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Wage Payment Procedure in Indonesia

“Manpower Law regulates the amount, form, structure, and mechanism of wage payment.”

According to Law No. 13 of 2003 on Manpower, A wage is the right of the employee that is received and expressed in the form of money as remuneration from the employer to employee, which amount is determined and paid according to a work agreement, consensus, or laws and regulations, including allowances for the employee and their family for a job and or service that has been performed or will be performed. Employer, is an individual, entrepreneur, legal entities, or other entity that employ manpower by paying them wages or other forms of remuneration. Employee is any person who works and receive wages or other forms of remuneration. These definitions have been constantly used in Manpower Law and any of its subsequent implementation regulations.

Amount, Form, Structure, and Wage Payment Mechanism

Employee has the right to receive work remuneration in the form of wage or in other forms. This means, as long as both parties agreed to it, employer could give other forms of benefits as work remuneration. According to government regulation No. 78 of 2015 on wages, this include but not limited to bonus, holiday allowance, service payment, etc.

However, for the wage itself, it must be strictly in the form of money. The component of wage itself consists of basic wage and fixed allowances, in which the ratio between the two must be at least 75% to 25%. Referring to regulation of Minister of Manpower No. 1 of 2017, the amount of wage itself is decided by the employer and the employee, but the structure of wage must put the job, position, work experience, degree and competence of the employee into consideration. This must be reviewed regularly with consideration to the employer’s capability and productivity. However, this doesn’t mean employer could set a low wage based on the employee’s consent. The minimum amount of wage must comply with the provincial/district based minimum wage or provincial/district based sectoral minimum wage. This applies to any employee, even the ones in probation period.

The employer and employee can agree on whether the wage is paid based on work period or based on work result. The payment for wage based on work period could be calculated daily, weekly, or monthly. However, the payment itself must be conducted either weekly or monthly (except if the work period is less than a week). Employer is still required to pay the wage if the employee is absent due to illness. However, it is only paid for 75% (if the employee has been in sick leave for more than 4 months), 50% (if the employee has been in sick leave for more than 8 months), or 25% (if the employee has been in sick leave for more than 12 months).

Prohibitions related to the Wage

Sometimes a company, especially ones in crypto business, offer their employees to be paid with crypto asset. Other companies also sometimes offer to pay their employees with foreign currency such as USD, especially for their foreign employees. Even if the employee agreed to it, this practice is actually prohibited by law.

Referring to Law No. 7 of 2011 on currency, money refers to Rupiah as issued by the Republic of Indonesia, both paper and coins. Referring to government regulation no 78 of 2015 on wages and Bank of Indonesia Regulation No. 17/3/PBI/2015 on Mandatory Use of Rupiah in the Republic of Indonesia, payment of wage must be conducted with Rupiah currency, but the payment could be in cash or via bank. This means, the wage payment method could be conducted in a non-cash fashion, such as via bank transfer, but it must still be in Rupiah. By this definition, payment of wage with crypto asset or other currency option other than Rupiah is prohibited. However, merely agreeing the amount of wage in other currency is still acceptable, as long as it is converted into Rupiah in the actual payment.

Author: Benedictus Giovanni

Gaffar & Co. is an Indonesian Boutique Law Firm that focused on commercial law Area includes capital market, finance and investment regulatory.

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