Towards the end of the year, the Provincial Minimum Wage was updated. Parties within the company, especially the founder and the HR Division, were once again in confusion as the Provincial Minimum Wage changes. They need to adjust the salary levels that received by employees. Then, what is the meaning of Provincial Minimum Wage? How about employee’s basic salary? Does it different or same?
According to Article 89 of Law No. 13 of 2003 concerning Manpower (Undang-Undang No. 13 Tahun 2003 tentang Ketenagakerjaan), the minimum wage is determined annually as a safety net to create a decent life for all levels of society in Indonesia with consideration from the Governor and District Heads/Mayor, along with the Provincial Wage Council. While the basic salary is, the basic consideration that paid to employees according to the level or type of work; and the amount of which is determined based on the agreement of the company and the employee itself.
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Discussing about Provincial Minimum Wage, based on the provision of Government Regulation No. 78 of 2015 on Wages (PP No. 78 tahun 2015 tentang Pengupahan), the increment of Provincial Minimum Wage are calculated based on inflation data and national economic growth. According to the Central Bureau of Statistics (Badan Pusat Statistik), last year’s inflation reached 3.72% and the average of national economic growth was at 4.99%. Thus, the Ministry of Manpower determined that the 2018 Provincial Minimum Wage increased by 8.71%.
The Minister of Manpower, Hanif Dhakiri, stated that the government has sought to take decisions that can accommodate the interests of various parties. On the other hand, the arrangement of Provincial Minimum Wage, especially in Jakarta, was still not in accordance with the demand from the workers. Nevertheless, the government considered the increase rate to be quite high and realistic, especially if seeing the current industry situation. The government was also trying to meet the expectation of employers by not raising wages too high. With a rational regional minimum wage, the government intended to encourage companies to map their financial budgets better. This, will have a positive impact on economic development and expansion of employment.
In 2018, The Special Capital Region of Jakarta’s Provincial Minimum Wage remained the highest in Indonesia. The Special Capital Region of Jakarta’s Governor, Anies Baswedan, considered the increase of Jakarta’s 2018 Provincial Minimum Wage by 9.4% was a good policy so that workers can live properly. The Special Capital Region of Jakarta’s 2017 Provincial Minimum Wage which was previously amounted to Rp3.335.000, have been increased to Rp3.648.035.
Meanwhile, the Provincial Minimum Wage of each region also referred to the policy of each regional head, considering that the Provincial Minimum Wage is the lowest limit of wage provisions in a province. Districts/cities are allowed to set larger District/City Minimum Wage. For example, Karawang’s 2017 District Minimum Wage which reached Rp3,605,272 became the highest regional minimum wage nationally.
In contrast, the Special Region of Yogyakarta became the area with the lowest 2018 Provincial Minimum Wage on the island of Java. Through the Decision of the Governor of Special Region of Yogyakarta No. 220/KEP/2017 dated 1 November 2017 on Arrangement of 2018 Provincial Minimum Wage, the minimum wage of Special Region of Yogyakarta province became Rp1,454,154, increased from 2017 Provincial Minimum Wage which was Rp1.337.645.
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With this wage increment, companies are required to adjust employee salaries by job title, job description, and so on. With technological advances, employee salary calculations can be performed online and automatically using payroll applications or HRIS. The determinants of employee wage rates such as fixed allowances and non-permanent benefits will be directly calculated in the online paycheck.
Use Gadjian HR solutions, can improve the efficiency of HR Division and company in managing HR administration. Additionally, salary payment to all employees can also be done with just one click through Mandiri Cash Management (MCM)-Gadjian.
