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Indonesia has increased the average minimum wage of each province by 1.09 percent for 2022. The figure was obtained through the new guidelines on minimum wage under Government Regulation 36 of 2021 (GR 36/2021) — one of the implementing regulations of Indonesia’s Omnibus Law.

Under GR 36/2021, the minimum wage is based on the economic and employment conditions, which are:

  • Purchasing power parity;
  • Manpower absorption levels; and
  • Median wage variables (the margin between the 50 percent of the highest wages and 50 percent from the lowest 50 percent of the lowest wages from employees in the same position).

In addition, the government also takes into account the per capita consumption of households as well as economic growth and inflation.

GR 36/2021 has also abolished the sectoral minimum wage.

What are the new rates for 2022?

The following rates represent the minimum wage of each province in Indonesia. The rates in cities or districts are normally higher than the provincial minimum wage.

Hourly wages for part-time workers

Through GR 36/2021, part-time workers are eligible for hourly wages — a first for the country. The formula for determining the hourly wage is as follows:

Hourly wage = Monthly wage/126

To calculate the daily wage:

Six working days/week

Daily wage = Monthly wage/25

Five working days/week

Daily wage = Monthly wage/21

The employer and employee are allowed to set their agreement, but the final salary should not be lower than the calculation using the aforementioned formulas.

[tips title="Important Tip"]Companies are prohibited from paying their workers – which includes those that are hired for less than one year – below the prescribed minimum wage.[/tips]

Businesses that are unable to comply can submit a letter to the governor of the province from which their company is registered and ask for a postponement of payment. The letter must be sent a minimum of 10 days before the new minimum wage rates come into force. 

As the minimum wage for each province differs, foreign investors should seek the help of registered local advisors to help understand how these latest changes will affect their operations. 

Indonesia Minimum Wage 2022

Province

Monthly minimum wage rate (rupiah)

Province

Monthly minimum wage rate (rupiah)

Aceh

3,166,460 (US$220)

West Nusa Tenggara

2,207,212 (US$153)

North Sumatra

2,552,609 (US$177)

East Nusa Tenggara

1,975,000 (US$137)

West Sumatra

2,512,539 (US$175)

West Kalimantan

2,434,328 (US$169)

Riau

2,938,564 (US$204)

South Kalimantan

2,906,473 (US$202)

Riau Islands

3,144,466 (US$219)

Central Kalimantan

2,922,516 (US$203)

Jambi

2,649,034 (US$184)

East Kalimantan

3,014,497 (US$209)

South Sumatra

3,144,146 (US$218)

North Kalimantan

3,310,723 (US$230)

Bangka Belitung

3,264,884 (US$227)

Maluku

2,618,312 (US$182)

Bengkulu

2,238,094 (US$155)

North Maluku

2,862,231 (US$199)

Lampung

2,440,486 (US$169)

Gorontalo

2,800,580 (US$195)

Banten

2,501,203 (US$174)

North Sulawesi

3,310,723 (US$234)

DKI Jakarta

4,452,724 (US$310)

Southeast Sulawesi

2,710,595 (US$188)

West Java

1,841,487 (US$128)

Central Sulawesi

2,390,739 (US$166)

Central Java

1,813,011 (US$126)

South Sulawesi

3,165,876 (US$224)

Special Region of Yogyakarta

1,840,951 (US$128)

West Sulawesi

2,571,328 (US$182)

East Java

1,891,567 (US$131)

Papua

3,561,932 (US$248)

Bali

2,516,971 (US$175)

West Papua

3,200,000 (US$222)

What does it mean for business?

Despite the yearly increases in the minimum wage, productivity amongst Indonesia’s workforce continues to remain low. Less than half of the country’s workforce can be classified as ‘skilled’, resulting in the slow advancement of vital business sectors such as manufacturing. 

This is an ongoing concern for local companies who are looking to expand their business operations internationally or are seeking foreign investments. Additionally, analysts have pointed out that the formula used for calculating the minimum wage rate does not take into account labor productivity or sector-level productivity. 

Small and medium-sized business owners, that are registered with the government, have traditionally been hit the hardest with the yearly increases. Businesses in leading sectors will also have to increase their UMSP rate, which in turn can increase their overall costs and make their exports less competitive. 

These formal businesses have long complained of the lack of enforcement in implementing the minimum wage regulation on businesses in the informal sector – some 57 percent of Indonesia’s 120 million workforce is in the informal sector – who often pay employees below the standard rate. 

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