While the minimum wage regulations are still unclear, I believe that annual wage adjustment negotiations are currently underway at each company. I think everyone is struggling with the situation where there has been no or very little increase in the state/prefectural minimum wage that they have been matching for a long time. On the other hand, once the annual wage adjustment has been decided or concluded, the next step is to revise the wage scale. Let's focus on this wage scale this time.

[What is the wage scale]

Under current legislation, each company is required to determine the wage scale in a board decision. You will be asked to present it when notifying the Ministry of Labor/Labor Regional Secretariat of your work regulations/collective agreement. Please be sure to create one, as registration will not be possible unless it is presented. A wage scale is a system that determines the minimum and maximum wages for employees by position, rank, or job, and confirms the overall wage balance. Some companies use tables and graphs based on theoretical calculations, while others set the settings according to the current situation. The Ministry of Labor/Labor Regional Secretariat doesn't care about the content, as long as you can show what actually exists. Under current regulations, the Ministry of Labor/Labor Regional Secretariat is not supposed to keep the wage scales of each company, so it will not be leaked to other companies. Creating a wage scale itself is not that difficult. Simply create the document as it should be or as it is. However, each employee must be notified of the wage scale determined by the board of directors, and only the scale to which each employee applies. After revisions, only those affected by the changes will be notified. Although there is no set method for giving notification, you may be asked to provide proof that you have given notification, so please be prepared. Each company uses different methods, such as writing it on the wage statement when the new wage changes, posting it on a bulletin board, or explaining it to each employee individually. However, if a notice is given in paper form, the paper may take on a life of its own, so care must be taken.

[Use of wage scale]

So, will this wage scale that has been created and notified to employees be used only for notification of work rules/labor agreements? In fact, this wage scale is useful for checking the wage status of all employees. For example, suppose you have established minimum and maximum wages for each position. Naturally, you will need to check whether there are any employees who earn an outstanding amount of money for any position, and what the balance is between the next higher and lower positions. Although it is difficult to change wages, it is possible to identify employees who do not meet the standards during this annual wage adjustment period and make adjustments little by little. If the salary is higher than the upper limit that should be, it is possible to give the employee an opportunity to improve their skills so that they can be promoted, or if there is little chance of promotion, it is possible to inform the employee that the salary will reach a ceiling. It can also be used as a basis for salary reduction in the event of demotion. This can be the key to making it possible to implement pay cuts due to demotion, which is still not common in Indonesia.

Relevant regulations: Chapter IV of Government Decree No. 36 of 2021 PP-36/2021 Bab IV