Minimum Wage

OLd Rules

New Rules

Wages for workers with one year or more year of service are negotiated on bipartite between workers with the employer in the relevant company

Wages for workers with more than one year of service are guided by structure and scale of wages

The determination of the minimum wage is carried out every year based on the decent life necessities by taking into account productivity and economic growth. The decent life necessities is the standard requirement for a single worker to be able to live physically fit for the needs of 1 (one) month. The decent life necessities consists of several components reviewed within five years by the National Wage Council

Minimum Wages are determined based on economy and employement conditions, including purchasing power paraty (the balance of purchasing power), the labor absorption rate, and median wages (the margin between 50 percents of the highest wages and 50 percents the lowest from the employees in the certain position.

Data on economic growth, inflation, purchasing power parity, labor absorption rates, and median wages are sourced from institutions authorized in the field of statistics.

Decent Living Necessities

1. The decent life necessities consists of several components. The components in question consist of several types of necessities of life which are reviewed within a period of 5 years.
2. A review of the components and types of living necessities is carried out by the Minister by considering the results of a study conducted by the National Wage Council.
3. The study conducted by the National Wage Council uses data and information sourced from the authorized institution in the field of statistics.
4. The results of the review of the components and types of living necessities become the basis for calculating the next minimum wage by pay attention to productivity and economic growth.

Wages are adjusted annually by the upper and lower limits.

Minimum Wage Adjustment, carried out annually. Adjustment of the minimum wage value is set at a certain value range between the upper and lower limits of the Minimum Wage in the area concerned

The upper limit of the minimum wage is determined based on the average consumption per capita and the average number of household members working in each household. This average data uses data in the area concerned. While the lower limit of the minimum wage is determined and calculated using the calculation of 50% of the upper limit of the minimum wage.

The value of economic growth or inflation used in the formula for adjusting the value of the minimum wage is the value of economic growth or inflation at the provincial level sourced from the authorized institution in the field of statistics.

There are exceptions to the Provision of Minimum Wages for Micro and Small Businesses"

Wages for micro and small businesses are determined based on an agreement between Employers and Workers in the Company with the following provisions:
a. at least 50% of the average public consumption at the provincial level; and
b. the agreed Wage value is at least 25% above the poverty line at the provincial level sourced from the authorized institution in the field of statistics.

Legal Consequences of Paying Wages Below the Minimum Wage

Article 90 paragraph (1) of the Manpower Law 13/2003:
Employers are prohibited from paying wages lower than the minimum wage as referred to in Article 89.

Article 185 of the Manpower Act 13/2003:

1. Whoever violates the provisions as referred to in Article 42 paragraph (1) and paragraph (2), Article 68, Article 69 paragraph (2), Article 80, Article 82, Article 90 paragraph (1), Article 143, and Article 160 paragraph (4) and paragraph (7), is subject to a minimum imprisonment of 1 year and a maximum of 4 years and/or a minimum fine of IDR 100,000,000.00 and a maximum of IDR 400,000,000.00.
2. The crime as referred to in paragraph (1) is a criminal offense.

Legal Consequences of Paying Wages Below the Minimum Wage

Article 23 paragraph (3) GR 36/2021:
Employers are prohibited from paying Wages lower than the minimum Wage

The Job Creation Law 11/2020 amends the provisions of Article 185 paragraph (1) of the Manpower Law 13/2003 by eliminating the criminal provisions of Article 90 paragraph (1) concerning the prohibition of paying wages lower than the minimum wage, so that it reads as follows:

1. Whoever violates the provisions as referred to in Article 42 paragraph (2), Article 68, Article 69 paragraph (2), Article 80, Article 82, Article 88A paragraph (3), Article 88E paragraph (2), Article 143, Article 156 paragraph (1), or Article 160 paragraph (4) is subject to a minimum imprisonment of 1 year and a maximum of 4 years and/or a minimum fine of IDR 100,000,000.00 and a maximum of IDR 400,000,000.00.
2. The crime as referred to in paragraph (1) is a criminal offense.

OLd Rules

New Rules

The governor can stipulate:

1. Provincial minimum wage by paying attention to the recommendations of the provincial wage council.
2. Regency/city minimum wage by taking into account the recommendation of the regent/mayor as well as suggestions and considerations of the provincial wage council. The recommendation of the regent/mayor is based on the advice and consideration of the regency/city wage council.
3. Provincial and/or regency/city sectoral minimum wages based on the agreement between the employers' association and the trade/labor unions in the relevant sector. The determination can also get advice from the Provincial or Regency/City Wage Council.

The governor may stipulate:

1. Provincial minimum wage by considering to the recommendations of the provincial wage council that submitted through the agency that carries out government affairs in the provincial manpower sector.
2. Regency/city minimum wage by paying attention to the recommendation of the regency/city wage council which is submitted to the regent/mayor to be recommended to the Governor through the office that carries out government affairs in the provincial manpower sector.
   

Article 82 letter (d) GR 36/2021
At the time this Government Regulation comes into force: Governors may no longer set sectoral minimum Wages.

1. The Regency/City minimum wage must be greater than the Provincial minimum wage in the relevant province
2. The Provincial sectoral minimum wage must be greater than the Provincial minimum wage in the relevant province.
3. The Regency/City sectoral minimum wage must be greater than the Regency/City minimum wage in the relevant regency/city.

1. In the event that the current year's Provincial minimum wage is higher than the upper limit of the Provincial minimum wage, the governor is obliged to set the following year's Provincial minimum wage equal to the current year's Provincial minimum wage value.
2. The regency/city minimum wage must be higher than the Provincial minimum wage. In the case that the regency/city minimum wage calculation result is lower than the Provincial minimum wage value, the regent/mayor cannot recommend the regency/city minimum Wage value to the governor.
3. In the event that the current year's the regency/city minimum wage is higher than the upper limit of the regency/city minimum wage, the regent/mayor must recommend to the governor the regency/city minimum wage value for the following year is the same as the current year's regency/city minimum wage value.

The Provincial minimum wage is determined by a governor's decision and announced no later than November 21 of the current year. If that date falls on a holiday, the announcement will be made one day earlier. The Provincial minimum wage is effective as of January 1 of the following year.

OLd Rules

New Rules

The Governor can set the Regency/City Minimum Wage

The governor can determine the Regency/City Minimum Wage with certain conditions, namely:

1. The average economic growth of the relevant regency/city for the last 3 (three) years from the available data in the same period, is higher than the average economic growth of the province; or
2. The value of economic growth minus inflation of the district/city concerned for the last 3 (three) years from the data available in the same period, is always positive, and is higher than the provincial value.

In the event that certain conditions as intended are not met, the governor cannot determine the minimum wage for districts/cities that do not yet have a Regency/City Minimum Wage

The Regency/City Minimum Wage is calculated based on the calculation formula applied before

Regency/City that do not have minimum wage use a wage calculation formula by calculating the relative Regency/City Minimum Wage to Provincial Minimum Wage based on purchasing power parity ratio, the rate of labor absorption, the median wage, and then the three of that are averaged again.

If there is a review of decent life necessities, the Governor determined the Regency/City Minimum Wage considering the recommendations of the regent/mayor and the Provincial Wage Council. However, the recommendation of the regent/mayor is only a suggestion.

The variables of purchasing power parity, labor absorption rate, and median wages were calculated based on the average of the last three years from the available data.

The Regency/City Minimum Wage is determined by a Governor's Decree and announced no later than November 30 of the current year. If that date falls on a holiday, then the announcement is made one day earlier. The Regency/City Minimum Wage is effective as of January 1 of the following year.