New Formula for Calculating the Minimum Wage in the Labor Protection Draft Bill

Draft Bill on Labor Protection (“Labor Protection Draft Bill”) will update the formula for calculating the minimum wage. Zainul Munasichin, a member of Commission IX of the House of Representatives of the Republic of Indonesia (“DPR RI”), said that the minimum wage will be determined by taking into account economic growth, inflation, and a specific index.

“The new formula is economic growth plus inflation, then multiplied by a specific index. The value of this index is still under discussion,” he told Hukumonline.

Zainul said that during the deliberations, Commission IX proposed that the value of this specific index range from 0.5 to 1. However, this figure is still under discussion while input is being gathered from business actors. “We’ll see how the discussions progress,” he said.

Based on the draft of the Labor Protection Draft Bill received by Hukumonline, this specific index is stipulated in Article 114. In the elucidation, the specific index is defined as a variable representing the workforce’s contribution to the economic growth of a province, regency, or city, taking into account the interests of both companies and workers, as well as the principle of proportionality to ensure a decent standard of living for workers.