Minimum Wages

The New Regulation regulates that the minimum wage comprises out of either:

1. wages without any allowances; or
2. wages with fixed allowances

The variable allowances are not accounted in the calculation of the minimum wage.

The minimum wage is determined on yearly basis by the government, by taking into account the following factors:

1. decent living standard: the wage should be sufficient for a single employee to live an acceptable living standard in the region he works;
2. productivity; and
3. economic growth.

For the calculation of the minimum wage the following formula is used:

UMn = UMt + {UMt x (Inflationt + % Δ PDBt)}

UMn = the new minimum wage for the upcoming year

UMt = the current minimum wage

Inflationt = the inflation calculation from September of the previous year until September of the running year

Δ PDBt = growth of Gross Domestic Product which is calculated from the growth of the Gross Domestic Product over the third and fourth quarter of the previous year and the first and second quarter over the running year.

Imposing Fines on Employees by Employer

The company can impose sanctions on the management of a company or employees in case they deliberately violate or due to negligence violate provisions in the Work Agreement, Company Regulations and/or Collective Labor Agreement.  The fines collected by the company may only be used for the benefit of the employees and cannot be used by the company to e.g. increase the profit / income of the company.

On the other hand the company can also be imposed sanctions when they delay payment of wages or religious holiday allowance (THR) to employees.

Further Reading:

Wage of Indonesian Employees Reregulated (1/3)
Wages of Indonesian Employees Reregulated (2/3)


This column is provided by PNB Law Firm Jakarta

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