Minimum wage regulations have been in great confusion since last year, but Ministerial Decree No. 18 of 2022 was issued just before the November 20 deadline (November 16) for determining the state minimum wage. The content is different from Cabinet Order No. 36 of 2021, and although the provision is limited to the 2023 minimum wage, it seems to be a clear violation of the law. On the other hand, the 2022 Jakarta Special Region Minimum Wage Act was ruled in violation in November 2022, so even if you think that this is legally incorrect, it will take a considerable amount of time for the provision to be invalidated. However, companies are required to pay the new minimum wage from January 1, 2023, and are required by labor unions to negotiate annual wage adjustments, so they cannot wait for an official ruling on legal violations. What should companies consider when adjusting their practices?

[Company capabilities and market trends]

Before the Omnibus Law, which established minimum wages by sector, many companies felt that the minimum wage set by the government was quite strict in terms of their ability, so they were inevitably dragged down by minimum wage decisions. On the other hand, due to the abolition of the sectoral minimum wage under the Omnibus Law, and the Bureau of Statistics data and calculation formula used to determine the minimum wage, an unusual situation has occurred in which the 2022 minimum wage is lower than the minimum wage amount applied by each company. Since salary reductions based on the new minimum wage were prohibited, each company had to make annual wage adjustments at its own discretion. However, the original minimum wage is a safety net, so it can be said that we have overcome the era of being at the mercy of the minimum wage. Each company should set its own wage amount based on its ability, performance, and market trends.

[Current situation where we cannot wait for the judgment of violation of law]

On the other hand, the state minimum wage, whose setting deadline was extended to November 28th, will be subject to the Minister of Labor Ordinance No. 18 of 2022, which exceeds the calculation formula of the omnibus law. Looking at this trend, it seems likely that the prefectural/city minimum wage will follow the same trend. The Indonesian Management Association (APINDO), which has been vocal about the legal violations, has not responded to the minimum wage amounts announced one after another. In other words, each company makes annual wage adjustments while referring to the minimum wage that has actually increased, and just when the effects have subsided and it is no longer possible to go back to the original state, a judgment is issued saying that the increase is in fact a violation of the law, resulting in a fait accompli. Maybe the government is very tough and that's what they're aiming for in the first place. In reality, we are in an unusual situation where both labor and management have complained about the minimum wage setting based on this law, but it can be said that both the labor union, which is loudly calling for a 13% increase, and the management, which is demanding compliance with the calculation formula of the Omnibus Law, have become a good place for them to think, ``This is all I can do.'' We are now faced with a situation in which we have no choice but to fall into the government's strategy, which has given up on the original response of each company.

Relevant regulations: Government Decree No. 36 PP-36/2021 in 2021, Ministerial Decree No. 18 in 2022