Jakarta Governor Joko “Jokowi” Widodo announced on Tuesday that the 2013 provincial minimum wage had been set at Rp 2.2 million (US$228), a 44 percent increase from this year’s Rp 1.5 million.
The increase was slightly lower than the recommendation of Rp 2,.216,243 issued by the City Remuneration Board last week.
“We rounded the number. I hope all parties can accept this decision. We cannot please all sides,” Jokowi told reporters at City Hall.
The governor’s decision made at the eleventh hour, as Tuesday was his deadline, has drawn criticism from wary businesspeople.
A ministerial decree on minimum wages requires provincial governments to decide on the new level two months before the new policy takes effect — on Jan. 1 each year.
Earlier this month, the Jakarta Remuneration Board set the basic cost of living (KHL) at Rp 1,978,789. This amount was used as the main reference when deciding on the provincial minimum wage.
The board is chaired by officials from the city administration and representatives from labor unions and employers’ associations. The tripartite forum makes recommendations on the minimum wage to the governor on an annual basis. The Jakarta governor has the final say on the city’s minimum wage.
Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said that although the new minimum wage would burden some businesses, employers would still comply with the new decision.
“There is nothing else we can do, we have been struggling at our best,” Sofjan said.
He said that while the new wage level might not hurt big businesses, it would be the small and medium enterprises (SMEs) that would suffer the most.
“The turnover of the SMEs is usually less than Rp 20 million per month, how can they survive if they have to spend Rp 2.2 million per employee?” Sofjan said. “For some, redundancies may be inevitable, others may also close their businesses,” he said.
The government plans to be lenient with SMEs by not insisting outright that they pay their workers the new minimum wage. Manpower and Transmigration Minister Muhaimin Iskandar recently said that SMEs can propose a postponement if they feel the new minimum wage is too much of a burden. Business owners are allowed to request a waiver, which is only granted after audits proving that the business is undergoing financial difficulties. City Manpower and Transmigration Agency head Deded Sukendar said that there had been few companies requesting waivers.
“Tomorrow, we will speak with some associations. The raise is significant, 44 percent, certain sectors will feel the impact of it,” said Eddy Kuntadi, chairman of the Indonesia Chamber of Commerce and Industry (Kadin).
Failure to pay the minimum wage is punishable by law. Business owners may face up to Rp 400 million in fines and one to four years in prison for violating the existing regulation.
In 2011, the minimum wage was set at Rp 1.29 million or only 92 percent of the KHL of Rp 1.4 million. In 2010, the wage of Rp 1.11 million was 84.48 percent of the KHL at that time. Not until 2012 was the minimum wage higher than the basic cost of living (102 percent).