Worker/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:
- Provincial minimum wage (‘UMP’) is minimum wage for all regencies/municipalities in a province. UMP is set and announced by each governor every 1st of November.
- Regency/municipal minimum wage, (‘UMK’), is minimum wage for a regency/municipality. UMK are set and announced by governors no later than November 21 after UMP are set.
- Sectoral provincial minimum wage (‘UMSP’), is minimum wage for a province on a sectoral basis.
- Sectoral regency/municipal minimum wage, (‘UMSK’), is minimum wage for a regency/municipality on a sectoral basis.
Provincial minimum wages and regency/municipal minimum wages will be put into effect from the first of January in the following year. UMSP and/or UMSK shall be set by Governors based on an agreement between the organization of companies and the labor union/trade union in the relevant sector.
The setting of minimum wages is as follows:
- Employers are banned from wages lower than the already existing minimum wages.
- Minimum wages are only applicable to workers/laborers having experience of less than 1 year.
- Minimum wages shall be paid to workers/laborers every month, except where an agreement provides otherwise.
- If workers/laborers are employed under a piece-work system or day-off system for 1 month (maximum of 12 months), the average monthly wages will be equal to minimum wages paid at the relevant companies.
- When companies cover more than one sectors, minimum wages accord with UMSP or UMSK.