Rules for Cutting Employee Salaries in Employment Law


The provisions for the deduction of employee wages are regulated in Article 63 of Government Regulation No. 36 of 2021 regarding Wages as amended by Government Regulation No. 51 of 2023 (“GR No. 36/2021”), which explains that employers are permitted to deduct employee’s wages as long as the following conditions are fulfilled:

  1. Payment of fines, compensation, and/or wage advances is carried out by the work agreement, company regulations (“PP”), or collective work regulations (“PKB”).
  2. For renting a house, renting company property rented out by the entrepreneur to employees, and/or debts or debt installments of employees must be made based on a written agreement or written agreement.
  3. Excess wage payments are made without the employee’s consent.

In the event of a deduction from an employee’s salary, the maximum deduction allowed is 50% of each wage payment received by the worker.

 Can Employee Salary Deductions Be Done?

 Employers can deduct employees’ salaries to pay fines, compensation, or advances on wages as long as this has been regulated in the work agreement, PP, or PKB.

To determine whether the wage deductions made by the company as asked are valid, you must first pay attention to the contents of the work agreement, PP or PKB between workers and employers at the company.

Apart from that, if these provisions are regulated in a work agreement or PKB, they must be based on the agreement of both parties making them, as set out in Article 52 paragraph (1) letter a jo. Article 116 paragraph (1) jo. Article 117 of the Manpower Law.

Suppose it turns out that the work agreement, PP or PKB does not regulate wage cuts due to an unfavorable sales difference. In that case, the company has no right to cut its employees’ wages on that basis. If the company continues to deduct wages, employees can take legal action.

 Legal Actions

 Disputes that arise due to wage deductions can be categorized as rights disputes. These disputes occur due to non-fulfillment of rights due to differences in implementation or interpretation of the provisions of laws and regulations, work agreements, PP, or PKB.

Suppose there is a rights dispute between employers and workers. In that case, both must first take legal action in the form of bipartite negotiations, namely negotiations between workers or trade unions and employers to resolve industrial relations disputes by deliberation to reach a consensus.

In the case an agreement cannot be reached, one or both parties will register the dispute with the agency responsible for the employment sector, attaching evidence that efforts to resolve it through bipartite negotiations have been carried out.

After that, both parties settled through mediation. Suppose a settlement through mediation does not get an agreement. In that case, one of the parties can file a lawsuit with the Industrial Relations Court at the local district court.


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