Draft Bill on Employment Protection Revises the Mechanism for Determining Regional Sectoral Minimum Wages

Obon Tabroni, a member of Commission IX of Indonesia’s House of Representatives (“DPR RI”), stated that the Draft Bill on Employment Protection (“Draft Bill on Employment Protection”) would improve the mechanism for determining sectoral minimum wages so that it could be implemented more effectively at the regional level. According to him, this step is important because the previous mechanism for determining sectoral minimum wages often reached an impasse.

Obon explained that, to date, the determination of sectoral minimum wages at the regional level has often been constrained because the deliberation process must be conducted with associations at the national level. In practice, however, such associations often do not have representatives or organizational structures at the regional level.

“In the past, determining sectoral wages required discussions with the relevant associations. It was almost certain that no agreement would be reached because the associations only existed at the national level, while there were none at the regional level. That is the mechanism we are trying to improve,” said Obon.

Based on the Draft Bill on Employment Protectionreceived by Hukumonline, provisions on sectoral minimum wages are set out in Article 117. The draft provides that governors must determine provincial sectoral minimum wages and may also determine sectoral minimum wages at the regency/city level. Sectoral minimum wages shall be determined based on recommendations from the Wage Council and apply to specific sectors that meet the prescribed criteria.

Furthermore, the article provides that the determination of sectoral minimum wages must meet the requirement of being at least five percent higher than the provincial minimum wage or regency/city minimum wage. Sectoral minimum wages are also to be reviewed annually. The Draft Bill further mandates that the technical provisions governing the implementation of sectoral minimum wages will be regulated in a regulation of the government.