Provincial Minimum Wage Policy so Far Only Implemented by 30 out of 34 Indonesian Provinces

Indonesian Version

 
Marcell Sihombing, Ady T.D. Achmad
 

 

As the end of the year draws nearer, the government has once again reminded all of the country’s governors to comply with the provisions set out in Government Regulation No. 78 of 2015 on Wages (Regulation 78/2015) when determining provincial minimum wages for the 2017 period (2017 UMP) in their respective provinces. Commenting on this matter, Haiyani Rumondang, the Director General of Industrial Relations and Social-Security Development (Director General) at the Ministry of Employment, recently revealed that 34 provinces had already determined the 2017 UMP but that only 30 provinces had already complied with the provisions set out under Regulation 78/2015.
 
“The four provinces in question, namely South Kalimantan, East Nusa Tenggara, Papua and Aceh, have not yet [complied],” asserted Director General Rumondang on Monday, 28 November 2016.
 
According to Director General Rumondang’s calculations, the average wage increase across the country’s provinces under the 2017 UMP is around 8.91%, with IDR 3,355,750 being set as the highest UMP. Director General Rumondang also went on to reveal that, according to data compiled by Statistics Indonesia (Badan Pusat Statistik), Indonesia's gross domestic product (GDP) figures for the 2016 period encompass a 3.07% inflation rate and a 5.18% economic-growth rate. Thus, the calculated increase under the 2017 UMP using the simple addition formula set out under Regulation 78/2015 is now set at 8.25%.
 
Of the 30 provinces which have already complied with the provisions set out under Regulation 78/2015, four provinces have already implemented the gradual realization mechanism for the so-called Decent Living Standards (Komponen Hidup Layak - KHL). The increases in the Decent Living Standards allowance under the 2017 UMP for these provinces are as follows: 10% for West Nusa Tenggara; 8.27% for Gorontalo; 8.45% for Maluku; and 17.48% for North Maluku. Meanwhile, three provinces which previously hadn’t increased their 2016 UMP (i.e. East Java, Central Java and Yogyakarta), have now decided to determine the 2017 UMP for the coming year.
 
Director General Rumondang also sought to remind the public that Regulation 78/2015 stipulates that governors should have determined and simultaneously announced the 2017 UMP by 1 November 2016. This was to have been followed by the determination of regency/city minimum wages by 21 November at the latest.
 
On a slightly different note, Said Iqbal, President of the Indonesian Workers Union Confederation (KSPI), asserted that the issue non-compliance by the four provinces mentioned above reveals that there are governors across the country who are actually daring enough to refuse to set low UMPs. Indeed, Mr. Iqbal believes that regional-government heads have the authority to increase the UMP to levels way above the provisions which are set out in Regulation 78/2015.
 
Mr. Iqbal is thus planning plans to file a lawsuit at the State Administrative Court (PTUN) this December, relating to the determination of minimum wages across various provinces which have already complied with the various provisions set out in Regulation 78/2015. According to Iqbal, the provisions set out in Regulation 78/2015 contradict the provisions which are set out in Law No. 13 of 2003 on Employment (Employment Law).
 
“The Employment Law clearly stipulates that the calculation mechanism for the determination of minimum wages is to be decided at a tripartite meeting which is organized by the Regional Wage Council (Dewan Pengupahan Daerah) and not by utilizing the formula which is set out in Regulation 78/2015,” Mr. Iqbal asserted.
 
Rosan Roeslani, the General Chairman of the Indonesian Chamber of Commerce and Industry (KADIN), also ventured an opinion on this issue and stated that the formula to be used in order to calculate any increases in the minimum wage, as set out under Regulation 78/2015, is an implementation of the various economic policy packages which have been issued by the government over the last two years. Mr. Roeslani went on to assert that businesses have lauded the introduction of this policy, as the existence of a calculation formula allows businesses to predict and thus plan for increases in the minimum wage several years in advance.
 
Regarding the fact that a number of provinces have determined increases in their minimum-wage levels without having complied with the provisions set out in Regulation 78/2015, Mr. Roeslani expressed his hope that all provinces would ultimately comply with this regulation. However, Mr. Roeslani also admitted that several provinces clearly require an adaptation period before they will fully be able to comply with the various provisions set out under Regulation 78/2015. Furthermore, Mr. Roeslani also sought to remind the government that it should organize and rollout a massive dissemination program across the entire country.
 
In support of Mr. Roeslani’s position, Hariyadi B. Sukamdani, the General Chair of the National Board of the Employer’s Association of Indonesia (DPN APINDO), asserted that Regulation 78/2015 offered legal certainty for businesses. Sukamdani claimed that prior to the issuance of Regulation 78/2015, there was no way for businesses to predict the amount of any minimum-wage increase for a given year. By way of example, a meeting organized by the Regional Wage Council agreed upon a certain minimum-wage increase which was ultimately recommended to a certain provincial head. However, the head of the province in question ultimately refused to take this recommendation into account when it came to determining the next UMP increase for his province. Refusals such as this, according to Mr. Sukamdani, have been one of the underline causes behind various recent mass layoffs across the country.
 
Commenting on the workers’ plan to file a lawsuit at the PTUN against the determination of the minimum wage as set out under Regulation 78/2015, Mr. Sukamdani stated that such legal actions were the fundamental right of any citizen who feels that his/her rights have been compromised as a result of government policy. Mr. Sukamdani thus warmly welcomed the KSPI’s decision to utilize this right and is even encouraging them to do so, as other options regarding this matter may lead to the rights of other parties being compromised.
 
“Filing a lawsuit with the PTUN is every citizen’s fundamental right. This is thus the correct way of dealing with this issue, as other approaches could prove detrimental to us all,” Mr. Sukamdani concluded.
 
As additional information, here is a complete and official Ministry of Employment list of the 2017 UMP which has been set for the abovementioned 34 provinces: