Indonesia to Allow Certain Companies to Adjust Working Hours, Wages

Indonesia’s Minister of Manpower on March 8, 2023, issued MOM Regulation No. 5 of 2023 regarding the Adjustment of Working Hours and Wages in Certain Export-Oriented, Labor-Intensive Companies Affected by Changes in the Global Economy (“MOM 5”).

MOM 5 was issued to help certain export-oriented, labor-intensive companies facing continuity of work and continuity of business issues as a result of weaking global demand.

The regulation allows companies that qualify to adjust their working hours and wages based on a mutual agreement with the company’s labor union. The executed mutual agreement must be registered at the local manpower office and is only valid for a maximum of 6 months.

Under MOM 5, export-oriented, labor-intensive companies that qualify to adjust their working hours and wages must:

• Have a minimum of 200 employees;
• Have labor costs make up at least 15% of production costs; and
• Be dependent on orders from the United States and Europe for production, as evidenced by purchase orders.

MOM 5 also states that to qualify, the export-oriented, labor-intensive company must be in one of the following industries:

• Textile and apparel;
• Footwear;
• Leather and leather goods;
• Furniture;
• Children's toys.

The Ministry of Manpower has emphasized that any wage adjustment under MOM 5 will not affect the basis for calculating social security contributions and benefits for employees, termination of employment, and other rights of workers.

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