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Garment: Work & Wages
WORK & WAGES IN GARMENT SECTOR
MINIMUM WAGES IN GARMENT SECTOR
Since Law Number 11 of 2020 on Job Creation and its derivative regulation regulating Wages namely Government Regulations Number 36 of 2021 was issued, big changes in Minimum Wage determination have been occurred. Nevertheless, as a matter of fact, issues regarding Minimum Wage determination still exist. The following information is the information regarding minimum wages based on the new regulation.
1. What does minimum wage mean?
2. How much is the Minimum Wage?
3. How to determine and who does determine the Minimum Wage?
4. Is that also valid for Garment Sector?
5. Are garment companies permitted pay wage less than the Minimum Wage?
REGULAR WAGE IN GARMENT SECTOR
1. What does Regular Wage mean?
2. Does Regular Wage apply in Garment Industry?
3. What do fixed allowance and non-fixed allowance mean?
5. Are all garment manufacturers/companies obliged to give pay slip to their employees?
6. In Garment Industry, there are workers who work as daily workers. Does regular wage apply to them?
7. In Garment Industry, there are daily wage, weekly wage, or monthly wage. Are they permitted?
8. What if a garment company cannot pay out the wage routinely?
9. How much is the fine imposed if a company pay its employees’ salaries late?
MINIMUM WAGE
WHAT DOES MINIMUM WAGE MEAN?
The minimum wage is the lowest monthly wage determined every year in a certain region. The minimum wage may be determined by a Provincial Government widely known as the Provincial Minimum Wage or determined by Regency/Municipal Government, therefore known as Regency/City’s Minimum Wage. Minimum wage becomes the lowest number of wage because the regulation prohibits employers from paying their workers lower than Minimum Wage. Minimum wage may only be given to workers who are still single with working period 0-1 year (without experience). According to Article 24, paragraph (1a) of the Presidential Regulation 51/2023, employees who have worked for less than 1 year and have specific qualifications can receive a higher salary than the minimum wage. Minimum wage is only the basic wage or basic wage plus fixed allowance.
HOW MUCH IS THE MINIMUM WAGE?
Minimum wage varies for each region, usually known as Provincial Minimum Wage (UMP) and Regency/City’s Minimum Wage (UMK). For an instance, for the Province of Jawa Barat, the Governor of Jawa Barat determines UMP in that province as the lowest wage for such province, whereas UMK is different in each regency and city in that province, but it shall not be less than the determined UKP. DKI Jakarta, however, only recognizes UMP DKI Jakarta that is determined by the Governor of DKI Jakarta, and valid for all region of DKI Jakarta.
HOW TO DETERMINE AND WHO DETERMINES THE MINIMUM WAGE?
Article 26 of Presidential Regulation 51/2023 states that the minimum wage is determined based on economic and labor conditions, including variables like economic growth, inflation, and a specific index. This specific index, represented by the symbol α, is a new variable with values ranging from 0.10 to 0.30. The provincial/district/city Wage Council determines the value of the symbol α, considering factors such as employment absorption rate, average or median wages, and other relevant factors related to labor conditions. At the final stage, the minimum wage is determined by the Governor after receiving suggestions and considerations from the provincial wage council to determine the value of the Provincial Minimum Wages (UMP), whereas the Regent/Mayor determines the District Minimum Wages (UMK).
IS THAT ALSO VALID FOR THE GARMENT SECTOR?
Yes. By enacting Law Number 11 of 2020 on Job Creation (UU 11/2020) and repealing article 89 of Law Number 13 of 2003 on Employment (UU 13/2003)m Sectoral Provincial Minimum Wage or Sectoral Regency/City’s Minimum Wage is no longer recognized. Currently, there are only UMP and UMK. Article 82 point d of Government Regulation number 36 of 2021 confirms that “when this Government Regulation is in effect: Governors may no longer determine Sectoral Minimum Wage.” Wage that is more than UMP and UMK may be determined under the agreement between the employer and workers/laborer at each company.
ARE GARMENT COMPANIES PERMITTED TO PAY WAGES LESS THAN THE MINIMUM WAGE?
No. Suspension of the payment of minimum wage is previously recognized in article 90 paragraph (2) of Law no. 13 of 2003. However, by virtue of Law No. 11 of 2020, this article has been repealed, as such Suspension of the payment of minimum wage is no longer effective. A company shall not pay garment workers’ wage less than Minimum Wage. If it pay less than minimum wage, the Company has committed violation that may be considered as a criminal offence. Article 185 paragraph (1) of Law no. 13 of 2003 regulates that violation against this rule may be subject to a minimum of 1 (one) year and a maximum of 4 (four) years’ imprisonment and/or fine with a minimum amount of IDR 100,000,000.00 (one hundred million rupiah) and a maximum amount of IDR 400,000,000.00 (four hundred million rupiah), for employers violating it.
Working Hour Adjustment and Wage Reduction in Certain Job-Intensive Industries with Export Orientation
Wokers’ rights are once again undermined with a reason ‘to sustain work and companies.’ A new Minister regulation on Working Hour Adjustment and Wages of Companies in Labour Intensive Industries with Export Orientation was issued. The government's rationale is to respond to lower demand in labour-intensive industries with export orientation amidst the uncertainty of the global economy. Want to know more about this? Check the FAQ here!
REGULAR WAGE IN GARMENT SECTOR
What does Regular Wage mean?
Regular wage is wage payment made routinely by employers to their workers on the date that has been agreed upon, following the Agreement on the wage payment schedule between employers and workers.
DOES REGULAR WAGE APPLY IN GARMENT INDUSTRY?
Yes, it also applies for Garment Sector.
WHAT DO FIXED ALLOWANCES AND NON-FIXED ALLOWANCES MEAN?
Fixed allowances are the allowances that is given by a company to its workers, whose figures is not affected by attendance, or target, or certain achievements, for examples responsibility allowance, family allowance, dan etc..
Whereas non-fixed allowances are the allowances whose figures is given based on assessment of a company on attendance, certain target or achievements, examples attendance allowance, bonus allowance, overtime, incentive, and etc..
WHAT IS PAY SLIP?
Pay slip is the receipt of the payment of workers’ wages containing the details of wages received by workers when the wages are paid. The purpose of a pay slip is to serve as written evidence if dispute arises in regard of the wage payment in the future.
ARE ALL GARMENT MANUFACTURERS/COMPANIES OBLIGED TO GIVE PAY SLIPS TO THEIR EMPLOYEES ?
Yes. Article 53 of Government Regulation number 36 of 2021 imposes obligation to companies to give a pay slip in every wage payment. Companies that violate the obligation to give pay slip may be subject to administrative sanction in the form of: a. written warning; b/ limitation of business activities; c. suspension of production, either partially or in full, and d. freezing of business activities (article 79 paragraph (1) of Government Regulation number 36 of 2021).
IN GARMENT INDUSTRY, THERE ARE WORKERS WHO WORK AS DAILY WORKERS. DOES REGULAR WAGE APPLY TO THEM?
Yes, regular wage applies to all types of workers, whether daily workers or not, both permanent and contracted workers.
IN GARMENT INDUSTRY, THERE ARE DAILY WAGE, WEEKLY WAGE, OR MONTHLY WAGE. ARE THEY PERMITTED?
Wage payment is made based on the agreement between a garment company and their workers. The Regulation allows wage payment in daily, weekly, biweekly, and monthly bases subject to the agreement between the company and its workers. Moreover, on the agreed date of payment, wage payment must be made according to its agreed schedule and date.
WHAT IF A GARMENT COMPANY CANNOT PAY OUT THE WAGE ROUTINELY?
According to article 18 of Government Regulation on Wages, a company is obliged to pay the wages on the date agreed upon between the company and its workers. Wages must be paid in full on every period and pay day. Wages may be paid directly or through bank transfer.
The determination of wage payment schedule is usually made in an employment agreement, company regulations, or collective employment agreement (if there is a labor union). The company cannot solely decide to change the time of wage payment.
If the company cannot pay the wages promptly according to the schedule agreed upon because of its omission or failure, then the company may be imposed with a fine. The Fine does not discharge the company from its obligation to pay the workers/laborers’ wage.
HOW MUCH IS THE FINE IMPOSED IF A COMPANY PAY ITS EMPLOYEES’ SALARIES LATE?
Article 88A paragraph (6) of Law number 11 of 2020 specifies that A company because of omission or failure causing delay in payment is imposed fine according to percentage of workers/laborer’s wages. This fine is regulated in Article 55 of Government Regulation No. 78 of 2015 on Wages, as follows:
- Starting from the fourth day to the eighth day as of the date of wage payment, a fine of 5% (five percent) is imposed for each day of delay of wage payment;
- After the eighth day, if wage is still not paid, fine referred to in point a is added 1% (one percent) for each day of delay provided that 1 (one) month may not exceed 50% (fifty percent) of the wage that must be paid; and
- After a month, if the wage is still not paid, is subject to a late penalty as referred to in points a and b plus interest at the prevailing interest rate at the central bank.
IF A GARMENT COMPANY COMMITS A VIOLATION AGAINST THE WAGE POLICY, WHAT MEASURES CAN BE TAKEN BY THE EMPLOYEES?
If a garment company commits a violation against the wage policy, then you may take the following measures:
- Workers may negotiate this matter with the employer.
- If they fail to reach consensus, the workers may move forward to mediation process by involving mediators from local employment agency.
- Or laborers/laborer union may directly report the violation to Employment Supervision Division of the Provincial/ Municipal/ District Authority.