Indonesian companies should not use minimum wage as effective wage

Manpower Minister Ida Fauziyah has said the widespread practice of companies using minimum wage as the effective wage needs to be addressed
By: | January 27, 2022
Topics: Compensation and Benefits | Employee Experience | Health and Wellness | Indonesia | News

The minimum wage should only be applied to workers who are in their first year of work. After the first year of work, the wage structure and scale must be applied for all workers.

“In many cases, the minimum wage is instead designated as the effective wage, regardless of the work period and productivity in one company. This is clearly an issue that we must address,” Fauziyah said at a meeting with Commission IX of the House of Representatives recently.

She said the minimum wage is meant to act as a safety net for workers. Therefore, wage structure and scale, according to their workload and length of service, must be applied to workers who have worked for more than a year.

“The minimum wage is intended to be a safety net and is the lowest permissible wage for workers because the minimum wage is intended as a measure to eradicate poverty,” Fauziyah said.

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The minister said that she is currently holding dialogues with businesses to encourage them to apply the wage structure and scale instead of the minimum wage as the effective wage, according to Antara.