Minimum Wage in Indonesia – frequently Asked Questions

Is there a separate legislation relating to minimum wages in Indonesia?

Indonesia has legislation for minimum wage (MW) as stipulated under Labor Law Act No. 13 Year 2003 article No. 88, 89 and 90.

Indonesia does not has one particular Act that regulates wages beside articles 88, 89 and 90 in the Labor Law Act No. 13/2013. However, there is new Government Regulation that replaces Government Regulation No. 8 of 1981 regarding the Protection of Wages. Newly established Government Regulation No.78 Year 2015 on Wages, introduces a new formula for provinces to calculate their minimum wage each year, beginning in 2016. The introduction of the formula should bring certainty to the annual calculation of minimum wage and help create a more reliable business climate. The new formula requires minimal wage to be adjusted every year based on an accumulation of inflation rate and economic growth figures.

The formula will be implemented in such a way as to keep the purchasing power of the workforce in line with inflation and economic growth.

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 Labor Law Act, each region is given the power to frame their own minimum wages at provincial level and district level/city based.

Based on Government Regulation No.78 Year 2015 on Wages, Governor shall determine the provincial minimum wage, which is calculated based on a formula calculation of the minimum wage as stipulated in the regulation.

Regarding the establishment of the Provincial Sectoral Minimum Wage, Wages Regulation also asserted that the governor may set minimum wage sectoral provincial and/or district/city based on an agreement with the employers' association of trade unions in the sectors concerned.

Sectoral minimum wage as mentioned, carried out after obtaining the advice and judgment of the leading sectors of the provincial wage councils or wage boards districts/cities in accordance with its duties and authority. In addition, the sectoral minimum wage should also be greater than the minimum wage districts / cities in the county / town concerned.

On what basis is minimum wage calculated?

According to Government Regulation on Wages article 12, Minimum Wages minimum wage is calculated based on time and target.

Wages based on time as intended, can be set out on a daily, weekly, or monthly basis. Meanwhile Wages based on target is set in accordance with the results of the work that has been agreed upon. The amount of wages, as conducted by employers is based on an agreement between the employees and employers.

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.

Based on Wages Regulation, in terms wage is set daily, daily wage calculation is: a). For employer who have working time system : 6 working days a week, a month wage divided by 25 (twenty-five); or b). For employer who have working time system : 5 working days a week, a month wage divided by 21 (twenty-one).

Are governmental bodies, employer and/or trade union representatives involved in minimum wages setting?

According to Government Regulation No.78 Year 2015 on Wages, the Governor will have the authority to decide the Minimum Wage without any recommendation from Wage Council, unlike before where each province decides 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.

Newly established Government Regulation No.78 Year 2015 on Wages, introduces a new formula for provinces to calculate their minimum wage each year. The new formula requires minimal wage to be adjusted every year based on an accumulation of inflation rate and economic growth figures. For example, assuming that the 2015 inflation rate and the economic growth were both 5 per cent, then the 2016 minimum wage would increase by 10 per cent.

There will also be adjustments every five years in the index for minimum decent living costs (KHL), which is determined by the regional wage council, made up of representatives from regional administrations, business associations and labour unions.

Regions that set their minimum wage level below the minimum living costs will have to adjust within four years after the regulation takes effect.

How are upratings (adjustments) of minimum wages decided upon?

Formula calculation of the minimum wage next year is the wage of the current year are added to the current year wage multiplied by the sum of inflation and economic growth. The adjustment is established by the governoor, considering the recommendation made by the provincial wage council. For district level, considering the recommendation from the mayor, and advices of the provincial wage council.

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?

According to article 44 verse 2 PP 78, adjustment of the componenet will be done once in five years based on the result of research made by the national wage council.

What is/are the yardstick/s on which minimum wage upratings are based?

New minimum wage = current minimum wage + (current minimum wage x (Inflation + % GDP annual increase during the year))

What is National Poverty line?

(City + Rural) : Rp. 312,328 Click here to know the national poverty line in context with Minimum Wage, living wages and actual wages. Select the currency (Euro or national currency) to know 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 Labor Law 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 Government Regulation No.78 Year 2015 on Wages article 70 , sanctions for violence against minimum wage regulation are decreasing. Warning and administration sanction, which means employer can’t access public services such as : prohibition for using foreign workers, prohibition for using outsourced workers, prohibition to submit legal permit for work training, occupational safety and health.

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).