Introduction of New Minimum Wage Formulation Through the Minister of Manpower Regulation No. 18 of 2022 concerning The Minimum Wage Enforcement for 2023
Overview
On 16 November 2022, the Government of Indonesia has issued the Minister of Manpower Regulation No. 18 of 2022 concerning The Minimum Wage Determination for 2023 (“MoM 18/2022”), which intends to ensure labourer’s rights as well as maintaining the public purchasing power for 2023.
This ARMA update will discuss the new additions of the MoM 18/2022 in relation to the previous Government Regulation No. 36 of 2021 concerning Wages (“GR 36/2021”).
General Provisions
As previously mentioned in GR 36/2021, MoM 18/2022 divides minimum wages in two types which are (i) wages without benefits and (ii) basic wages and fixed allowances.
Based on Article 4 of MoM 18/2022, minimum wages apply to workers/employees with a working period of less than 1 (one) year in a company. In addition, it is also possible workers/employees with certain qualifications to earn wages above the determined minimum wage. Such qualifications are determined by the following:
- Education:
- Competence; and
- Work experience required to carry out a certain job/position.
Further, Article 5 of MoM 18/2022 states that the determination of minimum wages are determined based on economical and manpower conditions, in which is applied to 3 types which are:
- Provinces which already possess a minimum wage;
- Regency/cities which do not previously possess a minimum wage; and
- Expansion areas (daerah hasil pemekaran).
Provisional Minimum Wage (“UMP”)
Article 6 of MoM 18/2022 regulates that the minimum wage for regions which already possess a minimum wage (UMP) are obliged to be adjusted to the following formula:
Note:
- UM(t+1) : Determined minimum wage / upah minimum yang akan ditetapkan.
- UM(t) : Minimum wage for the current year / upah minimum tahun berjalan.
- Adjustment of UM : The adjustment of the value of the minimum wage which is calculated through the sum of inflation multiplied by economic growth.
Furthermore, the adjustment of the minimum wage can be calculated as follows:
Note:
- Inflation : Provincial inflation calculated from the month of September of the previous year to September of the current year (percentage);
- PE : Economic growth calculated through changes in economic growth in the I, II, III and IV quarters of the current year to economic growth in the I, II, third III of the previous year and quarter IV of the previous two years.
- A : The form of a certain index that describes the contribution of labor to economic growth, which is calculated with a value between 0.10 and 0.30.
Different from the GR 36/2021, The MoM 18/2022 states that the determination of the minimum wage adjustment should not exceed the maximum of 10% (ten percent).
Current 2023 UMP
In connection with the issuance of the MoM 18/2022, below are some details concerning the new 2023 UMP for some major areas in Indonesia:
| No. | Province | UMP |
|---|---|---|
| 1. | DKI Jakarta | Rp 4,901,798 |
| 2. | Papua | Rp 3,864,696 |
| 3. | Bangka Belitung | Rp 3,498,479 |
| 4. | Sulawesi Utara | Rp 3,485,000 |
| 5. | Aceh | Rp 3,413,666 |
| 6. | Sumatra Selatan | Rp 3,404,177 |
| 7. | Sulawesi Selatan | Rp 3,385,145 |
| 8. | Papua Barat | Rp 3,282,000 |
| 9. | Kepulauan Riau | Rp 3,279,194 |
| 10. | Kalimantan Utara | Rp 3,251,702 |
| 11. | Kalimantan Timur | Rp 3,201,396 |
| 12. | Riau | Rp 3,191,662 |
| 13. | Kalimantan Tengah | Rp 3,181,013 |
| 14. | Kalimantan Selatan | Rp 3,149,977 |
| 15. | Gorontalo | Rp 2,989,350 |
| 16. | Bali | Rp 2,713,672 |
| 17. | Banten | Rp 2,661,280 |
| 18. | Jawa Timur | Rp 2,040,244 |
| 19. | Jawa Barat | Rp 1,986,670 |
| 20. | DI Yogyakarta | Rp 1,981,782 |
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
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