M

anpower and Transmigration Minister Muhaimin Iskandar has proposed incentives for companies to help resolve disputes between workers and their employers over the provincial minimum wages.

To avoid disputes over the minimum wage issue Muhaimin said the government would give tax and fiscal incentives to small- and middle-scale companies.

The incentives would also be offered to labor-intensive industries to enable them pay their workers in accordance with the current remuneration system.

Muhaimin made his statement during a keynote speech at a public discussion on industrial disputes organized by the Centre for Strategic and International Studies (CSIS) in Jakarta on Thursday.

He disclosed that many small and medium enterprises (SMEs) were unable to comply with the provincial minimum wages and had planned to gradually downsize in the next few months due to the additional expense they would have to bear in 2013.

The minister added that the wage hike was part of the ministry’s plan and had nothing to do with pressures from the recent national strikes. The wage hike was necessary because the 2005 ministerial decree on 46 wage components was no longer relevant with the decent wage concept, he said.

Muhaimin, who is implicated in the graft case centering on the 2012 transmigration infrastructure accelerated development funds (PPID), said that the government set the minimum wages based on the classification of the companies and their financial capability.

“The minimum wage for SMEs should be different from big companies while micro finance [UMKM] is excluded from the requirement,” he said.

Meanwhile, the secretary-general of the Indonesian footwear producers association, Anton Supit, said there would be massive dismissals in the next few months as a result of the increase of the wage, even though most would not be able to pay dismissal severance as a result of financial difficulties. “This will worsen the unemployment problem because most workers [affected] are unskilled elementary and high school graduates,” he said.

He said that with the wage hike being up to 70 percent next year, the cost for workers in labor-intensive companies would leap to 32 percent from the current 15 percent.

Chairman of the Confederation of All-Indonesian Workers Union (KSPSI) Syukur Sarto said the two alternatives were applicable but employers should be transparent about their financial conditions so that wage problems could be resolved through bipartite dialogue.

“Wage conflicts have often occurred because of employers while big companies are proud of having paid workers according to the minimum wages,” he said.

Earlier this week, the Industry Ministry recommended that labor-intensive firms should be exempt from adopting the new minimum wage next year to meet the country’s expected industrial growth by the end of 2013.

Industry Minister MS Hidayat said on Monday that his office was “upbeat” about the country’s non-oil and gas industry growing to around 6.8 percent to 7.1 percent next year, despite the lack of infrastructure and the high cost of investment.

He added that the growth estimate would not be realized if labor-intensive companies, which employ tens of thousands of workers, remained under the new minimum wage between 30 and 40 percent to around Rp 2.2 million (US$228) next year.