Last time, we recommended taking a wait-and-see approach to the minimum wage and not taking any action until an official announcement was made. Under such circumstances, the president suddenly decided that the minimum wage increase rate would be 6.5% without a formula, after the deadline for establishing a new state minimum wage had passed. It also mandated the establishment of sectoral minimum wages. The deadline for setting prefectural/city minimum wages has passed, and each region is in great turmoil. Under such circumstances, state and prefectural/city minimum wages were decided to increase by 6.5% across the board, and although there are differences in sectoral minimum wages by region, there are many regions where several minimum wages have been set, and in some cases the increase rate exceeded 10%. Under these circumstances, how should each company negotiate annual wage adjustments?

[Is this really the decision?]

Most likely, the state and province/city minimum wage will be determined by a 6.5% increase. At present, it seems unlikely that either state governors or union federations will oppose the president's decision. What worries me is the sectoral minimum wage. In the days when the minimum wage was agreed upon by a wage committee made up of three parties: workers, companies, and the government, the new minimum wage was set far in advance of January 1st, when it was applied, and it was applied retroactively to January 1st. In other words, there remains the possibility that sector-specific minimum wages will be set that will come into effect from January 1, 2025.
There is also some concern about the stance of the trade union federation, which had threatened the government with a nationwide general strike if the government did not implement the unconstitutional ruling at the end of October. The unconstitutional ruling states that states are obligated to set sectoral minimum wages, but in reality, most prefectures/cities set sectoral minimum wages. Trade union federations may try to put pressure on the government to force the establishment of sectoral minimum wages.

[Compliance with minimum wage regulations and annual wage adjustment]

The timing of annual wage adjustments should be determined in the employment regulations/labor agreement/company regulations. On the other hand, the state, prefecture, and city minimum wages that have already been announced will come into effect from January 1, 2025, so it is no longer possible to pay wages lower than the established minimum wage. First of all, it is necessary to raise the wages of employees who violate minimum wage regulations to the minimum wage amount or higher. On the other hand, annual wage adjustments, which are a part of employee welfare and also a result of personnel evaluation, need to be negotiated after carefully considering the company's situation. Just because the minimum wage increase rate is 6.5% doesn't mean all employees need a 6.5% raise. Minimum wage regulations only determine the minimum wage that a company can pay, and have nothing to do with salary increases. Of course, in order to maintain the standard of living of their employees, many companies increase the base based on factors such as the rate of inflation, but the minimum wage increase rate is not the minimum wage increase rate. So is the minimum wage increase. Some companies match the base increase to the minimum wage increase, but since raising wages to the minimum wage may cause a reversal of wages, they simply increase the base by the same amount for all employees.
In Indonesia, there is a large disparity in wages even within the same company, so if you increase wages based on a percentage, the majority of the salary increase budget will be spent on employees with higher wage levels. In order to control the soaring labor costs, why not try giving a raise in wages first?