Indonesian Employment Law Update: Minimum Wage

Labor & Employment

By Richard D. Emmerson and Indrawan D. Yuriutomo

There have been a couple of recent developments in Indonesia as regards monthly minimum wages that employers should take note of.

2017 Minimum Wage for Jakarta

First, the Governor of Jakarta has issued a new regulation on the minimum wage for 2017, Regulation No. 227 of 2016 dated October 27, 2016 regarding the Jakarta Provincial Minimum Wage for 2017 (“Reg. 227″). Beginning January 1, 2017, the minimum wage in Jakarta will be IDR 3,355,750 per month.

Under Reg. 227, companies in Jakarta are prohibited from paying workers less than IDR 3,355,750 per month. Companies can, however, seek to defer the application of the new minimum wage by submitting an application for postponement to the governor’s office no later than 10 days before January 1, 2017.

The Jakarta minimum wage is going up 8.25% in 2017 from the previous year.

Deferral of Minimum Wage

In a related development, Indonesia’s Constitutional Court has issued Decision No. 72/PUU-XIII/2015 dated September 29, 2016 regarding Judicial Review of the Employment Law. The Constitutional Court found the phrase “but is not required to comply with the prevailing minimum wage provision for the period of deferment” in the elucidation of Article 90(2) of the Indonesian Employment Law to be unconstitutional and not legally binding.

Article 90(2) of the Employment Law provides that if an employer is unable to pay the applicable minimum wage, then the employer can defer payment of such minimum wage. The elucidation of this article suggests that when the period of deferral of the relevant minimum wage ends, the employer must start paying the minimum wage but is not required to pay the minimum wage during the period of deferral (i.e., the employer is not obligated to later pay the applicable minimum wage in arrears).

With this Constitutional Court decision, it would appear that even when an employer obtains approval to defer the implementation of a new minimum wage, the employer must later pay the applicable minimum wage in arrears for the period of deferral when the deferral period ends. Recognizing that employers are only able to obtain approval to defer the application of a new minimum wage based on clear evidence of financial necessity, this decision is very controversial.

SSEK a Leading Employment Law Firm

SSEK is rated as a top-tier labor and employment law firm by Chambers Asia-Pacific, The Legal 500 and Asialaw. SSEK is the Employment Law Alliance member firm for Indonesia. The ELA is the most comprehensive network of labor and employment attorneys in the world. ELA members provide employment, labor and immigration expertise in more than 135 countries around the globe and all 50 U.S. states. They work closely together to ensure that their clients’ legal matters are handled seamlessly wherever they do business. ELA is ranked by Chambers Global as an  Elite Law Firm Network.

This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user’s own risk. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.

Comments are closed.