According to Government Regulation on Wages (Peraturan Pemerintah No 78, 2015 Tentang Pengupahan), the governor of each province in Indonesia must publish the Regional Minimum Wage (UMP – Upah Minimum Propinsi) for their region by November 1st for the following year.
To do so, each governor must assess local conditions, consider inflation and economic growth. According to BPS (Badan Pusat Statistik, Indonesia’s statistics agency), inflation was 3.72 percent from September 2016 to September 2017. GDP growth was 4.99 percent.
Pak Hanif Dhakiri, the Minister of Manpower, has confirmed that the UMP will increase in 2018 by an average of 8.71 percent. The government calculates this by adding the inflation and GDP growth rates.
Minimum Wage by Province
The 2018 UMP for each of Indonesia’s 34 provinces should be as follows:
|Province||Minimum Wage (Rupiah)|
|Nusa Tenggara Barat||1,825,000||1,631,245|
|Nusa Tenggara Timur||1,793,715||1,650,000|
The UMP for Jakarta has doubled over the past five years, increasing from Rp 1.68 million in 2012 to Rp 3.35 million in 2017.
At the opposite of the spectrum, the four provinces with the lowest UMP are all in Java, where economic development is still low. Consequently, this motivates people to seek work elsewhere in the archipelago.
From 2012 to 2017, Yogyakarta has seen its UMP increasing from Rp 0.9 million to just Rp 1.33 million.
What does Minimum Wage include?
According to the law, wages include everything received in the form of money by the employee. One can deduct any monetary allowance given for transport, food, etc. from the UMP amounts listed above.
However, the basic wage (upah pokok) should not be lower than 75% of the total wage. In other words, fixed allowances should not be more than 25% of the total wage.
If the employer provides lodging or offers any equipment for personal use by the employee, this should be written in a contract. The employer may then deduct the value of these benefits from the total wages.
Note that the THR Keagamaan is NOT part of the wage. THR Keagamaan is the yearly bonus for EVERY employee (Expat and Indonesian). Employees receive this bonus at the time of their faith’s major religious celebration. Therefore THR should not be included in the wage to be paid to an employee.
To read more about THR Keagamaan, particularly for Muslim employees, you can check out our article Lebaran Bonus and Considerations for Household Staff
The same rule applies to other bonuses. Both are considered Non-Upah and should come on top of the monthly wage.
City and regency variations
You should also note that every kabupaten (regency) and kota (city) can recommend to the governor a minimum wage for their area. This can be higher than the provincial minimum wage but can’t be lower. Considering these recommendations, every governor may publish a list of UMK (Upah Minimum Kota/Kabupaten, or regency/city minimum wages). Local governments must publish this list no later than November 21st each year.
To see the possible differences between the UMK and the UMP, consider the figures below from Bali. In 2017 Bali’s provincial UMP was Rp 1,956,727.
Yet, Kabupaten Bangli UMK was Rp 1,000 higher than the UMP, in other words Rp 1,957,727. Kabupaten Badung’s UMK was set at Rp 2,299,311. This is the highest in the province and about 17% higher than the UMP.
Variations by Industrial Sector
The sector of employment may also affect the employees minimum wage. This is the UMS (Upah Minimum Sektoral, or minimum sectoral wage). Governors also make decisions concerning UMS. Companies should be aware of whether UMS applies to their sector of industry.
Here are three examples:
- For Papua Barat, the UMP for 2018 will be Rp 2,667,000. Meanwhile the UMS for the mining sector will be Rp 3,500,000.
- In Tangerang, where the main PT Multi Bintang brewery is, the alcoholic beverage industry has a UMS 15% higher than the UMP.
- In DKI Jakarta in 2017, the automotive sector had an UMS of Rp 4.1 million. Meanwhile the UMP was Rp 3.35 million.
Rules to remember
Lastly, by law the UMP only applies to workers who have worked for a company for less than a year. Salaries for workers with more than a year of service should be discussed and subject to a negotiation.
Employer guilty of disobeying the minimum wage law may face a jail term of 1 to 4 years and/or a fine of Rp 100 million to Rp 400 million.
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Government Regulation on Wages (Peraturan Pemerintah No 78, 2015 Tentang Pengupahan) (in Bahasa Indonesia) – download