Adjustments to Working Time and Wages in Certain Export-Oriented Labor-Intensive Industrial Companies
By Yehezkiel Obey Yoneda / 7 July 2023
Gain an understanding of adjustments to working time and wages for Certain Export-Oriented Labor-Intensive Industrial Companies, including provisions regarding adjustments and agreements between employers and workers.
Key Points
- To prevent termination of employment, Certain export-oriented labor-intensive industrial company (“IPKBE Company”) can make adjustments to working time by reducing the usual working time.
- Adjustment to working time can be made less than (i) 7 hours in 1 day (for working time of 6 days in 1 week), or (ii) 8 hours in 1 day (for working time of 5 days in 1 week).
- IPKBE Company can make wage adjustments, to at least 75% of the wages normally received.
- The Adjustment to working time and wages are regulated in a written agreement between the employer and the worker, and submitted to the manpower agency.
- The adjustment to working time and/or wages is valid for 6 months from the time Permenaker 5/2023 entry into force, or until 6 September 2023.
Background
As a result of changes in the global economy which have caused a decrease in market demand, especially in certain export-oriented labor-intensive industries, the government determined special policy regarding adjustments to working time and wages to maintain continuity of work and continuity of business.
This special government policy is regulated under the Minister of Manpower Regulation Number 5 of 2023 on Adjustment of Working Time and Wages for Certain Export-Oriented Labor-Intensive Industrial Companies Affected by Changes in the Global Economy (“Permenaker 5/2023”).
Criteria for Export-Oriented Labor-Intensive Industrial Companies
- have at least 200 labors;
- the percentage of labor costs is at least 15% of the total production costs; and
- production depends on requests for orders from the United States and countries in the European as evidenced by an order request letter.
- textile and apparel industry;
- footwear industry;
- leather and leather goods industry;
- durniture industry; and
- children’s toy industry.
Adjustment of Working Time and Wages
Working Time Adjustment
- for working time of 6 days in 1 week, adjustments to working time can be made less than 7 hours in 1 day and 40 hours in 1 week;
- for working time of 5 days in 1 week, adjustments to working time can be made less than 8 hours in 1 day and 40 hours in 1 week.
Wage Adjustment
In addition, the IPKBE Company can also make wage adjustments, provided that the wages paid to the workers may not be less than 75% of the wages normally received.
Meanwhile, the amount of wages does not apply as a basis for calculating contributions and payment of benefits for workers, but the final wage before the agreement on wage adjustments.
The adjustment to working time and/or wages is valid for 6 months from the time Manneker Regulation 5/2023 entry into force, or until 6 September 2023.
Employer’s Agreement with Workers
The result of the agreement are conveyed to the workers, and manpower agency in accordance with their level and authority to carry out recording, supervision, monitoring, and evaluation.
Key Contacts
Ivor I. Pasaribu
