Minister Of Manpower Ida Fauziyah: Entrepreneurs Who Do Not Raise The 2022 Provincial Minimum Wage Will Be Subject To Criminal Sanctions

Indonesian Minister of Manpower, Ida Fauziyah. (Photo: Doc. Ministry of Manpower)

JAKARTA - The Minister of Manpower Ida Fauziyah ensured that entrepreneurs who do not raise the 2022 Provincial Minimum Wage (UMP) will be subject to criminal sanctions. This means that entrepreneurs are not allowed to pay the UMP below the UMP set by the regional head.

Ida also said that based on the Job Creation Law, there is no longer any suspension of the minimum wage, so all companies are required to pay wages of at least the 2022 minimum wage.

"For companies that pay wages below the minimum wage are subject to criminal sanctions," she said in a virtual press conference, quoted Wednesday, November 17.

Furthermore, Ida said that this minimum wage is a national strategic project. Therefore, there are sanctions for local governments if they do not set the 2022 UMP.

"There are sanctions given to regional heads who do not fulfill their obligations, will receive administrative sanctions, and in the circular (SE) the written warning sanctions are explained, then until the heaviest is temporary and permanent dismissal. This refers to the provisions of Law Number 23 of 2014," she said.

Determined and announced no later than next week

Ida said that the government gave the Governor time to determine and announce the money no later than November 21, 2021. However, because November 21 is a national holiday, the determination must be made no later than one day, previously on November 20, 2021.

"District/city minimum wage (UMK) is no later than November 30, 2021, and is carried out after of course after the determination of the provincial minimum wage," she said.

Therefore, Ida explained that the determination of the UMP for each province still needed to wait for the results of the determination from the governor.

This provision is in accordance with law number 11 of 2020 concerning job creation. In addition, the government through the Minister of Home Affairs Tito Karnavian has also reminded the Governor regarding this obligation through a circular letter from the Minister of Home Affairs Number 561/6393/SC regarding the determination of the 2022 annual minimum wage.

Furthermore, Ida said that various data for the calculation of the minimum wage formula have also been given by the center to the regions where the data is sourced from the Central Statistics Agency or BPS.

"The spirit of the Minimum Wage formula based on Government Regulation (PP) Number 36 of 2021 is to reduce the drinking wage gap, so that justice can be realized between regions. Justice between regions is achieved through an average household consumption approach in each region," she said.

Indonesia's minimum wage is too high

Ida said that the calculation of the minimum wage next year is deliberately adjusting the new rules. One of them is by referring to the median wage because this is an internationally accepted standard. According to Ida, ideally, the median wage index should be in the range of 0.4 to 0.6 percent. However, Indonesia is already more than 1, so there needs to be an adjustment to the formula for calculating the minimum wage.

"This condition of the minimum wage which is too high causes most of our employers to be unable to reach it and will have a negative impact on implementation in the field," she explained.

Ida said the negative impact in question, namely the increase in the minimum wage was not based on an increase in the performance of workers or laborers. Meanwhile, labor unions are more likely to demand wage increases than to talk about performance-based or productivity-based wages.

Not only that, said Ida, another impact of an increase in the minimum wage that is not in accordance with the rules is that it can reduce Indonesia's competitiveness index, especially in the aspect of legal certainty. According to Ida, this will also reduce investor confidence and narrow the space for dialogue on wage agreements and the determination of the structure and scale of wages.

In fact, Ida admits that she is worried that there will be side effects such as delays in the expansion of new job opportunities, substitution of labor to machines, triggering layoffs or layoffs, encouraging relocation from locations with high minimum wage values to lower ones. Including pushing the closure of the company.