Legal Update #2, 2012 : The Minimum Wage Issues in Indonesia

Minimum wage was first introduced to Indonesia in 1956 and became the core of the National Labour Regulations. In 1969, The National Wage Council was formed with each province having Provincial or Regional Wage Councils whose functions include surveys and adequate calculation of the basic needs of workers and their families. The Wage Council is composed of representatives of government, employers and trade unions.

Each year, the Wage Council must provide recommendations with a proposal to the governor in order to establish the Provincial Minimum Wages. This is in accordance with Manpower Act No. 13, of 2003, Article 89 Clause 1, which states that the establishment of minimum wage is determined by provinces and Regencies/cities.

Unfortunately, the minimum wage has remained a national labour issue in Indonesia with each province having its own dilemma in addressing what is often seen as the basic needs of workers. Better Work Indonesia has collected literature references that can assist international buyers to better understand the minimum wage issues in Indonesia.

References:
1. Chun, N.; Khor, N. Minimum Wages and Changing Wage Inequality in Indonesia. ADB Economic Working Paper Series. March, No. 196 (Asian Development Bank)
2. http://www.wageindicator.org/main/minimum-wages/indonesia/faq-minimum-wages-indonesia

Acts on minimum wages for provinces and Regencies/cities
1. Jakarta:

  • Regulation of the Provincial Governor for Jakarta Special Capital Region No. 117, 2011; Provincial Minimum Wage, dated 28 November 2011. Click here.
    This regulation consists of the following:

    • Provincial Minimum Wage for 2012.
    • Prohibition for employers to pay lower wages than the Provincial Minimum Wage.
    • Employers who are unable to implement the provisions of the law may apply to the governor for postponement through related agencies.
    • This rule only applies to workers employed for less than one year; for workers employed for more than one year, wages will be based on the agreement between employer and worker’s unions.
    • Provincial Minimum Wage effective 1 January 2012 applies to workers employed for less than one year.
  • Regulation of the Provincial Governor for Jakarta Special Capital Region No. 13, 2012; Provincial Sectoral Minimum Wage, dated 8 February 2012. Click here.
    • This regulation sets out the Provincial Sectoral Minimum Wage for Jakarta Special Capital Region for 2012 regarding workers in the following business sectors:
      • Building and public works
      • Chemical, energy and mining
      • Metal, electronic and machinery
      • Automotive
      • Insurance and banking
      • Food and beverages
      • Pharmaceutical and health
      • Textiles, clothing and leather
      • Tourism
      • Telecommunications
    • This rule only applies to workers employed for less than one year; for workers employed for more than one year, wages will be based on the agreement between employer and worker’s unions.
    • This decision is valid as of 1 January 2012.

2. Banten:

  • The Decree of Banten Governor No.561/KEP.886-HUK/2011; Establishment of Minimum Wage of Banten province 2012, dated 21 November 2011. Click Here.
    This regulation consists of the following:

    • Establishment of minimum wage of Banten province 2012.
    • Companies who already provide wages above the regencies/cities minimum wage may not alter the wages to reflect the lower regencies/cities minimum wage.

    * The above mentioned decree is no longer valid for Tangerang City, Tangerang Selatan City and Tangerang Regency; it has been replaced by the proceeding.

  • The Decree of Banten Governor No. 561/KEP.1-HUK/2012; The Amendment to the Decree of Banten Governor No. 561/KEP.886-HUK/2011: Establishment of Minimum wage of Banten province, dated 4 January 2012. Click here.
    This regulation consists of the following:

    • The amendment of regencies/cities minimum wage for the proceeding:
      • South Tangerang City
      • Tangerang City
      • Tangerang Regency
    • This decision is valid as of 4 January 2012.
  • The Decree of Banten Governor No. 561/KEP.2-HUK/2012: Sectoral Minimum Wage of Regencies/Cities of Tangerang, dated 4 January 2012. Click here.
    This regulation consists of the following:

    • The Sectoral Minimum Wage including textile, garment and leather.
    • The business sectors are classified into three categories.
    • This rule only applies to workers employed for less than one year; for workers employed for more than one year, wages will be based on the agreement between employer and worker’s unions.
    • This decision is valid as of 4 January 2012.

3. West Java:

  • The Decree of West Java Governor No. 561/KEP.1540-Bangsos/2011: Minimum Wage of Regencies/Cities of West Java, dated 21 November 2011. Click Here.
    This regulation consists of the following:

    • Cancellation of the decree of West Java Governor No. 561/Kep.1564-Bangsos/2010: Minimum Wage of Regencies/Cities of West Java 2011.
    • Establishment of minimum wage for 26 regencies/cities in West Java.
    • Companies who provide wages above the regencies/cities minimum wage may not alter the wages to reflect the lower regencies/cities minimum wage.
    • This rule only applies to workers employed for less than one year; for workers employed for more than one year, wages will be based on the agreement between employer and worker’s unions.
    • Companies unable to implement the provisions of the law may apply to the governor for postponement through related agencies.
    • Supervision and control over the implementation of regencies/cities minimum wage 2012, and postponement of the company, is made by the governor and regent/mayor of West Java.
    • The decision is valid as of 1 January 2012.
  • The Decree of West Java Governor No. 561/KEP.21-Bangsos/2012: Third Amendment to the Decree of West Java Governor No. 561/KEP.1540-Bangsos/2011: Minimum Wage of Regencies/Cities of West Java, dated 27 January 2012. Click here.
    This regulation consists of the following:

    • Amendment for minimum wage of Bekasi Regency
    • The Sectoral Minimum Wage

4. Central Java:

  • The Decree of Central Java Governor No. 561.4/73/2011: Minimum Wage for 35 Regencies/Cities in Central Java 2012. Click here.
    This regulation consists of the following:

    • The minimum wage for 35 regencies/cities in Central Java province.
    • The minimum wage consists of basic salary and fixed allowances.
    • This rule only applies to workers employed for less than one year; for workers employed for more than one year, wages will be based on the agreement between employer and worker’s unions.
    • Companies who provide wages above the regencies/cities minimum wage may not alter the wages to reflect the lower regencies/cities minimum wage.
    • Companies unable to implement the provisions of the law may apply to the governor for postponement through related agencies or officers.
    • The establishment of a Minimum Wage Implementation Monitoring Team.
    • Supervision is carried out by official labor inspectors.
    • This decision is valid as of 1 January 2012.

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