Legal Updates:

Minimum Wage Postponement

Dear Valued Partners,

We would like to inform you about the Minimum Wage Postponement 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 2003. 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.
Better Work Indonesia is funded by:

Legal Updates:
Minimum Wage Postponement

For example:
Previous years minimum wage is Rp. 1,500,000,-
New minimum wage amount is Rp. 2,000,000,- starting January 1st 2013
Proposed wage amount of minimum wage postponement is Rp. 1,800,000,-
Approval/Rejection of postponement from Governor released on March 1st, 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 2013.
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 years minimum wage is Rp. 1,500,000,-
New minimum wage amount is Rp. 2,000,000,- starting January 1st 2013
Proposed wage amount of minimum wage postponement is Rp. 1,800,000,-
Approval/Rejection of postponement from Governor released on March 1st, 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 2013.
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?

Better Work Indonesia is funded by:

Legal Updates:
Minimum Wage Postponement

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 2003.
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 2007. 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
Better Work Indonesia is funded by:

Legal Updates:
Minimum Wage Postponement

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.

Better Work Indonesia is funded by:

Legal Updates:
Minimum Wage Postponement

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

Better Work Indonesia is funded by: