Background

Government issued new regulations, namely Government Regulation No. 78 Year 2015 on Remuneration (“Regulation on Remuneration”), which came into force since 23 October  2015. Regulation on Remuneration is as an implementing regulation specifically on remuneration.

Wage and Non-wage Income

A remuneration policy is aimed at achieving income both in the form of wage and non-wage income that preserve a decent living for worker/labourer. Wage means revenue that is received in the form of money as a compensation given by employers to the employees, as stipulated on an employment agreement, company regulation or collective labour agreement in accordance with the prevailing law and regulation, including allowances to the employees or its family. Such compensation consists of several components which are; (i) wages without allowance; (ii) basic wages and fixed allowances; or (iii) basic wages fixed allowances, and non-fixed allowances.

Non-wage income may be a religious holiday allowance, bonus, compensation working facilities, and/or money for services on certain business.

Wage is stipulated based on a daily, weekly, or monthly basis, or result in accordance with the agreed work.

Employer shall pay wages timely by providing proof of payment of wage in Rupiah which contains the details of the wage received by worker/labourer.

For the day or the date on a holiday, the weekly rest day, the wages payment is regulated in the employment agreement, company regulation, or collective labour agreement.

The review of wage is made by the employer on a regular basis for price adjustments of life necessities and/or the increasing of working productivity by considering the ability of a company that is regulated in the employment agreement, company regulation or collective labour agreement.

Type of Wage

Worker/labourer who are absent from work or unable to do the work because of doing other activities are remains to be paid as stipulated in employment agreement, company regulations or collective labour agreement.

Employer who employs worker/labourer to work overtime, work on weekly rest day or on a public holiday, shall pay overtime wages as a compensation for the worker/labourer.

Employer who wants to provide severance to worker/labourer, shall fulfill the basic components of the calculation of severance as follows;

basic wages;

fixed allowance that is granted to worker/labourer and their families, including the purchase price of the free of charge supply, that if supply has to be paid by worker/labourer with subsidies, then the wages is considered as deviation between the purchase price and the price that has to be paid by the worker/labourer.

If the employers provide wage without allowance, the basis for calculating severance pay is calculated from the amount of wages received by worker/labourer. Wages severance payment is given under the provisions as follows;

in terms of the income of worker/labourer are paid on the basis of a daily calculation, then monthly income is equal to 30 times of daily income;

in terms of the wages of worker/labourer are paid on the basis of the calculation unit of results, pieces/wholesale or commission, the daily income is equal to the average revenue per day during the past 12 months, provided that it should not be less than the minimum wage provincial or district/city; or

in terms of jobs that depend on weather conditions and the wages based on piece rate, the calculation of the wages monthly is calculated on the average wage of the last 12 months.

Wage for the calculation of income tax may be imposed on employer or worker/labourer that are regulated under labour agreement, company regulation or collective labour agreement, and conducted in accordance with the prevailing law and regulation.

Payment of Wage in Case of Bankruptcy

Employer that are declared bankrupt by the court, then wage and other rights of worker/labourer are prioritized to be paid after payment of the creditors of rights holders of collateral material. If the worker/labourer are declared bankrupt, wages and all payments arising from the employment relationship are not included in the bankruptcy unless it is stipulated otherwise by the judge, provided that it does not exceed 25% of the wages and all the incurred payments that shall be paid.

If the money provided by employer to pay the wage is confiscated by a bailiff upon a court order, the confiscation should not exceed 20% of the amount of wage that has to be paid.

Minimum Wages

The local government, in this case is the Governor, shall set the minimum wages as a safety net for the lowest monthly wage of worker/labourer, which are comprised of wage without allowance or the basic wages including fixed allowances. The determination is made annually based on the needs of decent living and productivity and economic growth. Governor establishes provincial sectoral minimum wages and/or district/municipal based on agreement between employers association and the worker/labourer union in the related sector.

The Imposition of Fines and Withholding of Wages

Employer or worker/labourer who violates the provisions of the employment agreement, company regulation or collective labour agreement due to deliberate action or negligence are fined, if it is expressly stipulated in the employment agreement, company regulation or collective labour agreement.

Employers who are late and/or do not pay wage in accordance with the agreement are imposed a fine on the following conditions, without eliminating the employer’s obligation to continue the pay wages to worker/labourer;

starting from the fourth day until the eighth day from date of wages should be paid, there is a late charge of 5% each day;

after the eighth day, if the wages are still not paid, late charge 1% for each day of delay, provided that 1 month should not exceed 50% of the wages to be paid.

Withholding of wages by employer is to; (i) fine; (ii) damages; and/or (iii) an advance of wages carried out in accordance with employment agreement, company regulation, or collective labour agreement. The maximum for wages withholding is 50% of each payment of wages received by worker/labourer.

Erinda Resti Goesyen