Entrepreneurs Are Obliged to Create Wage Structure and Scale

The structure and scale of wages are commonly set up by companies in many countries, especially by multinational companies. The main objective is to provide protection for workers regarding wage standards that will be received.

Through this policy, the government can also monitor which companies are compliant in making Company Regulations and which are not. This is because there is a force from the government, which is usually followed by a sudden inspection to ensure the conformity of wage standards based on the results of  evaluation of Company Regulations.

In Indonesia, the obligation of employers to develop and socialize the structure and scale of wages just commenced this year. This instruction is contained in the Regulation of the Minister of Manpower (Permenaker) No. 1 Year 2017 on Wage Structure and Scale, effective since March 21, 2017. This policy affirms that entrepreneurs are obliged to formulate the structure and scale of wages by taking into account class, position, tenure, education and competence.

Government gives time limit until October 23, 2017 for all entrepreneurs operating in Indonesia to create and socialize the wage structure and scale to all the employees. 

Wage structure and scale constitute wage level composition from the lowest to the highest level or vice versa, containing wage nominal ranging from the lowest to the highest based on the value or the level of position. In creating wage structure and scale, the entrepreneurs shall refer to basic wage.

The entrepreneur criteria determined in Permenaker Number 1 Year 2017 cover individual, partnership or legal entity running the company, both self-owned or owned by other party, employing at least 10 (ten) people or labors. This entrepreneur criteria refer to Article 108 Law Number 13 Year 2003 on Manpower.

Wage structure and scale are determined by the head of company in the form of Decision Letter. Wage structure and scale shall be attached during the registration, extension or renewal of Contractual Bargaining Agreement (CBA) or Company Regulation by presenting it to the related official.

This Permenaker is also equipped with wage structure and scale attachment by using 3 (three) methods such as Simple Ranking, Two Points and Factor Point Method.

For entrepreneurs who fail creating the wage structure and scale as well as do not inform its employees shall be subject to administrative sanction regulated in Permenaker Number 20 Year 2016 on Procedure of Administrative Sanction Imposition and Government Regulation Number 78 Year 2015 on Wages. Administrative sanctions are as follows: 

• a. Written warning;
• b. Restriction of business activity;
• c. Temporary termination of production tools partially or entirely; and 
• d. Suspension of business activity.

The positive side that can be seen from this policy, among others, is that workers will get the certainty of promotion and wage increase based on its performance.

While the benefits for the entrepreneurs, they can see the position of companies in the market, which in the future will directly affect the competitiveness of enterprises and employee welfare.

However, it must be acknowledged that there will be an additional operational burden for employers to create wage structures and scales. It is also related to the professionalism of entrepreneurs in preparing the performance appraisal system and promotion, as well as efforts to improve employee capability.

Disclaimer! This article is a personal opinion and does not reflect the policies of the institution where the author works.