The law creates job occupations, wages ready for new workers to go down

Bisnis.com, JAKARTA – Changes in the salary scheme established in the Employment Creation Law are expected to directly affect the determination of the minimum wage for workers by 2021.

If the implementing regulations of this law are issued, the income received by new workers is potentially lower.

In Law No. 13 of 2003 on Manpower, the minimum wage is regulated in article 89, where the minimum wage that workers receive is based on the province or district / city. Article 90 further emphasizes the prohibition of taxpayers paying workers below the minimum wage.

In addition, Article 43 of Government Regulation Number 78 of 2015 on Wages explains that the minimum wage is calculated annually based on the need for a decent life (KHL). The determination of the minimum wage must also take into account productivity and economic growth.

The formulation of annual salary increases is calculated by referring to the inflation rate and economic growth. This means that if inflation is 3 percent and economic growth is 5 percent, the minimum wage adjustment can increase by as much as 8 percent.

The Employment Creation Law, which was approved on October 5, 2020, modifies a series of regulations contained in the Labor Law. Articles 89 and 90 were eliminated and replaced by the existence of Articles 88A to 88E.

The determination of the minimum wage according to the provincial area (UMP) remains the governor’s obligation as stipulated in paragraph 1 of article 88C. However, paragraph 2 of the same article establishes that the governor can determine the district / city minimum wage (UMK) with certain conditions.

The “may” and “condition” clauses are considered to have the potential to make workers in a province earn the same amount of salary regardless of differences in the economic conditions of each district / city.

The Secretary General of the Indonesian Workers Organization (OPSI), Timboel Siregar, said that the new calculation scheme in the Employment Creation Law could directly affect the minimum wage by 2021.

Previously, the wage increase formula referred to the Circular of the Minister of Manpower that contained the inflation rate and national economic growth. In 2019, regional heads must announce the amount of the 2020 minimum wage by November 1 of the current year.

“It is possible that the Employment Creation Law will have a direct impact on the minimum wage in 2021. But the government must very quickly issue the implementing regulations and synchronize,” he said.

However, this hasty move runs the risk of creating further conflict considering that the approval of the Employment Creation Law itself has generated a wave of resistance from various community groups. Timboel hopes that the government can be wiser in looking at this matter and not carelessly establish a new calculation basis in formulating the minimum wage.

“If the government does not want to take risks and trigger a major conflict, it is better not to rush to make implementing regulations. At least prepare the regulations for the 2022 implementation. Not immediately next year,” Timboel said.

In addition, he explained that the increase in the new minimum wage could decrease the income of workers because article 88D establishes that the formula to calculate the minimum wage contains a variable of economic growth or inflation.

The word ‘or’ in this article provides an interpretation that future wage increases are no longer calculated based on the cumulative rate of economic growth or inflation, but on one of the variables.

“So far, UMP is close to the lowest UMK. We can see an example in West Java, for Karawang, the UMK has reached IDR 4.5 million, compared to Banjar, which is only IDR 1.8. It is not impossible that the minimum wage for the Karawang workers are 2 million rupees because it refers to the UMP, ”Timboel said when contacted on Wednesday (7/10/2020).

He also mentioned that the formulation of the calculation of the minimum wage, which has the potential to refer only to provincial areas, will reduce people’s purchasing power. Especially in districts / cities where the minimum wage is higher than the UMP when referring to the old rules.

In addition to suppressing the purchasing power of workers, the corporate world can also be affected because the goods and services offered are not necessarily absorbed by consumers whose wages have been adjusted.

In addition, Timboel also argues that the new wage scheme may encourage companies to terminate employment (PHK) of workers whose wages refer to the old rules.

“Companies can be motivated to fire older workers whose wages are already high. So that they can recruit new workers whose wages have followed the new scheme, “he said.