Adjustment of Working Time and Wages in Certain Business Sectors
The Ministry of Manpower allows an adjustment to the working time and wages of a certain export-oriented labor-intensive industry company (a “Labor-intensive Industry Company”) by introducing Minister of Manpower Regulation No. 5 of 2023 on Working Time and Wages Adjustments on a Certain Export Oriented Labor-intensive Industry Companies which are Impacted by the Global Economic Change (the “Regulation”). The Regulation entered into force as of March 8, 2023.
The Regulation intends to maintain the continuity of work and business amidst the current changes in the global economy. Furthermore, the Manpower Ministry’s Director General for Industrial Relations and Social Security Development states that the Regulation is issued to address the request from several export-oriented industry associations regarding the flexibility of working hours and days of their employees due to the pressure the companies face.
We highlight below the key provisions of the Regulation:
♦ Criteria of Labor-intensive Industry Companies
To be entitled to the adjustments, there are certain criteria under the Regulation. A company shall have (i) at least 200 (two hundred) employees, (ii) the labor costs constitute at least 15% (fifteen percent) of the production costs, and (iii) production dependency on the order from the United States and countries in Europe which is proven by order request letters.
The Regulation the companies that may implement the adjustments are companies in the following industries:
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- the textile and apparel industry;
- the footwear industry;
- the leather and leather goods industry;
- the furniture industry; and
- the children’s toys industry.
♦ Adjustment of Working Time and Wages of Labor-intensive Industry Companies
Under the Regulation, an adjustment of working time may be made to be less than (i) 7 (seven) hours per day and 40 (forty) hours per week for 6 (six) working days, or (ii) 8 (eight) hours per day and 40 (forty) hours per week for 5 (five) working days. The adjustment of the working days shall be based on an agreement of the employer and the employee.
With regard to the wages adjustment, the Regulation stipulates that a Labor-intensive Industry Company may adjust its employees’ wages to 75% (seventy-five percent) of their current wages. Similar with the adjustment of the working time, the adjustment of wage is subject to an agreement of the employer and the employee.
Both the working time and wages adjustments shall be valid for 6 (six) months as of the enactment of the Regulation (i.e., until September 8, 2023).
Such agreement shall be in writing and at least consist of (i) the adjustment of the working time, (ii) the adjusted amount of wages, and (iii) the validity period of the agreement. Note that the validity period of the agreement may not exceed the adjustment validity period (i.e., at the latest, September 8, 2023).
Based on the above, it is clear that if the employee does not agree to any proposed adjustment above then a Labor-intensive Industry Company would not be able to make such adjustment.
March 24, 2023
AKSET
Please contact Johannes C. Sahetapy-Engel (jsahetapyengel@aksetlaw.com), Thomas P. Wijaya (twijaya@aksetlaw.com), and Ammarsyarif Ghazyandra Goenawan (agoenawan@aksetlaw.com) for further information.
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