Understanding Indonesia’s Payroll System

Provided that the employees have worked hard and diligently. All companies must fulfill the rights of their employees. One of the main obligation of employers to employees is salary payment. A salary payment includes benefits such as the health insurance of BPJS. As well as reimbursing its employees for any expenses, and giving payment slips for proof of salaries.

The problem is, sometimes there are some companies that do not pay employees’ salaries on time. This behavior, if repeatedly done, may impact the financial condition of the employees. The law protects employees rights on their salary payments and the conditions that foresees it. And breaking this law, means fine to those who disobeyed the rules. Let’s find out by taking a look at the executive law which the Indonesian government has put.

Indonesia's Payroll

Obligation of salary payment: Indonesian Manpower law no 13, year 2013

The obligation to pay employees’s salaries is in Indonesian Manpower law no 13, year 2013. Based on Indonesia’s Payroll regulation. Companies must give employees salaries for the work done. It is given as a reward from the companies to employees based on the amount of work and results which the employees have given that are based on the work agreement and manpower laws.

When should a company pay salaries?

According to Article 19 of Government Regulation Number 78 of 2015 concerning Indonesia’s Payroll. The company ideally pays salaries within the period of a week ( once every seven days) or no more than one month (once every thirty days). As working hours differs for each company, at times employees can have 5-6 working days in a week. Meanwhile, in one month, the working day might take approximately 20 days.

What happens when an employee works less than that?

If that happens, then the provision of employees’ salaries must be followed in accordance with the agreed work contract by the company and employees. On the case that an employee works beyond the stated working hours in the agreement. Employees must receive overtime payments. Employees receive overtime payments, based on the number of hours they have worked for.

What if the company is late in paying employee salaries?

Based on the Indonesian Manpower Law. Article 93, Paragraph 2 of the Manpower Act. Companies paid fines. And they are in accordance with a certain percentage of the employees wages. In addition to the fine. Employees must also receive the obligated salary payment.

In Article 55 Paragraph 1 of Indonesia’s payroll regulation no 78 of 2015 which concerns wages. Based on the “fines regulation”. Starting from the 4th day to the 8th day from the date of payment of the salary. The company must pay a fine of 5% for each day of delay in the amount of salary to be paid.

When salary payments are not paid to the employee  past the 8th day period. The company will be fined according to the previous point and added 1% for each day of delay. With a note, in one month no more than 50% of the salary must be paid to employees. After a month, if the employee’s salary is still unpaid, the company is subject to a fine according to the previous two points, then added to the interest on the interest rate imposed by the government.

Indonesia's labor

As an employee, what can I do if my employer doesn’t pay my salary on time?

Employees have the rights to take certain actions, if the company is giving late payments for their salaries. For whatever reason it is, a good company must always abide to the rules. Overall, there are 3 steps on what an employee can take if the company that they work for does not pay their salaries.

Indonesia's Labor

1st, Employee & Employer Negotiation.

To resolve any disputes on payment. Employees and employers can negotiate to resolve disputes internally. Employees and employers will usually carry out this negotiation within 30 days of their 1st dispute.

2nd, Third party Negotiations.

When both employees and employers do not come to an agreement within 30 days. Then it means that Internal negotiations have failed. On this case, employees and employers can make settlements by inviting a third part to help solve the problem. When third party negotiations fail. Employees or the employers will usually summon An official mediator from the local manpower/ ministry of labor to mediate the issue.

3rd, Lawsuits.

If third party mediation has also not succeeded in solving the problem. Then the employee has the right to file a lawsuit against the company through the Industrial Relations Court, which is a special court that is still within the scope of the general court.

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