Legal Alert: 2018 Provincial Minimum Wages
Authors: Juni Dani, Edly F. Widjaja
On 1 November 2017, the governors of provinces in Indonesia announced their respective Provincial Minimum Wage (Upah Minimum Provinsi or “UMP”) increment for 2018. The incremental amount of the UMP was made in reference to the Circular Letter of the Ministry of Manpower No. B.337/M.NAKER/PHIJSK-UPAH/X/2017 dated 13 October 2017 concerning Dissemination of National Inflation Rate Data and Gross Domestic Product Development of 2017.
The letter bases its calculation on national inflation and national economic development (the development of Gross Domestic Product or “GDP”) data as the UMP formula in accordance with the Government Regulation No. 78 of 2015 concerning Wages. This year, according to the letter issued by the Chairman of Central Statistics Body of Republic Indonesia (Badan Pusat Statistik Republik Indonesia) No. B-188/BPS/1000/10/2017 dated 11 October 2017, national inflation is 3.72% and GDP development is 4.99%. As a result, the percentage of UMP increment is 8.71% and shall be applied to all provinces in Indonesia except for provinces that are willing to set a higher percentage.
The table below lists the comparison for this year’s UMP with new UMP set for 2018 by all provinces in Indonesia:
As can be seen from the above table, the highest UMP is set by the DKI Jakarta Province (i.e. IDR 3,648,035 or approximately USD 270) while the lowest UMP is set by the Special Region of Yogyakarta (IDR 1,454,154 or approximately USD 108).
Pursuant to the Minister of Manpower and Transmigration Regulation No. 7 of 2013 concerning Minimum Wages, the governors may also determine a higher City Minimum Wage (Upah Minimum Kota or “UMK”) based on the recommendation and input from the Provincial Wage Council (Dewan Pengupahan Provinsi) and the mayor or regent. Major cities such as Tangerang, Bandung, Surabaya, or Batam usually have a higher minimum wages than what is stipulated under the UMP. The stipulation of the UMK must be determined at the latest by 21 November 2017.
The new UMP and UMK shall be valid starting from 1 January 2018.