history, the fixed component has been updated twice. Usually it gets updated one in ten years. The fixed component is updated based on inputs received from the National Wage Council and is then decided by the President/Manpower Minister.
What is/are the yardstick/s on which minimum wage upratings are based?
There are 6 yardsticks on which Minimum wage rate are based on:
1) Minimum Subsistence Requirement of workers
2) Consumer Price Index;
3) Company capacity to pay & carry out business continuously;
4) Level of wages and incomes in the country; 5) Economic development; 6) Level of employment. Information related to basic requirement for living is collected through survey conducted every month by the wage council.
What is National Poverty line?
What is the incidence of minimum wages(s) in the national labour force (wage earners only)?
The Incidence of minimum wage in the national labour force is as follows: (a) below 30% - Usually those who work on temporary statue (contract, daily workers); (b) 35% - Most of them who work on private sectors ; (c) above 35% - Part of them are employee who works on public sectors with permanent status.
How is minimum wages compliance regulated?
Minimum wage compliance is regulated either through Labour Inspector or Trade Unions. Under Labour Act Article 176, labour inspector needs to ensure proper implementations of minimum wages. Additionally, Trade Unions can also ensure proper and timely implementation of minimum wages.
Which legal sanctions can be applied if compliance is lacking?
According to Labour Act 13/2003 under Article 185 subsection (1) “Whosoever violates what is stipulated under subsection (1) of Article 90 shall be subjected to a criminal sanction in jail for a minimum of 1 (one) year and a maximum of 4 (four) years and/or a fine of minimum of Rp100,000,000 (one hundred million rupiah) and a maximum of Rp400,000,000 (four hundred million rupiah)”.
According to Article 90 paragraph (2) "For employers who cannot afford to pay the minimum wage as stipulated in Article 89 (on minimum wage) have to do a postponement".
The postponement of the payment of minimum wages by an enterprise that is financially not able to pay minimum wages is intended to release the enterprise from having to pay minimum wages for a certain period of time. If the postponement comes to an end, the enterprise is under an obligation to pay minimum wages that are applicable at the time but is not obliged to make up the difference between the wages it actually paid and the applicable minimum wages during the period of time of the postponement.
Are sanctions often being applied?
This depends on the report of compliance sent to the government.
Are employer and/or trade union representatives involved in compliance procedures?
No, the employer and or trade unions representatives are not involved in compliance procedures because the minimum wage is determined by the government (governor).
To whom/Where can individuals complain, if they think they are earning less than minimum wage?
Workers can complain to the Employers or Company Management or NGOs.
Based on Labour Act article 136 subsection (1) they need to sit together to find a deal. There is a resolution through the settlement of industrial disputes and complaints relating to the labour court. Article 136 subsection (2) or complained to the NGO (Non Governmental Organization).