ABOUT LABOR’S WAGES UNDER MANPOWER LAW of REPUBLIC of INDONESIA

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In Indonesia, we have our labors/employee law is under Law No.13/2003 about Manpower. There are some issues in this act. This law getting “Equality before the Law” which every management company and every labors/employee has same rights and obligations. It means that between company and workers have ties legal and social touch, which must be cultivated properly. In this time we will discusses about Wages :

  1. WAGES

Regarding Article 1 Paragraph 30, wages is the right of the worker/labors that is received and expressed in the form of money as remuneration from the entrepreneur of the employer to worker/labors, whose amount is determined and paid according to a work agreement, consensus or laws and regulations, including allowances for the workers/ labors and their family for a job and or service that has been performed or will be performed.

On Article 88 paragraph 1 said that every workers/labourer has the right to earn a living that decent from the viewpoint of humanity. What is means “the right to earn living that decent from the viewpoint of humanity? On paragraph 2 in this law, its force the government to make policy for getting protection the labors/employee.  Then on paragraph 3, the wages policy that protect workers/laborers as mentioned under paragraph 2 shall include :

  1. Minimum Wages
  2. Overtime pay
  3. Paid-wages during the absence
  4. Paid – wages because of activities outside of his job that he has to carry out
  5. Wages payable because he uses his right to take a rest
  6. The form and method of payment of wages
  7. Fines and deducations from wages
  8. Other matters that can be calculated with wages
  9. Proportional wages structure and scale
  10. Wages for the payment of severance pay, and
  11. Wages for calculating income tax

However, in determining the amount of wages, employers are prohibited to payed less than the minimum wage which established by local authorities (Articles 90 Paragraph 1). If employers foretell payment of wages lower than the minimum wage, so the agreement is null and void (Artichles 91 Paragraph 2). Then, Wage components contain of basic wages and fixed allowances, so the amount of the basic wage at least 75% of the basic salary and fixed allowance, it according of Articles 94.

What is minimum wage? On Article 89 Paragraph 1as mentioned of subsection 3 of Articles 88 may consist of :

  1. Provincial or district/city-based minimum wages
  2. Provincial or district/city-based-sectoral minimum wages

Then, at same Article 89, the establishment of  minimum wages shall be directed towards meeting the need for decent living. Minimum wage shall be determined by Governors/District Head/Mayor after considering recommendation from Provincial/District/City Wages Councils (Dewan Pengupahan Provinsi/Kabupaten/Kota). Wages Councils consist of  employers, government and labor union (add the university). Because the proper fulfilment in each province is different, it is called the Provincial/District/City Minimum Wage. Minimum wage is a minimum standar which is used by employers or industry to provide wages to wokers in the business environment or work.

Upah Minimum Provinsi (UMP – Provincial/District/City Minimum Wage) is not the same of basic wages, but wages overall. So, it is true that the UMP provide by employers/companies is the total number of wages or known as take home pay. Total wages the employee may consist of component of a basic salary, fixed allowances and other (not fixed) allowances.

Wages are depends on (usually) :

  1. The cost of living minimum needs of workers and their families
  2. Laws whom binding the minimum wages
  3. Companies Capability and Productivity
  4. Position, work period, education background and competency
  5. The different types of jobs.

The policy for component of the wage/salary set by each company. So, the wages should not be lower than Provincial/District/City Minimum Wage (UMP) which set by the government.

The derivative rules regarding wages are the Circular of the Minister of Manpower (Surat Edaran Menteri Ketenagakerjaan) No. SE-07/MEN/1990 on Grouping Components Wages and Earning Non-Wages that the wage component is as follows :

  1. Basic wages; is the basic remuneration paid to employees in accordance with the level or type of work as stipulated by the agreement
  2. Fixed allowances is a regular payment ralting to work, given fixed for workers and their families and paid in the same time as the payment of basic wages, such as wife allowance, child allowance, housing allowance, death allowance, regional allowance and etc. Meal and Transport allowance may be included in the fixed allowance component of allowances are not associated with the presence, and received regulary by workers in a unit of time, daily or monthly.
  3. Non-Fixed allowances is a payment that is directly or indirectly related to the workers, which is given is not fixed to the workers and their families and paid according to the unit of time that is not equal to the time payments for basic wages, such as th Transportation allowance are based on attendance, meal allowance can be entered into allowances not remain if the benefits granted on the basic of presence (allowance can be in the form og money or dining facility)

Besides that, regarding at the same circular above, the component of  non-wages income are follows :

  1. Facilities is a pleasure in the form or real/ in kind granted by the company because of the things that are specific or to improve the welfare or workers, such as transport facilities (pick up or other workers); feeding freely; places of worship; a babysitting; cooperatives; canteen and others
  2. Bonus is not part of the wages, but workers received payments from the company’s profit or labor because workers produce results greater than normal production targets or because of an increase in productivity; the amount of the distribution of bonus is set by agreement.
  3. Holy Day (Religion) Allowance, Gratuities and other profit sharing

The company can doing  payroll deductions related to tax according Article 88 Paragraph 3 Point K. regarding Law No. 36/2008 about Income Tax, Article 4 Paragraph 1 (a) said that the object of tax is income. Its means every additional economic capabilities which is received or got by taxpayer even in or out Indonesia that can be use as consumption to increase taxpayer wealth, such as :

  1. Replacement or compensation in respect of employment or services received or acquired, including salaries, wages, allowances, fees, commission, bonus, gratuity, pension, or other forms of remuneration, unless otherwise provided in this Law.

Thus, the company is obliged to withhold income tax from gross salaries of employees. The amount  of income tax to be cut, the amount depends on :

  1. Total gross earnings of employees
  2. Marital status (single, married, number or children)
  3. An income which should not be subject to income tax
  4. The tax rate applicable

Beside the income tax, regarding Government Regulation No 8/1981 about Wages Protection said on Article 22 Paragraph 2 that wage deduction due to a payment to the state for membership due/ participants a social security fund organized and established by legislation, then the withholding law is an obligation workers. Next, regarding social security will be discussed separately.

Hereafter dismemberment wage is due to absences for no apparent reason. By the law, according Article 93 Paragraph 1 declare if workers do not work, then wages are not paid. However, cutting the wages of workers who are absent from work can not be done just like that, because is based Law of Manpower, workers protected their right to full compensation for the day or  the days he/she was absent from work, among others, in terms of worker absenteeism because of illness, maternity leave is entitled to undergo, married, marry of their children, menstruating (women), or family members (parents, in-laws, family in one house) passed way.

On certain situations, workers are absent from work must still earn wages. The condition are :

  1. Sick, workers cannot do the job
  2. Female workers who are sick on the first and second day menstrual period, so it cannot do the job
  3. Workers absent from work because of marriage, married, circumcised, baptized his son, his wife gave birth or miscarriage, husband or wife or son or daughter or parents or in-laws or a family member passed way in one house
  4. Workers cannot work because they are carrying out their duty to the country
  5. Workers cannot do his job because of his religion commanded to worship
  6. Workers willing to do the work that has been promised but employers do not hire, either because of its own mistakes and obstacles that should be avoided entrepreneurs
  7. Workers exercised the right break/ leave
  8. Workers carry out the task of unions labor  with the consent of employers
  9. Workers carry out the educational task of the company

On Article 93 Paragraph 4 Law No.13/2003, wages do not come to work because the hitch is as follows :

  1. Married workers, paid for 3 days
  2. Marry his son, paid for 2 days
  3. Circumcise his son, paid for 2 days
  4. Baptize their children, paid for 2 days
  5. The wife gave birth/miscarried, paid for 2 days
  6. Husband/ wife, parent/ in-law, son or daughter passed way, paid for 2 days
  7. Family members in the house passed way, paid for 1 day

 

(source : wrote and summary by Administration Dept cc Legal Dept – Jakarta Office cc hdian files)