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Ada Pertanyaan? Hubungi Kami Ricky Pratomo, Ady Thea Dian
Labor demonstration in Jakarta. Photo by: RES.
As we approach the end of 2016, Regional Wage Councils (Dewan Pengupahan Daerah) across Indonesia are busy discussing the formulation of new minimum-wage levels for 2017. One such council is the Regional Wage Council for the DKI Jakarta region and employee representatives to Jakarta's Regional Wage Council have requested a new minimum wage level of IDR 3.8 million, while the representatives of employers are seeking a IDR 3.3 million minimum wage.
Through the issuance of Letter No. B.175/MEN/PHIJSK-UPAH-X/2016 dated 17 October 2016, M. Hanif Dhakiri, the current Minister of Employment, is urging all Governors across Indonesia to stipulate new minimum-wage levels based on Government Regulation No. 78 of 2015 on the Minimum Wage (“Regulation 78/2015”). This letter also addresses a further eight issues as regards the legal minimum wage.
Firstly, all Governors will be required to formulate a provincial minimum wage (Upah Minimum Provinsi – “UMP”) in 2017. Secondly, all UMPs for the 2017 period should be stipulated and announced on 1 November 2016. Thirdly, all Governors may also formulate regional/municipal minimum wages (Upah Minimum Kabupaten/Kota – “UMK”) for certain regencies/cities which are capable of paying minimum-wage levels above those set out by UMPs. Fourthly, any such UMKs must be stipulated and announced before 21 November 2016.
Fifthly, any UMPs and UMKs stipulated by Governors will be valid from 1 January 2017 onwards. Sixthly, all Governors should calculate their new minimum-wage levels using Article 44 (1) and (2) of Regulation 78/2015, which sets out the following formula:
| New Minimum Wage | = | Current Minimum Wage + {Current Minimum Wage × (National Inflation % + National Economic Growth %)} |
Seventhly, any such calculations must refer to national-inflation and economic-growth data (which is based on the current gross-domestic-product growth rate), as provided by Statistics Indonesia (Badan Pusat Statistik – “BPS”).
“In line with Head of BPS Letter No. B-245/BPS/1000/10/2016 dated 11 October 2016, [the rate of] national inflation currently stands at 3.07%, while the national economic growth rate is 5.18%,” Minister Dhakiri stated in his letter.
Eighthly, based on Article 63 of Regulation 78/2015, any region which set a 2016 UMP or UMK level below the Decent Living Standards (Kebutuhan Hidup Layak – “KHK”), should adjust their minimum-wage levels so that they are equal to the official KHK by 2019 at the latest. The minimum wage formula for such regions is as follows:
| New Minimum Wage so as to Achieve KHK | = | Current Minimum Wage + {Current Minimum Wage × (National Inflation % + National Economic Growth %)} + Governor’s Adjustment so as to Achieve KHK |
At the end of his Letter, Minister Dhakiri mandates that all Governors should submit all of the abovementioned data to the relevant regent/mayor, as well as to the Wage Council in their respective provinces and regencies/cities.
Ministry’s Directives Seen as in Contradiction with Employment Law
Commenting on the abovementioned directives, Timboel Siregar, the Secretary General of the Indonesian Trade Unions Organization (Organisasi Serikat Pekerja Indonesia – “OPSI”), has argued that the Minister’s letter violates Article 89 of Law No. 13 of 2003 on Employment (“Employment Law”). Referencing Article 89 (3) of the Employment Law, Mr. Siregar asserted that any increases which are made to the minimum wage must take the recommendations which are made by the respective Provincial Council and/or regent/mayor into account. In this context, the Minister should have addressed his letter to the Regional Wage Council and/or the regents/mayors concerned.
Furthermore, Mr. Siregar has also argued that the official 3.07% inflation rate does not match up very well with the actual situation on the ground within society, as this figure was only calculated based on an appraisal of goods and services. However, the formulation of any minimum wage should be based on the various KHK components which are set out under Article 43 (1) Regulation 78/2015.
“The inflation rates should be formulated based on the 60 KHK components,” Mr. Siregar stated last Friday.
Mr. Siregar is concerned that the formulation of any minimum wage will ultimately be biased and inaccurate, if the national-inflation level is not formulated based on an appraisal of the various KHK components. Mr. Siregar offered an example of this mismatch by stating that the national-inflation rate during December of 2015 was 0.96%, while the specific inflation rate for foods and ingredients was actually 3.20%. Mr. Siregar went on to reveal that the overall inflation rate for January 2016 was only 0.51%, while the actual inflation rate for foods and ingredients was 2.20%.
By referring to the national-inflation and economic-growth data provided by the BPS, Mr. Siregar estimates that the minimum-wage increment for 2017 might reach as high as 8.25%. In order to stabilize employee purchasing power however, Governors are authorized to increase minimum-wage rates above the level of the data supplied by the BPS, in line with Article 89 (3) of the Employment Law.
(cd/sp)
Ricky Pratomo, Ady Thea Dian
Labor demonstration in Jakarta. Photo by: RES.
As we approach the end of 2016, Regional Wage Councils (Dewan Pengupahan Daerah) across Indonesia are busy discussing the formulation of new minimum-wage levels for 2017. One such council is the Regional Wage Council for the DKI Jakarta region and employee representatives to Jakarta's Regional Wage Council have requested a new minimum wage level of IDR 3.8 million, while the representatives of employers are seeking a IDR 3.3 million minimum wage.
Through the issuance of Letter No. B.175/MEN/PHIJSK-UPAH-X/2016 dated 17 October 2016, M. Hanif Dhakiri, the current Minister of Employment, is urging all Governors across Indonesia to stipulate new minimum-wage levels based on Government Regulation No. 78 of 2015 on the Minimum Wage (“Regulation 78/2015”). This letter also addresses a further eight issues as regards the legal minimum wage.
Firstly, all Governors will be required to formulate a provincial minimum wage (Upah Minimum Provinsi – “UMP”) in 2017. Secondly, all UMPs for the 2017 period should be stipulated and announced on 1 November 2016. Thirdly, all Governors may also formulate regional/municipal minimum wages (Upah Minimum Kabupaten/Kota – “UMK”) for certain regencies/cities which are capable of paying minimum-wage levels above those set out by UMPs. Fourthly, any such UMKs must be stipulated and announced before 21 November 2016.
Fifthly, any UMPs and UMKs stipulated by Governors will be valid from 1 January 2017 onwards. Sixthly, all Governors should calculate their new minimum-wage levels using Article 44 (1) and (2) of Regulation 78/2015, which sets out the following formula:
| New Minimum Wage | = | Current Minimum Wage + {Current Minimum Wage × (National Inflation % + National Economic Growth %)} |
Seventhly, any such calculations must refer to national-inflation and economic-growth data (which is based on the current gross-domestic-product growth rate), as provided by Statistics Indonesia (Badan Pusat Statistik – “BPS”).
“In line with Head of BPS Letter No. B-245/BPS/1000/10/2016 dated 11 October 2016, [the rate of] national inflation currently stands at 3.07%, while the national economic growth rate is 5.18%,” Minister Dhakiri stated in his letter.
Eighthly, based on Article 63 of Regulation 78/2015, any region which set a 2016 UMP or UMK level below the Decent Living Standards (Kebutuhan Hidup Layak – “KHK”), should adjust their minimum-wage levels so that they are equal to the official KHK by 2019 at the latest. The minimum wage formula for such regions is as follows:
| New Minimum Wage so as to Achieve KHK | = | Current Minimum Wage + {Current Minimum Wage × (National Inflation % + National Economic Growth %)} + Governor’s Adjustment so as to Achieve KHK |
At the end of his Letter, Minister Dhakiri mandates that all Governors should submit all of the abovementioned data to the relevant regent/mayor, as well as to the Wage Council in their respective provinces and regencies/cities.
Ministry’s Directives Seen as in Contradiction with Employment Law
Commenting on the abovementioned directives, Timboel Siregar, the Secretary General of the Indonesian Trade Unions Organization (Organisasi Serikat Pekerja Indonesia – “OPSI”), has argued that the Minister’s letter violates Article 89 of Law No. 13 of 2003 on Employment (“Employment Law”). Referencing Article 89 (3) of the Employment Law, Mr. Siregar asserted that any increases which are made to the minimum wage must take the recommendations which are made by the respective Provincial Council and/or regent/mayor into account. In this context, the Minister should have addressed his letter to the Regional Wage Council and/or the regents/mayors concerned.
Furthermore, Mr. Siregar has also argued that the official 3.07% inflation rate does not match up very well with the actual situation on the ground within society, as this figure was only calculated based on an appraisal of goods and services. However, the formulation of any minimum wage should be based on the various KHK components which are set out under Article 43 (1) Regulation 78/2015.
“The inflation rates should be formulated based on the 60 KHK components,” Mr. Siregar stated last Friday.
Mr. Siregar is concerned that the formulation of any minimum wage will ultimately be biased and inaccurate, if the national-inflation level is not formulated based on an appraisal of the various KHK components. Mr. Siregar offered an example of this mismatch by stating that the national-inflation rate during December of 2015 was 0.96%, while the specific inflation rate for foods and ingredients was actually 3.20%. Mr. Siregar went on to reveal that the overall inflation rate for January 2016 was only 0.51%, while the actual inflation rate for foods and ingredients was 2.20%.
By referring to the national-inflation and economic-growth data provided by the BPS, Mr. Siregar estimates that the minimum-wage increment for 2017 might reach as high as 8.25%. In order to stabilize employee purchasing power however, Governors are authorized to increase minimum-wage rates above the level of the data supplied by the BPS, in line with Article 89 (3) of the Employment Law.
(cd/sp)