Although the Job Creation Law has been revoked and inoperative, according to the Closing Regulation of Emergency Law No 2 of 2022, the implementing regulations of Law No 11 of 2020 still apply as long as they do not contradict the Emergency Law (Perpu Cipta Kerja).

Examples of regulations for implementing the Job Creation Law that are still valid are PP No. 34 of 2021 concerning the use of foreign worker; PP No. 35 of 2021 concerning PKWT (Fixed Time Employment Agreement), outsourcing, work time and rest time, and layoffs; and PP No 36 concerning Wages.

In addition, Perppu No 2 of 2022 does not revoke and cancel the Manpower Law No 13 of 2003, but only revises several clause. So, the clauses that have not been changed or deleted in the Manpower Law are still valid.

Wage is a part of the Indonesian Manpower Law that is newly amended by the Omnibus Law No 11 of 2020 on Job Creation.

As every worker deserves a living wage to meet a decent living standard, the government has issued a regulation to guide:

a. minimum wage

b. wage structure and scale

c. overtime pay

d. absence and off work pay

e. wage form and method

f. things depend on wage

g. the wage for calculating other payments

Government Regulation No. 36 of 2021 on Wages as a derivative rule of the Job Creation Law, replacing previous Government Regulation No. 78 of 2015, regulates detailed salary guidance.

Salary Structure & Salary Scale

In formulating the wage structure and scale used as guidelines for determining wages, the employer needs to consider the company capabilities and productivity, according to Article 92 of the Manpower Law amended by Job Creation Law.

In accordance with Perpu Cipta Kerja No.2 of 2022, the provisions of Article 92 of the Manpower Law are amended to read:

(2) The structure and scale of wages are used as guidelines for employers in determining wages for workers/laborers who have worked for 1 (one) year or more.

Subsequently, the employer reviews the wage by considering the company's capabilities and productivity. Government Regulation No 36 of 2021 regulates provisions on wage structure and scale.

Wage Payment Obligation

When workers do not do work, wages do not need to be paid. However, fixed wages must be paid if:

a. sick workers / laborers so they cannot do work;

b. women who are sick on the first and second day of their menstrual period so they cannot do work;

c. workers do not enter work because they are marry, marry off, circumcise, baptize their children, give birth or miscarriage wives, husbands or wives or children or daughter-in-law or parents or in-laws or family members in one house die;

d. workers / laborers cannot do their jobs because they are carrying out obligations towards the state;

e. workers / laborers cannot do their work because they carry out worship that is ordered by their religion;

f. workers / laborers are willing to do the work that has been promised but the employer does not employ him, either because of his own mistakes or obstacles that employers should be able to avoid;

g. workers carry out the right to rest;

h. workers carry out the duties of trade unions / labor unions with the agreement of employers; and

i. workers carry out educational tasks from the company.

Work Agreements, Company Regulations or Collective Labor Agreements, are arranged to carry out payment of wages as mentioned above.

Basic Salary Calculation

If the wage component consists of basic salary and fixed allowances, the amount of the basic salary shall be a minimum of 75% (seventy five percent) of the total basic wage and fixed allowance.

Sanctions

Workers / laborers can be fined if they commit intentional violations or negligence. Conversely, if employers pay late wages, they can also be fined according to a certain percentage of workers' wages. The imposition of fines in the payment of wages is regulated by the Government.

Meanwhile, if the company is bankrupt or frozen because of the applicable laws and regulations, then the wages and other rights of the workers / laborers are considered as debt whose repayment must be prioritized.

Tunjangan Hari Raya (THR) regulation is Law of Minister of Labor No.6 in 2016 about Tunjangan Hari Raya for Workers in Religious Days.

Religious Holidays in Indonesia referred to the Regulation of the Minister of Labor are Eid al-Fitr for Moslem workers, Christmas for Catholic and Protestant Christian workers, Nyepi for Hindu workers, Vesak for Buddhist workers, and Lunar New Year for Confucian workers.

Based on Regulation of the Minister of Labor No. 6 in 2016, there are 6 important points about THR:

1. Working Period

THR shall be given to workers who have worked at least 1 month in the company. Calculations for workers with tenure less than 12 months and more than 12 months are different. For workers with tenure more than 12 months, they will earn THR as much as 1 month salary, but for workers with tenure 1 month and less than 12 months, they will get THR with calculation ((tenure) / 12) x 1 month salary.

The definition of "wage" used as a basis for calculating THR may vary according to company policy. Basically, the company uses one of the following quantities as the basis of the THR calculation:

1. Basic Salary Only

2. Basic Salary + Fixed Allowance

Here are some examples of THR calculation as an ilustration.

2. THR Form

THR can only be given in rupiah. In other words, giving vouchers, food packages, parcels and other gifts are not counted as THR.

3. Time to Give THR

THR by the company to the worker must be given not later than 7 days or a week before the religious holiday lasts. For example, if Eid al-Fitr falls on June 17, 2017, the company must provide THR to workers on June 10, 2017 as maximum date.

4. THR for Resigning Workers

Full-Time Workers (PKWTT / Permanent) are entitled to THR if termination occurs 30 days before Religious Day. 

Debates often arise in case of employment termination within religious days. It will be good if these issues are discussed with the management and employees in an open and familial way to avoid further disputes.

5. THR Tax

PPh 21 on THR is only applicable for workers who get THR above Taxable Income (PTKP), which is Rp 4.5 million per month or Rp 54 million per year.

If workers get THR less than Rp 4.5 million, workers are not subject to PPh 21 THR.

See here to learn more about example of calculating PPh 21 THR.

6. Company Sanctions

Prior to the Regulation of the Minister of Labor No. 6 in 2016 which regulates the THR, the company shall not be penalized if not giving THR to workers. However, after these regulation, the company will be penalized to a fine of 5% of total THR to be paid if not giving THR to workers.

The fines are the THR to be paid by the company to workers plus 5% of the total THR earned by the workers. Thus, companies will be more financially disadvantaged as government sanctions.

Working hours are time to do the work, can be done during the day and/or at night. Law No. 13 in 2003 about Labor regulates working hours for private sectors’ workers. Meanwhile, the arrangement of the start and end time of working hours is arranged according company needs in Work Agreement, Company Regulation (PP) or Joint Work Agreement (PKB).

In Law No.13 in 2003 Article 77 paragraph 1 requires every company to follow the provisions of working hours that have been set in 2 systems, namely:

The two applicable working hours system limits the working hours to be 40 (forty) hours in 1 (one) week. If working hours within the company exceed those provisions, then the overtime work time is considered as overtime, so workers are entitled to overtime pay.

An employment contract is an agreement between a worker and an entrepreneur verbally or in writing form for a definite time or an indefinite time. It regulates the terms and conditions of work and the rights and obligations of the two parties. The agreement also specifies the employee status. The Job Creation Law Chapter IV Employment, Points 12 to 16, which amends Articles 56 to 61 of the Manpower Law, regulates employee status.

Employee status depends on the agreement period:

a. Contract Agreement (PKWT)

A contract agreement (PKWT) is a fixed-term contract between a worker and an employer to establish an employment relationship for a certain period or temporary jobs.

A maximum period of PKWT or contract employee is up to five years with no probation. The employment relationship ends at the end of the contract period or the completion of the job.

b. Full-Time Agreement (PKWTT)

Full-Time Agreement (PKWTT) is an employment agreement between a worker and an employer to establish a permanent employment relationship or commonly referred to as a permanent employee. In PKWTT may require a probation period of 3 (three) months, if there is a rule of more than 3 months, according to the rule of law, since the fourth month, the worker shall be declared as permanent worker (PKWTT).

In addition to the employee status based on the agreement period, Indonesian labor regulations also include freelancers and outsourcing employees. They are PKWT workers with a slight difference.

a. Freelancer

Freelancer is regulated in Article 10 Government Regulation No. 35 of 2021. A freelance employment agreement is only for non-permanent jobs with a change in work time and volume, for which the wage payment depends on attendance.

A freelance agreement must comply with the regulation: the worker works less than 21 days a month. If the worker works 21 days or more a month for three consecutive months, then the employment relationship changes to PKWTT and a freelancer changes to a permanent employee.

b. Outsourcing

Outsourced workers are not recruited directly by the employer but supplied by a third party or labor provider (outsourcing) company. 

An outsourcing contract is agreed upon by the employer and the provider regarding the need of the employers.

The workers are the employee at the outsourcing company, despite work for the other (user) company. Job Creation Law, Point 20 on the amendment of Article 66 of the Manpower Law, and Government Regulation No. 35 of 2021 regulates outsourcing provisions.

Based on Law no. 13 of 2003 Article 79 paragraph (2), workers who have worked for a minimum of 12 months or 1 (one) year consecutively shall be given leave permit of at least 12 days. However, the company may adjust the terms of permit leave under the Work Agreement, Company Regulation (PP) or Joint Working Agreement (PKB) agreed by the company and workers.

For employee who unable to perform his work due to illness, the employer is still obliged to pay his salary. In Indonesia there is no maximum time for employees to be given sick leave. Employees who do not enter due to illness for 2 consecutive days or more should be accompanied by a doctor's certificate, without such official information will be considered absent and counted as annual leave.

If the pain suffered by employees is severe enough that it takes a long time to get back to work, adjustments will be made to the wages it receives:

- For the first 4 months are paid 100% of wages,

- For the second 4 months paid 75% of wages,

- For the third 4 months are paid 50% of wages,

- For the next month are paid 25% of wages before termination is made by employer.

Employers are obliged to pay overtime if they employ workers beyond the working hours stipulated by law. Overtime work must meet the following conditions:

a. ordered by the employer and approved by the worker in writing or through digital media;

b. maximum of overtime is four hours a day and 18 hours a week, excluding overtime during weekly rest periods or official holidays.

Overtime pay uses the hourly wage or 1/173 times the monthly salary (basic salary and fixed allowance). Here are the conditions:

1. Overtime on a working day:

a) the first-hour is paid 1,5 times the hourly wage;

b) each subsequent hour is paid two times the hourly wage.

2. Overtime on a weekly rest day or official holiday, for five working days and 40 hours a week:

a) for the first 8 hours, each hour is paid two times the hourly wage;

b) the 9th-hour pay is three times the hourly wage;

c) for the 10th, 11th, and 12th hours, each hour pay is four times the hourly wage.

3. Overtime on a weekly rest day or official holiday, for six working days and 40 hours a week:

a) for the first 7 hours, each hour is paid two times the hourly wage;

b) the 8th-hour pay is three times the hourly wage;

c) for the 9th, 10th, and 11th hours, each hour pay is four times the hourly wage.

If the official holiday falls on the shortest working day:

a) for the first 5 hours, each hour is paid two times the hourly wage;

b) the 6th-hour pay is three times the hourly wage;

c) for the 7th, 8th, and 9th hours, each hour pay is four times the hourly wage.

Termination of Employment (PHK) is termination of employment due to certain thing which resulted in the ending of rights and obligations between workers and employers. Termination can be done due to certain reasons and prohibited if done unilaterally and arbitrarily. Employers are obliged to negotiate a laid-off with unions or with workers, if such negotiations do not result in an agreement then a dismissal can only be made upon obtaining the determination of an industrial relations dispute settlement institution or Industrial Relation Court.

Employer are required to pay severance pay and / or long service pay and compensation of rights that should be received by workers as stated in Labor Law No. 13 of 2003 as well as existing agreements in the Collective Labor Agreement or Company Regulations. In the case of a worker / laborer committing an offense set forth in the employment agreement, company rules or cooperation agreement, the employer may terminate the employee after the relevant worker has been given the first, second and third warning letters respectively.

According to Article 88A, inserted by the Omnibus Law in the Manpower Law No 13 of 2003, an employee's right to wages begins with the employment relationship agreed by the employer and the worker and ends at the time of termination. Workers are entitled to equal pay for equal work.

Employers are obliged to pay wages to workers according to the agreement, which cannot be lower than the wages stipulated in statutory regulations. If such an agreement violates the laws and regulations, then it is null and void.

Article 88B adds that wages are determined based on the time unit and yield unit. Further provisions are regulated in Government Regulation No 36 of 2021.

Articles 88C, 88D, and 88E regulate the provisions of the minimum wage.

The governor is obliged to set the provincial minimum wage (UMP) based on economic and labor conditions, using data from the authorized statistics agency. The governor can also specify a regency/city minimum wage (UMK) based on regional economic growth or district/city inflation.

The minimum wage calculation uses the minimum wage formula specified in Government Regulation, which contains economic growth or inflation variables. The minimum wage only applies to workers with less than one year of the working period, and employers cannot pay wages lower than the minimum wage.

According to Articles 90A-90B, a salary above the minimum wage is agreed upon by the employer and the worker. Micro and small enterprises exempt from the minimum wage provisions, as the employer and the worker agree on the salary.

After the Job Creation Emergency Regulation was passed, there were changes in the calculation of the minimum wage. 

A. Article 88C is inserted in the Labor Law:

(3) Determination of the district/city minimum wage as referred to in paragraph (2) is carried out in terms of that the result of calculating the district/city minimum wage is higher than the provincial minimum wage.

(6) In terms of that a regency/municipality does not yet have a minimum wage and will set a minimum wage, the determination of the minimum wage must meet certain conditions.

B. Article 88D is inserted in the Manpower Law:

(2) The formula for calculating the minimum wage as referred to in paragraph (1) takes into account the variables of economic growth, inflation and certain indices.

C. Article 88F is inserted in the Labor Law:

In certain circumstances the government may stipulate a formula for calculating a minimum wage that is different from the formula for calculating the minimum wage as referred to in Article 88D paragraph (2).

Questions and answers regarding the Job Creation Law regarding Wages can be seen here.

Based on the Regulation of the Minister of Manpower No. 1/ 2017 on the structure and scale of wages, it is explained that the structure and scale of wages are the composition of the wage level from the lowest to the highest, or vice versa, containing the nominal wage nominal range from the smallest to the largest for each position rank. Position rank is a grouping of positions based on value or weight of position.

Wage scale must be composed by employer by class, position, tenure, education and competency. Stages of preparation of structures and wage scales are job analysis, job evaluation and determination of structure and wage scale. In Permenaker 1/2017 it also requires employers to notify the structure and scale of wages to all workers / laborers individually.

The latest Regulation on Income Tax or Income Tax 21 refers to the Regulation of the Directorate General of Taxation no.PER-16/PJ/2016. The calculation of PPh 21 adjusts to the non-taxable income (PTKP) stipulated by the Directorate General of Taxation, namely:

Here's an example of monthly salary PPh 21 calculation for permanent workers under the latest government regulations in 2016:

Retto in 2016 works for PT Jaya Abadi company by earning a monthly salary of Rp 5.750.000,- and paying pension fee of Rp 200.000,-. Retto is married but has no children yet. In January Retto earnings from PT Jaya Abadi only from salary. The calculation of PPh 21 in January is:

According to Law No. 24 in 2011 about the Social Security Administering Board, BPJS or Social Security Administering Board is a legal entity formed to organize a social security program. There are 2 types of BPJS, namely BPJS Health which organizes a health insurance program and BPJS Employment program that provides accident insurance, pension, pension, death insurance and job loss insurance.

Who are the participants of BPJS?

In BPJS Law, it states that the participants are everyone, including foreigners who work for a minimum of 6 (six) months in Indoneisa, who have paid the dues. In addition, the Procuring Entity or Company shall gradually register itself and his employees as a participant of BPJS according to the Social Security program that is followed.

If the employer or the company does not register the employee, will it get sanctioned ?

Employers or companies that do not register their workers will be subject to administrative sanctions:

1. Written warning: performed by BPJS

2. Fines: performed by BPJS

3. Not obtaining certain public services: performed by the Government or the Regional Government at the request of BPJS

In terms of not obtaining certain public services, it is include:

1. License related to business

2. Permission required to participate in a project tender

3. Permission to hire Foreign Workers (TKA)

4. Permission for workers or labor services company

5. Building Construction Permit (IMB)