Legal Updates: Minimum Wage Postponement

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Amelia Perkins
6 years ago
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Dear Valued Partners, We would like to inform you about the based in Indonesia Law and Better Work Indonesia perspective on the issue, based on our discussion with a team from Ministry of Manpower

9 of 2013 Minister of Manpower and Transmigration Decree No. 231 Year 2003 on Regulation on Minimum Wage Postponement Minister of Manpower Regulation No.

7 of 2013 on Minimum Wage You can access these regulations in our website or government website Click here to go to Better Work Indonesia Labour Law Guidelines Click here to go to Ministry of

Employers may seek approval from governer to postpone implementation of minimum wage. The procedure of postponement of minimum wage is regulated in Minister of Manpower and Transmigration Decree No.

1 Dear Valued Partners, We would like to inform you about the based in Indonesia Law and Better Work Indonesia perspective on the issue, based on our discussion with a team from Ministry of Manpower and Transmigration: Law Reference Labour Act No. 13 of 2003 Industrial Dispute Resolution Act No. 2 of 2004 Instruction of the President of Republic Indonesia No. 9 of 2013 Minister of Manpower and Transmigration Decree No. 231 Year 2003 on Regulation on Minimum Wage Postponement Minister of Manpower Regulation No. 1 Year 1999 jo Minister of Manpower and Transmigration Decree No. 226 Year 2000 jo Minister of Manpower and Transmigration Regulation No. 7 of 2013 on Minimum Wage You can access these regulations in our website or government website Click here to go to Better Work Indonesia Labour Law Guidelines Click here to go to Ministry of Manpower and Transmigration website Please note that all regulations are provided in Bahasa Indonesia only. Postponement of Minimum Wage a. Is postponement of Minimum Wage legal? Yes. Employers may seek approval from governer to postpone implementation of minimum wage. The procedure of postponement of minimum wage is regulated in Minister of Manpower and Transmigration Decree No. 231 Year Employer should follow the procedure as described in the regulation to get the approval from governor. b. When the minimum wage postponement application are approved or rejected, how should factories react? When the request is approved, company may use the new approved compensation starting from the first day of the new minimum wage applied (normally 1st of January). Thus, the company will need to pay the balance of payment retroactively as needed.

2 For example: Previous year s minimum wage is Rp. 1,500,000,- New minimum wage amount is Rp. 2,000,000,- starting January 1 st 2013 Proposed wage amount of minimum wage postponement is Rp. 1,800,000,- Approval/Rejection of postponement from Governor released on March 1 st, 2013 If the postponement proposal is approved: Company will need to pay the balance amount of Rp, 300,000 per month in January and February So the total payment in March2013 will be: Rp, 1,800,000 (approved wage amount after postponement) + Rp. 300,000 (balance amount in January 2013) + Rp. 300,000 (balance amount in February 2013) = Rp. 2,400,000. The amount of wages from April 2013 onwards will remain as Rp. 1,800,000 until the approval period is expired. When the request is rejected, the regulation requires the company to pay the workers as per the new minimum wage number from the first day of the new minimum wage applied. Thus the company will need to pay the balance of payment retroactively as needed. For example: Previous year s minimum wage is Rp. 1,500,000,- New minimum wage amount is Rp. 2,000,000,- starting January 1 st 2013 Proposed wage amount of minimum wage postponement is Rp. 1,800,000,- Approval/Rejection of postponement from Governor released on March 1 st, 2013 If the postponement proposal is rejected: Company will need to pay the balance amount of Rp, 500,000 per month in January and February So the total payment in March will be : Rp, 2,000,000 (new minimum wage) + Rp. 500,000 (balance amount in January 2013) + Rp. 500,000 (balance amount in February 2013) = Rp. 3,000,000. The amount of wages from April 2013 onwards will remain as Rp. 2,000,000 as per the minimum wage applied in that year. c. Can Local Manpower Office give approval for postponement of minimum payment?

3 In DKI Jakarta region, there is a Regional Regulation No. 47 of 2007 that delegates the authority from the Governor to the Head of Local Manpower Office to provide minimum wage postponement approval for companies employing less than 1,000 workers. Based on the Regional Regulation, this is acceptable. DKI Jakarta has a limited independent authority in governing its Local Manpower Offices. The process of obtaining postponement through the DKI Local Manpower Office and the Governor is the same, as stipulated in the Minister of Manpower and Transmigration Decree No. 231 Year d. Can factories postpone the implementation of minimum wage with collective agreement between management and workers representative (union/s), without approval from governor? No. Agreement between two parties (management and worker representatives or union) to postpone minimum wage (object of agreement) is not compliance with Minister of Manpower and Transmigration Decree No. 231 of 2003 and contrary to the Labour Act No. 13 of 2003 Article 90 (1) and Article 185. Not paying minimum wage is a criminal offense. Object, condition, or practice that contains criminal offense could not be waived solely based on a collective agreement. e. Is postponement of minimum wage collective agreement has a legal standing when it is endorsed by Local Manpower Office officials or Industrial Court? No. Any agreement that object does not comply with the National Regulations is immediately deemed as null and void. Labour Act No. 13 of 2003, Minister of Manpower and Transmigration Decree No. 231 of 2003, postponement of minimum wage should be based on Governor Decree, except for factories in DKI Jakarta that have workers less than 1,000 in accordance with DKI Regional Regulation No. 47 of Any collective agreement made between workers and employer to postpone minimum wage, although it was endorse or stamped by government officials or judicial institution officials should be immediately deemed as null and void. According Industrial Dispute Resolution Act No. 2 of 2004, Industrial Relations Court is a mechanism to resolve disagreement that resulted in a conflict between employer (employers association) and workers (unions). Act No. 2 of 2004 also stipulated that dispute that can be settled using the mechanism is about rights, conflicts of interest, termination and labor unions dispute in one company that occur due to differences in implementing and interpreting law legislation, employment agreement or company regulations or collective agreements. Prior to taking industrial dispute to the Industrial Relations Court, parties that have dispute should take several steps called industrial dispute resolution outside the court. One of the first steps is conducting a bipartite negotiation. Collective Agreement on postponing minimum wage is not considered as a product of a bipartite negotiation as minimum wage is binding once the governor decision is issued. The agreement in

4 question could not become a law for the parties (employer and workers or union) because the object of the agreement is already stipulated by law and regulations, and carries criminal sentence. According to the Directorate of Industrial Relations and Workers Security of the Ministry of Manpower, collective agreements between employers and workers/laborers in order to postpone the minimum wage could not be used as a legal standing because collective agreements is (only) one required part of dispute resolution process, and it is not intended to postpone of the minimum wage as mandated by the labour law and its implementing regulations. f. What is null and void? In philosophy of law, void means of no legal effect. An action, document, agreement or transaction which is void is of no legal effect whatsoever; an absolute nullity where the law treats it as if it had never existed or happened. g. Can factories used legal reference from the Instruction of the President of Republic Indonesia No 7 of 2013 Number 1 Point (4) and Minister of Manpower and Transmigration Regulation No. 7 of 2013 Article 19 as the basis of legality of the agreement in question? No. The regulations in question stipulate that wage structure of wage increment for factories located in areas where the minimum wage is set higher than the decent living wage. Factories should use the minimum wage as the basis of wage increment calculation as minimum wage is applied for workers working less than one year. h. For some regions that implement minimum wage (UMP/UMK) and sectoral minimum wage (UMSP/UMSK), what should factories follow? Factories should follow sectoral minimum wage is their sector of industry has agreed on the sectoral minimum wage. i. Can factories postpone the implementation of the sectoral minimum wage (UMSP/UMSK)? No. There is no legal platform to postpone sectoral minimum wage. In addition, sectoral minimum wage is based on collective agreement between employer association of a certain industry sector and unions; thus, it could not be postponed.

5 DISCLAIMER The content of this information is for general information purposes only. The responsibility for the information and any links attached to it rests solely with their authors and does not imply the expression of any opinion or endorsement whatsoever on the part of Better Work. The inclusion of any links and the presentation of material do not imply the expression of any opinion whatsoever on the part of Better Work. Please consult with the Ministry of Manpower and Transmigration for official documents. Better Work takes no responsibility over the nature, content and availability of the external sites linked to this document

ORDINANCE ON LABOUR CONTRACTS

STATE COUNCIL SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness Hanoi, 10 September 1990 ORDINANCE ON LABOUR CONTRACTS In order to protect the rights and interests of employees, to establish