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The Jakarta Post
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SMEs to be exempt from minimum wage obligation

  • Hans David Tampubolon

    The Jakarta Post

Jakarta | Tue, November 13 2012 | 08:04 am

The government plans to be lenient with small and medium enterprises (SMEs) by not insisting outright that they pay their workers the new minimum wage.

“SME businesses can propose a postponement if they feel the new minimum wage is too much of a burden,” Manpower and Transmigration Minister Muhaimin Iskandar told reporters after a coordination meeting on labor at the Office of the Coordinating Economic Minister on Monday.

“The authorities will then audit SME businesses that propose a postponement. An audit is needed to confirm whether they can comply with the new minimum wage or not,” he added.

Workers represented by various labor unions, businesses and regional administrations throughout the archipelago are currently deliberating a new minimum wage in each province for next year.

Workers have demanded a raise of between 30 and 50 percent for the minimum wage in each province. The workers’ demand has garnered support from the government.

“We support a significant increase in the minimum wage because we believe the current wage level is too low,” Muhaimin said.

Muhaimin said the government would try to mediate between businesses and the unions and would likely suggest an amount somewhere in the middle.

“If the workers demand a Rp 2.5 million (US$260) monthly minimum wage while business owners want Rp 1.9 million, we would have to find a number somewhere in the middle and a figure of around Rp 2 million monthly would probably be suitable according to the government’s estimation,” Muhaimin said.

This year, the minimum wage in Jakarta and Papua are among the highest in the country, set at Rp 1.52 million and Rp 1.58 million, respectively.

Businesses have opposed the proposal from workers and the government to significantly increase the wage. Businesses also want SMEs to be excluded if the proposal to increase the wage is approved by the government.

Businesses believe that SMEs would never be able to bear the increase. In fact, many SMEs pay their workers far below the minimum wage due to their small revenues.

According to the law, SMEs are enterprises that take in less than Rp 1 billion in annual sales and are worth less than Rp 2 billion in assets. This includes, for example, the modest food stalls that are omnipresent in the country’s urban areas.

More than 50 million SMEs are registered with the Cooperatives and Small and Medium Enterprises Ministry and they employ more than half of the country’s workforce.

Other than demanding a higher minimum wage, labor unions have also demanded the government put a stop to the practice of outsourcing.

Last month, the government proposed issuing a regulation to allow outsourcing but limiting it to five supporting jobs, namely cleaning services, security, catering, drivers and supporting services in mining operations.

The core business of a company would not be not allowed to be outsourced. Both unions and businessmen, however, are not happy with the proposed regulation.

Muhaimin said that the discussion between the government, workers and businesses on the outsourcing system had yet to reach a consensus. “We will try to reach a conclusion on the outsourcing system as soon as possible,” he said.

Labor unions, in their attempt to make the government and businesses fulfill their demand on the minimum wage and put an end to outsourcing, have pulled out all the stops to make sure their voices are heard.

These measures range from peaceful rallies to violent acts, such as conducting sweeps on colleagues who refuse to strike and by destroying the industrial facilities of companies that prohibit their workers from participating in rallies.

Businesspeople have said that violent rallies by the unions have frightened foreign investors, which may lead to the exit of several companies from Indonesia.

The Indonesian Employers Association (Apindo) estimates that investment lost due to unions’ violent acts stood at around $100 million.

Coordinating Economic Minister Hatta Rajasa said the government was committed to ensuring the enforcement of the law on unions that stage violent protests and rallies.


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