Effective as of January 1, 2023, the minimum wage of employees in Indonesia will increase by a maximum of 10 percent, according to the newly issued Minister of Manpower Regulation No. 18 Year 2022, dated November 17, 2022, regarding the Setting of Minimum Wage in 2023 (“MOM No. 18”).
Minimum wage means the lowest monthly wage set by governors for workers in their respective provinces as a safety net, according to MOM No. 18. As with Government Regulation No. 36 Year 2021, dated February 2, 2021, regarding Wages (“GR No. 36”), MOM No. 18 stipulates that the minimum wage shall be set at the provincial level and the regency/city level. Both the provincial and the regency/city minimum wage is determined by the relevant governor.
The minimum wage applies to all employees who have worked at their company for less than one year. After a year, employees may choose to be paid according to the wage scale of their company.
Interestingly, MOM No. 18 does not refer to any of the articles in the current Manpower Law, as amended, or GR No. 36.
MOM No. 18 contains a number of provisions that may conflict with provisions of GR No. 36, including the following:
||GR No. 36
||MOM No. 18
|Minimum wage adjustment
||The minimum wage adjustment is set at a certain value range between the upper and lower limits of the minimum wage in the region concerned.
||The 2023 minimum wage adjustment is calculated using a formula that includes the variables of economic growth, inflation, and certain indices.
|Maximum minimum wage increase
||Cannot exceed 10%
|Announcement of provincial minimum wage
||The provincial minimum wage is determined by the governor and announced no later than November 21 of the current year.
|The provincial minimum wage for 2023 is determined and announced by the governor no later than November 28, 2022.
|Announcement of regency/city minimum wage
||Regency/city minimum wages are determined by gubernatorial decree and announced no later than November 30 of the current year.
|Regency/city minimum wages for 2023 are determined and announced by the governor no later than December 7, 2022.
Note that Indonesian legislation comes in different forms and the Indonesian hierarchy of rules is as follows:
- 1945 Constitution of the Republic of Indonesia;
- People's Consultative Council Decree;
- Law/Government Regulation in Lieu of Law;
- Government Regulation;
- Presidential Regulation;
- Provincial Regulation; and
- Regency/Municipality Regulation.
In practice, there are also presidential decrees (keputusan presiden), presidential instructions (instruksi presiden), ministerial regulations (peraturan menteri), ministerial decrees (keputusan menteri) and circulars (surat edaran), all of which are legally binding.
Although MOM No. 18 and GR No. 36 regulate the same minimum wage rule, the provisions of MOM No. 18 are different from the currently applicable Manpower Law and/or GR No. 36. It remains to be seen how this apparent conflict may play out in practice.
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