Indonesia: Company Regulation - RHT Academy · - In 2016, President Joko Widodo issued Presidential...

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Indonesia: Company Regulation

Rusmaini Lenggogeni

Syahdan Z. Aziz

September 18 , 2018

2 SSEK LEGAL CONSULTANTS

Transforming the Company Regulation

I. Legislation

II. Company Regulation

III. Collective Labor Agreement

IV. Leave System under Indonesian Law

V. Religious Holiday Allowance in Indonesia

VI. Wages in Indonesia


LegislationI

The main sources and government agency governing

Company Regulation and the Collective Labor

Agreement:

▪ Law No. 13 of 2003 (March 25, 2003) on Manpower, as

adjusted by Constitutional Court decisions

▪ Law No. 2 of 2004 (January 14, 2004) on Industrial

Relations Dispute Settlement

▪ Law No. 21 of 2009 (August 4, 2000) on Labor Unions

▪ Ministry of Manpower (“MOM”) Regulations


Company Regulation II

Company Regulation is a regulation made in writing by a

company/employer that stipulates work conditions, company

procedures and the rights and obligation of the employer and

employees.



- Company Regulation is required for any company with 10

or more employees.

- Company Regulation must at a minimum cover the

following:

• Rights and obligations of the employer;

• Rights and obligations of employees;

• Terms of employment;

• Company’s code of conduct;

• Validity period of the Company Regulation; and

• Implementing provisions for employment laws and

regulations.



- It is common for a company regulation to cover the

following provisions:

• Probation period

• Working days and period

• Overtime payment

• Special leaves

• Wages administration

• Benefits and privileges


Collective Labor AgreementIII

Collective Labor Agreement (“CLA”) is an agreement

representing the result of negotiations between

workers/labor unions registered at the competent authority

and an entrepreneur, several entrepreneurs or an

entrepreneur organization containing work conditions and

the rights and obligations of both parties.


Collective Labor AgreementIII

- A CLA must at the minimum include:

• Name and address of the labor union and the employer;

• Registration number of the labor union issued by the

government;

• Rights and obligations of the labor union and the

employer;

• Validity period of the agreement (maximum of two years);

and

• Signatures of the representatives of the labor union and

the employer.


IV Leave System under Indonesian Law

Annual Leave and Public Holidays

- An employee is entitled to at least 12 working days of

annual leave after having worked at the company for 12

months continuously.

- In 2016, President Joko Widodo issued Presidential Decree

No. 24 of 2016 to create a new national holiday, Pancasila

Day, which is marked on June 1 beginning in 2017.

- In 2018, there are in total 17 public holidays and 7 joint

leave days.


Maternity Leave

- Entitled to one-and-a-half months of maternity leave before

giving birth and an additional one-and-a-half months after

giving birth. Therefore, in total, the worker is entitled to three

months of maternity leave.

- During maternity leave, the worker is entitled to full salary

and medical reimbursements.

- Preserving the worker’s job position during maternity leave.

Leave System under Indonesian LawIV


Paternity Leave

- Entitled to two days of paternity leave to accompany his wife

during labor.

- During paternity leave, the worker is entitled to full salary.

Leave System under Indonesian LawIV


Religious Holiday Allowance (Tunjangan Hari Raya or

THR)

MOM Regulation No. 6 of 2016 regarding THR for Employees,

requires all employers to provide THR to employees with at

least one month of service, regardless of whether the worker

is employed on a permanent or temporary basis. Previously,

the obligation to provide THR only applied to workers with

more than three months of service.

V Religious Holiday Allowance in Indonesia


THR must be paid once a year, within a maximum of seven

days of a given religious holiday, as follows:

• Idul Fitri for Muslim employees

• Christmas Day for Christian employees

• Hindu Day of Silence for Hindu employees

• Buddhist Waisak Day for Buddhist employees

• Chinese New Year for Confucian employees

V Religious Holiday Allowance in Indonesia


THR:

- Equal to a minimum of one month’s salary (basic salary plus

any fixed cash monthly allowances) for workers with a

minimum 12 months of service.

- Employees with more than one month but less than 12

months of service will receive THR on a pro-rata basis.

Religious Holiday Allowance in IndonesiaV


THR:

- Employers who do not meet their THR payment obligations

in due time are subject to a fine amounting to 5% of the total

THR amount payable, as well as administrative sanctions in

accordance with the applicable employment laws and

regulations.

Religious Holiday Allowance in IndonesiaV


VI Wages under Indonesian Law

What is “Minimum Wage”?

Lowest allowed monthly wage, consisting of basic salary

including fixed allowance, set by governors based on cost of

living.

What is “Basic Salary”?

Basic remuneration paid to employees in accordance with the

level or type of work which amount is determined by agreement.

What is “Fixed Allowance”?

A fixed (cash) allowance is a fixed amount regularly paid to an

employee and his/her family at the same time as payment of

basic salary.


Wages under Indonesian Law

Example of Fixed Cash Allowances:

Spousal/child support allowance, housing allowance,

transport allowance, etc.

Key: It is a Fixed Cash Allowance if not linked to the

employee’s presence at work, and it is paid regularly

and paid together with the basic salary.

VI



- Application of Minimum Wage rules starts January 1 of each

year.

- Applies to all employees located in the respective jurisdiction

(province or regency/city).

- Sanctions / Fine of non-compliance: Imprisonment of a

minimum of 1 year/maximum 4 years and/or a fine of at least

IDR 100 million/maximum IDR 400 million (i.e. except if

companies that obtain an exemption)

- Minimum Wage rule only applies to employees having a

service period of less than one year; it is expected that the

salaries of employees having >1 year of service already

exceed the Minimum Wage.

VI



A. Provincial Minimum Wage or Upah Minimum Propinsi

(“UMP”): Minimum Wage applicable for all regencies/cities

in a province.

B. Provincial Sectoral Minimum Wage or Upah Minimum

Sektoral Propinsi (“UMSP”): Minimum Wage applicable

to business sectors (i.e., field of business) in a province.

C. Regency/City Minimum Wage or Upah Minimum

Kabupaten/Kota (“UMK”): Minimum Wage applicable to

all areas of a regency/city.

D. Regency/City Sectoral Minimum Wage or Upah

Minimum Sektoral Propinsi (“UMSK”): Minimum Wage

applicable to business sectors (i.e., field of business) in a

regency/city.

VI

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Email [email protected]

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