Background
The provision of provincial minimum wage (“UMP”) is intended to protect the worker’s wage that meets decent livelihood for humans. Previously, UMP was referred as level 1 region minimum wage (“UMR Tk I”). Then, through Minister of Manpower Decree No. Kep-226/Men/2000 on Amendment of Article 1, Article 3, Article 4, Article 8, Article 11, Article 20 and Article 21 of Minister of Manpower Regulation No. Per-01/MEN/1999 on Minimum Wage in Article 1 point 1, UMR Tk I was changed to UMP.
The Provision of UMP
Article 1 point 2 of Minister of Manpower Regulation No. 7 of 2013 on Minimum Wage (“MR No. 7/2013“) describes that the definition of UMP wage is the lowest monthly wage which consists of basic salary including fixed allowance set by the governor as a safety net, applies to all district/city in the province.
As an illustration of UMP, it can be seen in DKI Jakarta Governor Regulation No. 176 of 2014 on Provincial Minimum Wage Year 2015. UMP of 2015 in Special Capital City Region of Jakarta (“DKI Jakarta”) is Rp 2,700,000.- (two million seven hundred thousand rupiah). Therefore, Rp 2,700,000.- includes basic salary and fixed allowance.
Basic Wage and Fixed Allowance
Article 94 of Law No. 13 year 2003 on Labor (“Labor Law 13/2003“) stipulates that the amount of the basic wage must not be less than 75% (seventy five percent) of the total amount of the basic wage and fixed allowance. Meanwhile, definition of fixed allowance is payment to worker that is made regularly and not related to the attendance or certain achievement of the worker. Therefore, elements of fixed allowance are:
- payment to the worker
- made regularly
- not related to the attendance or certain achievement of worker
Entrepreneur Obligation
Entrepreneur is prohibited to pay the wage lower than the UMP. Payment of wages under UMP can be categorized as criminal action and shall be subjected to a criminal sanction in the form of imprisonment for 1 (one) year at the minimum and 4 (four) year at the maximum and/or a fine of Rp 100,000,000.- (one hundred million Rupiah) at the minimum and Rp 400,000,000.- (four hundred million Rupiah) at the maximum.
Article 3 of Minister of Manpower Decree No. MR No. Kep-231/MEN/2003 on UMP Suspension Procedure describes that if the entrepreneur cannot afford to pay the minimum wage, he may request for UMP suspension to the Governor through the institution responsible in employment affairs no later than 10 (ten) days after the date of UMP provision entry into force. Upon this request, the provincial governor may give approval or rejection.
