The 4 Minimum Wage Types in Indonesia

Indonesia's labor market is governed by various regulations designed to ensure fair compensation for employees. One crucial aspect of these regulations is the minimum wage system, which provides a baseline for earnings across different regions and sectors.

Here’s a closer look at the four types of minimum wages in Indonesia:

The Provincial Minimum Wage, or UMP, is the baseline wage set by the government for each province. It ensures that employees in every province receive a minimum level of income that is adjusted for the cost of living in that region.

This wage is reviewed annually and can vary significantly between provinces due to differences in economic conditions and living costs.

The Regency/City Minimum Wage, or UMK, is a more localized minimum wage set within regencies or cities. This wage takes into account the specific economic conditions of a particular regency or city, providing a more tailored approach to wage setting.

It is designed to address the disparities between different areas within a province.

The Sectoral Minimum Wage, or UMS, applies to specific industries or sectors within a region. This type of minimum wage recognizes that different sectors may have varying economic conditions and productivity levels.

As a result, it ensures that employees in sectors like manufacturing, services, or agriculture receive appropriate compensation based on their industry’s standards.

UMR refers to the lowest wage applicable in a specific area. In the three regulations mentioned above, the term UMR is no longer used and has been replaced by UMP and UMK.

Note that the minimum wage only applies to employees with less than a year of service at a company. Therefore, employees with over a year of service should be paid more.

Understanding these different types of minimum wages is essential for employers and employees alike. It helps ensure fair compensation across diverse regions and sectors in Indonesia, contributing to a more balanced and equitable labor market.

For business owners with companies in Indonesia, it is important to understand the intricacies of regional minimum wages in the country. Staying informed and complying with these regulations not only ensures legal adherence but also contributes to building a supportive and fair workplace.

This proactive approach can enhance employee satisfaction and foster positive working relationships.

Based on What is the Minimum Wage Determined?

(1) The Minimum Wage is set annually based on the KHL (basic needs basket) and with consideration of productivity and economic growth.

What Does the Wage Comprise?

Essentially, wages consist of the following components:

• Wages without allowances
• Basic wages and fixed allowances
• Basic wages, fixed allowances, and variable allowance or
• Basic wages and variable allowances.

Why Do Minimum Wages Vary Between Districts?

Why does the Provincial Minimum Wage (UMP) differ across regions? Because the economic levels in each province vary.

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Learn more:

• Payroll System in Indonesia: Rules, Regulations, and Compliance
• Paid Leave Entitlements for Indonesian Workers
• Wage Structure in Indonesia
• Pension Guarantee (JP) and Old Age Security (JHT) in Indonesia
• Comparing Tax Rules: Singapore vs. Indonesia

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