Implementation of Provincial Minimum Wage


The provision of provincial minimum wage (“UMP”) is intended to protect the worker’s wage that meets decent livelihood for humans. Previously, UMP was referred as level 1 region minimum wage (“UMR Tk I”). Then, through Minister of Manpower Decree No. Kep-226/Men/2000 on Amendment of Article 1, Article 3, Article 4, Article 8, Article 11, Article 20 and Article 21 of Minister of Manpower Regulation No. Per-01/MEN/1999 on Minimum Wage in Article 1 point 1, UMR Tk I was changed to UMP.


The Provision of UMP

Article 1 point 2 of Minister of Manpower Regulation No. 7 of 2013 on Minimum Wage (“MR No. 7/2013“) describes that the definition of UMP wage is the lowest monthly wage which consists of basic salary including fixed allowance set by the governor as a safety net, applies to all district/city in the province.

As an illustration of UMP, it can be seen in DKI Jakarta Governor Regulation No. 176 of 2014 on Provincial Minimum Wage Year 2015. UMP of 2015 in Special Capital City Region of Jakarta (“DKI Jakarta”) is Rp 2,700,000.- (two million seven hundred thousand rupiah). Therefore, Rp 2,700,000.- includes basic salary and fixed allowance. Read the rest of this entry »

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Minimum Wages

operator stress at the computer officeWorker/labor wages might fall to the lowest level as a result of labor market imbalance. Therefore, it is necessary to harmonize the minimum wage policy to ensure the continuity of businesses and improve the living standard of workers/laborers. Minimum wage means the lowest monthly wage that employers may legally pay to workers including principal wage and regular allowances. Minimum wages are set based on the basic cost of living (‘KHL’).

Regulation of the Manpower and Transmigration Minister No PER-01/MEN/1999, as already amended by Decree of the Manpower and Transmigration Minister No.KEP.226/MEN/2000, shall be recalled and declared null and void. Regulation of the Manpower and Transmigration Minister No. 7/2013 ( ‘Regulation No. 7/2013’) shall take effect as from the date of promulgation, which is 18 October 2013.

Under Regulation No. 7/2013 a distinction is made between several types of minimum wages: Read the rest of this entry »

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Provisions on Mandatory Report on Employment

Business People in BoardroomLaw Number 7 of 1989 on Mandatory Report on Employment in the Company (“Law No.7/1981”) requires any entrepreneur or management to report in writing any establishment, discontinuance, recommencement, assignment or dissolution of the company to the minister or the competent authority.

Under Article 1 letter (b) of Law No.7/1981 entrepreneur means:

  1. an individual, a partnership or a legal body that runs a self-owned business;
  2. an individual, a partnership or a legal body that independently runs a business is not owned by them;
  3. an individual, a partnership or a legal body that is domiciled in Indonesia but represents a business as set out in number 1 and number 2 above.

The management is defined as the person who is appointed to lead a company.

Article 6 of Law No.7/1981 stipulates that entrepreneur or the management shall report in writing to the appointed minister or competent authority at the latest 30 (thirty) days after establishment, recommencement or transfer of the company. Under Article 2 of Ministry of Employment and Transmigration Regulation Number PER.14/MEN/IV/2006 on the Mechanism of Employment Report in the Company (“MOMT No.14/2006”), entrepreneur is required to prepare an employment report in accordance with the actual condition whether it is in the head office, branch office or the independent part of the company. Read the rest of this entry »

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Indefinite Term Employment Agreement

Jakarta Lawyer - LekslawyerUnder Article 56 of Law Number 13 of 2003 on Employment (“Law No.13/2003”), there are two types of employment agreements, namely the employment agreement for definite term employment agreement and indefinite term employment agreement (“PKWTT”).

Employment Relation

Article 51 of Law No.13/2003 regulates that employment agreement can be made orally or in writing. If it is made orally, the employer is obliged to issue a letter of appointment for the worker. The mentioned letter of appointment letter shall at least contain information on (i) the name and address of the worker, (ii) the date the worker starts to work, (iii) the type of job that the worker is supposed to do and (iv) the amount of wages that the worker is entitled to.

Under Article 54 paragraph (1) of Law No.13/2003, a written employment agreement shall at least contain: Read the rest of this entry »

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Definite Term Employment Agreement

Employee Agreement - Lawyer Jakarta - LekslawyerUnder Article 59 Law Number 13 of 2003 on Employment (“Employment Law”), fixed-term employment contract is an employment agreement for definite period of time, or the completion of work is for certain period (“PKWT”). PKWT is for a temporary job, seasonal job and work related to new activities at the probation stage.

PKWT may be undertaken for a period of maximum 2 (two) years and may only be extended once for 1 (one) year. PKWT may also be renewed for a period of no longer than 2 (two) years. In that case, the renewal of PKWT can only be made after the lapse of 30 (thirty) days grace period.

Under Article 62 of Employment Law, if (a) either party in PKWT terminates the employment relation before PKWT’s expiry date, or (b) if the PKWT ends for reasons other than (i) decease of worker, (ii) PKWT’s expiry, (iii) a court decision or resolution or order of the industrial relation dispute settlement institution which has permanent legal force, such as natural disaster, riot and disturbance to the security, and/or (iv) certain situation prescribed in the PKWT or the company regulation, the terminating party is obligated to give compensation for the remaining contract’s amount to the other party.

Minister of Manpower and Transmigration Decree No. Kep100/Men/VI/2004 on the Implementation of Employment Agreement For Definite Period (“MOMTD No.100/2004”), the PKWT can only be used for the definite term work as follows: Read the rest of this entry »

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Collective Labor Agreement

Labor Agreement Collective labor agreement (“CLA”) is stipulated in Law Number 13 of 2003 on Employment (“Law No.13/2003”) and Minister of Manpower and Transmigration Regulation No.PER.16/MEN/XI/2011 on Procedures for the Making and Legalization of Company Regulations and Procedures for the Making and Registration of Collective Labor Agreements (“MOMTR 16/2011”).

Under Article 1 number 2 of MOMTR 16/2011, CLA is an agreement, as a result of discussion between worker union/labor union or some worker unions/labor unions recorded on the competent authority of manpower and entrepreneur, or some entrepreneur or enterpreneur organization which contains the requirements of work, rights or obligations of both parties.

Article 22 of MOMTR 16/2011 regulates that CLA at least contains:

  1. name, domicile and address of worker union/labor union;
  2. name, domicile and address of company;
  3. number and recordation date of worker union/labor union at the competent authority of manpower in districts/cities;
  4. the rights and obligations of entrepreneur;
  5. the rights and obligations of worker union/labor union and worker/labor;
  6. the term and the date of entry into force of the CLA; and
  7. the signature of both parties who make CLA.

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Procedures for Imposing Fines and Wage Deduction by Employer

Businessman counting eurosBackground

The procedures for imposing fines and wages deduction by the employer are regulated under Government Regulation No. 8 of 1981 on Wage Protection (“GR No. 8/1981”). Wage means a revenue as compensation given by the employer to the employee for a work or service performed by the employee, that is stated or assessed in the form of money as stipulated based on an agreement or prevailing laws and regulations, and paid under an agreement between the employer and employee, including allowances to the employee or its family.

Under Article 12 GR No. 8/1981, in principle, the wage should be given in the form of money. However, part of the wage can be given in another form, provided that the value of the other form cannot be more than 25% (twenty five percent) from the value of wage that should be received by the employee. The other form of wage shall not be made in the form of alcohol, drugs or ingredients of drugs.

Imposition of Fines

The imposition of fines towards violations can only be made if it is strictly regulated in a written agreement or company regulation. The amount of fines for every violation shall be made and stated in Rupiah. Elucidation of Article 21 paragraph (1) GR No. 8/1981 states that the amount of fines that is imposed by the employer cannot be used for the employer’s interest, or employer’s operational cost. If the employer has imposed a fine to an employee, then the employer cannot file a claim for damages or losses to the employee.

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The Placement and Protection of Indonesian Overseas Workers


The definition of a worker is regulated under Article 1 paragraph(2) of Law Number 13 Year 2003 on Employment (“Employment Law”):

Worker is any person who is able to do the job in order to produce goods and/or provide services to meet their own needs or those of the community”.

Based on the definition above, several elements are known, namely :

  1. A worker is any person able to do the job.
  2. A worker is any person able to produce goods and/or provide services.
  3. A worker produces goods and/or services to meet their own needs or those of the community.

If those three elements are met, a person is defined as a worker. Under Article 5 of Employment Law, every worker is entitled to have equal opportunities in employment.

Indonesian Worker

In article 1 paragraph(1) of Law Number 39 Year 2004 on Placement and Protection of Indonesian Workers Abroad (“Law No.39/2004”): Read the rest of this entry »

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The Bipartite Negotiation Between The Enterpreneur and The Worker

664-01926301The definition of bipartite negotiation in Article 1 number 10 of the Law Number 2 of 2004 on the Resolution of Industrial Relationship
(“UU PHI”) is a negotiation between the workers/labours or worker unions/labour unions and the enterpreneur to resolve industrial relations dispute.

The dispute of industrial relationship must be settled first through bipartite negotiation by deliberation to meet the settlement, and the deadline for the settlement by bipartite negotiation is no longer than 30 (thirty) working days since the first day of negotiation. If within 30 (thirty) working days, one of the parties refuses to negotiate or the negotiation has been conducted but does not reach settlement, then the bipartite negotiation is considered as fail.


In every bipartite negotiation that is held by the entrepreneur and workers, minutes of meeting has to be made and signed by the parties. The minutes at least contains: Read the rest of this entry »

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The Company’s Closure (Lock Out) As One Of the Employer’s Rights

700-01878934Employment relationship between employer and employee is based on an employment agreement. Employment agreement is an agreement between employee and employer which specifies the work requirements, rights, and obligations of both parties. If viewed from the side of employers, the company’s closure (lock-out) is the basic right of employers to refuse part of or all of the employees to perform their works as a result of the failure of negotiations. However, employer is not justified to perform the company’s closure (lock-out) as a countermeasure because of the normative demands of the employee and / or employee unions. Under Article 1 number 24 of Law Number 13 of 2003 on Labor (“Labor Law”) company’s closure (lock-out) means an act of employers to refuse all of the or part of the employee to perform their works.

Company’s closure (lock-out) is prohibited to be performed by the companies who serve the public interest and / or the type of activities which endanger the safety of human life, including hospitals, clean water network services, control center of telecommunications, power providers, oil and gas processing and also train transportation.

Company’s closure (lock-out) has to be performed in accordance with the law. Employers who are going to perform the company’s closure (lock-out) are obliged to notify in writing to the employee and / or employee unions, and the government institution responsible in the field of employment, at least 7 (seven) days prior to the implementation of the company’s closure (lock out). Such notification shall at least contain: Read the rest of this entry »

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