Work and Wages

Minimum Wage

Minimum wage rate is determined annually in accordance with the National Government's wage policy to ensure decent living taking into account productivity and economic growth. Minimum wage is generally set at provincial level, district level and sometimes at sectoral levels by the Governor, following recommendations from the Provincial and/or District Wage Councils.

A Presidential Decree of 2004 on Wage Councils provides for National, Provincial and District Wage Councils which are advisory in nature. National Wage Council provides suggestions and considerations to the central government in formulating the wage policy and developing a national wage system.

The District Wage Councils sent their proposals to the Mayor who forwards it to the Provincial Governor. This proposal is shared with the Provincial Wage Council which sends final recommendation to the Provincial Governor.   

National, Provincial, and District Wage Councils are tripartite in nature. The membership of universities/experts, employer’s association, Trade Union are ensured in all three levels. Government representation in all these councils is equal to the collective representation of worker and employers while membership of universities and experts is adjusted based on the needs.

Under Government Regulation No 78/2015, Provincial Governors can determine the provincial minimum wage (without considering the recommendations of Wage Councils), which is calculated based on a formula for calculation of the minimum wages each year. However, Wage Council still have a role in providing advice and recommendation to the government in terms of wages, such as helping to monitor the implementation of pay scale in each companies and conduct decent living needs survey once every 5 years. 

Factors that are considered while determining minimum wage rate include: living requirements of the worker and their family; cost of living; level of economic development and per capita income; inflation rate; conditions of the labour market; and corporate capability, development and sustainability.

The living requirement components (food, housing, clothing, education, health, transportation, recreation & savings related expenses) and type of living needs are adjusted every five years in the index for minimum decent living costs (KHL), which is determined by the national wage council, made up of representatives from regional administrations, employer's associations and labour unions.

Minimum wage can also be set by collective agreement between employer and employee, provided that the amount of wage may not be less than what is determined by the government. Any agreement that specifies wages lower than those determined by Government is considered null and void.

Minimum wage is applicable only to single workers and workers with less than one year of service. Wages for workers with more than one year of service are discussed on a bipartite basis workers or their union and the relevant company management.

Under the Government Regulations No 78/2015 regulated on wage components. The wage components consist of basic wages, fixed allowances, and non-permanent allowances. The amount of basic wages must be at least 75 % of basic wages plus fixed allowances. 

Provinces are entitled to set separate minimum wages for each sector on the basis of agreements between corporate organisations and worker federations. Several provinces have set sectoral minimum wages for agriculture, mining, manufacturing, utilities, and forestry and rubber ware industries among others. However, some provinces have set a basic minimum wage which applies to all sectors.

Wages may be paid on a weekly or fortnightly basis, provided that the calculation is based on the monthly wages. Wages may also be set and paid on piece rate basis. 

Entrepreneurs who are unable to pay minimum wages may be allowed to postpone the payment of such minimum wages once they have submitted a written request to the provincial government. Such request must be based on a written agreement between employers and worker or their unions representing at least 50% of the workers.

Compliance with the statutory minimum wages is ensured by the labour inspectorate. In the case of violation on the part of employer, a worker may file a complaint with the labour inspectorate. The Manpower Act on article 185 provides for criminal sanctions as follows: whosoever violates the provisions of law regarding payment of minimum wage is liable to a punishment of imprisonment ranging from one to four years and a fine of a minimum of Rp100,000,000 (one hundred million rupiah) and a maximum of Rp400,000,000 (four hundred million rupiah). 

Source: §88-92 & 185 of the Manpower Act (Law No. 13 of 2003); Regulation concerning the procedure of proposing candidates for membership of the National Wage Council; §1-4 of the Regulation regarding implementation and component of achievement scale on adequate living needs (ALN); §43-44 of Government Regulation on Wages (No.78 of 2015); Presidential Decree No. 107 Year 2004 on Wage Council

For more information on updated minimum wage rates, please refer to the section on minimum wages. 

Regular Pay

A wage (upah) is the right of the worker/ labourer that is received and expressed in the form of money as remuneration from the entrepreneur or the employer to workers/ labourer, whose amount is determined and paid according to a [formal and written] work agreement (perjanjiankerja), a deal (kesepakatan), or laws and regulations, including allowances for the worker/ labourer and their family for a job and or service that has been performed or will be performed.

Wages may be paid on a weekly or fortnightly basis on the condition that the wage calculation is based on the monthly wages. The maximum wage period is one month.

Wages generally are to be paid in cash, legal tender. Wages must be determined in Rupiah, although they can be expressed as the Rupiah equivalent of a foreign currency. Certain other forms of payment may be used, as long as they do not take the form of alcohol or drugs.  The non-cash portion (in kind payment) may not exceed 25% of the total wages. These in-kind payments may be in the form of cost of meals, housing or childcare

Where wages are comprised of basic wages and fixed allowances, the basic wage must make up at least 75% of the total wage (basic wages + fixed allowances).

The employer should not make deductions from wages that are not authorized by law, company regulations or collective bargaining agreement. Employers must properly inform workers about their wage payments and deductions. The wage deductions for lost or damaged goods cannot exceed 50% of the worker’s total monthly wage. Employers are prohibited from restricting workers’ freedom to use their wages (pressuring workers to buy goods from the enterprise store or shop or to other services such as meals or housing).

Employers who pay their workers’ wages late either by willful misconduct or negligence have to pay a fine whose amount corresponds to a certain percentage from the worker wages. A worker may file an official request to the institution for the settlement of industrial relations disputes to terminate his/her employment relationship with his/her employer if the employer did not pay wages at a prescribed time for three months consecutively or more.

Employers are required to keep payroll, which includes the total regular hours worked, total overtime hours worked, and any other period of time for which premium pay is required (for each worker). Workers must be provided with clear individual wage statements (pay slips) including wage deductions.

In March 2017, the Ministry of Manpower issues Regulation (No. 1 of 2017) on Wage Structure and Scale under the Government Regulation No. 78/2015 on Wages. It requires employers to determine the structure and scale of wages taking into account class, position, employment, education and competence of workers. Wages that are set out in the wage structure and scale are basic wages and thus do not include any allowances. Employers are required to inform workers about the structure and scale of wages. The Regulation further requires employers to submit wage structure and scale to the Ministry of Manpower at the time of ratification or renewal of company regulations or registration, extension or renewal of collective bargaining agreement. A grace period was provided till 23 October 2017.

An employer may face the following sanctions if they do not prepare a wage structure and wage scale and does not inform employees about the wage structure and scale:

  1. Written warning letters;
  2. Restrictions on business activities;
  3. Temporary suspension of business activities; and/or
  4. Revocation of the business license

Source: §01, 54, 94, 95(2), 169 of the Manpower Act (Law No. 13 of 2003); §5 (2), 13, 22, 55, 57 Government Regulation on Wages (No.78 of 2015); Regulation of the Manpower Minister No. 7/2013 about Minimum Wage; Regulation No. 1 of 2017 on Wages Structure and Scale 

Regulations on Work and Wages

  • Undang-Undang no 13 tahun 2003 tentang Ketenagakerjaan / Manpower Act No. 13 of 2003
  • Keputusan Menteri Tenaga Kerja dan Transmigrasi No. 17 tahun 2005 tentang Komponen dan Pentahapan Pencapaian Kebutuhan Hidup Layak / Decree of Minister of Manpower and Transmigration No.17, 2005 on Living need components
  • Keputusan Menteri Tenaga Kerja dan Transmigrasi No.102/MEN/VI/2004 mengenai Waktu dan Upah Kerja Lembur / Decree of Minister of Manpower and Transmigration No.102/MEN/VI/2004 on Overtime Hours and Overtime Pay