All Employers must comply with the applicable Minimum Wage when paying the salaries of their Employee. For Companies struggling financially, the Manpower Law offers an option to apply for an exemption of the Minimum Wage payment obligation, in the form of Suspension (Penangguhan Pelaksanaan Upah Minimum). Learn more regarding the suspension in our article.
As has been previously explained in our article concerning Minimum Wage, Article 90 paragraph 1 jo. Article 185 paragraph 1 of Law No. 13 Year 2003 concerning Manpower (“Manpower Law”), as well as Article 2 paragraph of Ministry of Manpower and Transmigration Ministerial Decree No. Kep-231/Men/2003 concerning Suspension Procedures of Minimum Wage (“Ministerial Decree Kep-231/Men/2003”), all Employers are prohibited to pay a lower wage or salary to their Employees, which is lower than the applicable Minimum Wage. There are criminal and civil sanctions applicable for disobedience of such regulations.
However, if the employer is unable to pay the Minimum Wage, they are able to apply for the suspension of the Minimum Wage payment, pursuant to Article 90 paragraph 2 of Manpower Law. The procedure to apply for the suspension of the Minimum Wage is further stipulated in the Ministerial Decree Kep-231/Men/2003.
APPLYING FOR SUSPENSION OF MINIMUM WAGE PAYMENT OBLIGATION
The application for the Suspension of the Minimum Wage payment obligation must be submitted by the Employer to the Governor through the provincial Manpower Office no later than 10 (ten) days before the Minimum Wage is implemented effectively (1 January of each year).
The application itself must be made in the form of a written agreement between the Employer and the Employees/Labor Union, which was made pursuant to an in-depth, honest, and open negotiation between the 2 (two parties).
Subsequently, the application for suspension of Minimum Wage payment obligation must be accompanied by the following supporting documents:
- The original agreement in writing between the Employer and Employees or Labor Union of the respective Company;
- The Company Financial Reports, consisting of balance sheet, loss/gain calculations, along with explanations for the last two (2) years;
- A copy of the Company Deed of Establishment;
- Data of the Employe Salary, pursuant to Employee positions;
- The amount of Employees who will be applied for suspension of Minimum Wage payment;
- The development of production and marketing for the last 2 (two) years, as well as the production and marketing plan for the next two (2) years.
If the company has been ratified as a legal entity, the Company Financial Statements must be audited by a public accountant. Subsequently, the Governor, if he/she approves, can only give a suspension for the Minimum Wage for a maximum period of twelve (12) months. After the end of the suspension, the Employer must implement the Minimum Wage pursuant to the prevailing laws and regulations.
- The Governor’s decision on the suspension of the Minimum Wage payment obligation are as follows:
- The Company continues to pay the salaries with the same amount of the Minimum Wage in the previous year;
- The Company must pay the salaries higher than the Minimum Wage of the previous year, but still less than the current Minimum Wage, or;
- The Company must raise the salaries gradually.
Rejection or approval of the application for suspension are given within a period of 1 (one) month after the issuance of a receipt indicating that the provincial Manpower Office has received a complete application. If within one month of the receipt, the Governor has yet to issue an approval or a rejection,, the application shall be deemed as approved.
During the suspension request process, Employers must continue to pay the salaries of their Employers with the previous rate. In the event that the application is rejected by the Governor, the remuneration given by the Employer to the Employee is at least equal to the Minimum Wage, per its effective commencement date.
HOW CAN SMART CONSULTING HELP YOU?
To ensure a smooth investment and business operation from the legal perspective, but also still focus on maintaining your business in Indonesia and reach your revenue target, it is advised for you to find capable and trusted lawyers or legal consultants for advice and assistance in ensuring your legal compliance with prevailing laws and regulations.
SMART Consulting is an Indonesian Corporate Legal Services firm. SMART has assisted Clients in dealing with matters related to Manpower Law, such as drafting, reviewing and registering the Employee Toolkit, including Employment Agreement, Collective Labor Agreement, and Company Regulations. We also provide advisory services regarding Employment matters, as well as assistance in conducting termination of employment and manpower dispute resolutions.
Contact Us Now to get your legal solution for your business goals, and still comply with the prevailing laws and regulations.