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2024 Indonesia Provincial Minimum Wages: Penalties Await Non-Compliant Companies

Indonesia's latest provincial minimum wage, the 2024 UMP (upah minimum provinsi), has been issued for all provinces in the country. The standard is set out in a directive from the Minister of Manpower, requiring every regional leader to set their respective regional minimum wage in line with the 2024 UMP before November 30, 2023.


The directive itself is based on Government Regulation Number 51 of 2023 on the Amendment to Government Regulation Number 36 of 2021 on Wages. The minimum wage increase is intended to provide higher remuneration for workers and labor alike for their contributions to the national economic growth so far.


The regulation sets the bar for payments businesses make to their workers as arranged in contracts. Any remuneration agreed upon by businesses and workers or their labor unions should not be lower than the standard set by the provisions.


See also: Wage Increase for 2024 Is Here: Which Province Has the Highest?


Businesses Must Pay According to the Rules

Clause 2 of Article 23 of the Government Regulation mandates that businesses must not pay their workers lower than the applicable minimum wage. That’s why a wage paid by a company should follow the UMP or municipal minimum wage (UMK or upah minimum kabupaten/kota) applicable in its region.


The Minister of Manpower raises three points for consideration in implementing UMP, as stipulated by Government Regulation Number 51 of 2023. 


First, the minimum wage provisions, both UMP and UMK, apply to workers with less than one year of employment. 


Second, the adjustment or increase of a minimum wage is informed by three main variables: inflation, economic growth, and a special index denoted by the symbol alpha.


Third, for workers with employment of one year or above, productivity- or performance-based wage provisions should be made using a wage structure and a wage scale (referred to as SUSU).


See also: Get Ready: Here Are the Most In-Demand Jobs of 2024


"The minimum wage increase for 2024 aims to protect first-time workers from the low-wage trap. It also aims to prime the pump of national economic growth, given that the increased pay is likely to maintain workers' purchasing power, who will in turn inject more fuel into the economic engine," explained the minister in an official statement made recently.


Penalties for Businesses Paying Under the UMP

The existing provisions have also laid out penalties for businesses breaking the law, as defined in Article 81 Point 63 of Indonesia's Omnibus Law Number 11 of 2020 on Job Creation.


For business owners compensating their workers lower than the applicable minimum wage, the provision specifies a minimum prison sentence of one year to a maximum of four years and/or a minimum fine of one hundred million rupiahs to a maximum of four hundred million rupiahs.


The offense outlined in Clause (1) of the provision is a criminal offense, meaning that non-observance of the applicable UMP is essentially a severe offense.


In addition, an exemption exists for micro- and small-sized businesses, which may arrange special agreements with their employees regarding the pay. However, the wage they receive should at least cover 50 percent of the provincial average spending.


Further, it should be at the minimum 25 percent higher than the provincial poverty threshold. In determining an acceptable wage, both figures should be sourced from an authority in statistics, which in this case is Statistics Indonesia (BPS).


See also: Benefits to Expect When Negotiating Salary


However, while the government does not officially set a worker's maximum pay, quite a few companies have been giving higher than the UMP.


What's more is that in addition to salaries, these companies even reward their employees with allowances tied specifically to their positions and functions in the company and even annual bonuses based on how they perform in a year. One of those companies is PT Serasi Autoraya (SERA).


Founded on March 22, 1990, the company has ever since become the largest in Indonesia’s transportation and logistics industry. This Astra Group’s company constantly seeks new talent to join the team in various positions.


SERA continues to provide opportunities for individuals qualified for positions at the company and its subsidiaries.


For more details about employment opportunities at the company, visit its official website at www.sera.astra.co.id or click https://career.sera.astra.co.id/ to go directly to the career page.


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