06
May2021

Circular Letter of the Ministry of Manpower RI : The New THR Policy is Pro-Employee?

The obligation to pay Statutory Holiday Allowance (“THR”) for employees is a form of the Government’s effort to meets the need of employees and their families to celebrate their religious holidays (“Holiday Date”).

Through the Government Regulation Number 36 of 2021 concerning Wages (“GR 36/2021”), the Government requires employers in Indonesia to pay THR to their employers no later than 7 (seven) days before the Holiday Date. Furthermore, on April 12 2021, the Ministry of Manpower RI issued Circular Letter Number M/6/HK.04/IV/2021 concerning the Implementation of Statutory Holiday Allowance 2021 for Employees (“the New THR Policy”).

 

  • The Employer Obligation to Pay THR

In brief, the New THR Policy regulates as follows :

  1. Employers in Indonesia (“Employers”) obligated to pay THR to their employees, both under a fixed-term agreement or a permanent work agreement;
  2. Employers must pay the THR no later than 7 (seven) days before the Holiday Date.

 

  • The Calculation Scheme for THR Payment

According to the New THR Policy, both a fixed-term employee or a permanent employee entitled to received THR as follow :

  1. Employees who had worked for 12 (twelve) months or more, entitled to receive THR equal to 1 (one) month salary;
  2. Employee who had worked for 1 (one) month but less than 12 (twelve) months, entitled to receive proportional amount of THR with following scheme :

Service period x 1 (one) month salary

12

  1. Daily workers also entitled to receive THR, as follows :
  • Daily workers who had worked for 12 (twelve) months or more, in which the case THR is based on the average of monthly salary received during the past 12 months before the Holiday Date;
  • Daily workers who had worked for less than 12 (twelve) months, in which case THR based on the average monthly salary received during their service period.

 

 

  • Maximum Late Payment of THR in 2021

Previously, it was stated that the THR payment must be made no later than 7 (seven) days before the Holiday Date. However, for employers who are unable to fulfill their obligation in accordance with the time limit specified in GR 36/2021 jo. The New THR Policy, the Government open opportunity for them to carry out dialogue to negotiate with their employees regarding the possible late payment of THR. Result of the said agreement shall be set under a Joint Agreement (“SKB”).

Compared to the previous THR implementation last year, the Government surely has tightened the implementation of the THR in 2021. Before making the SKB, now employers must provide company’s financial statements in a transparent manner. In addition, there is no longer any leeway for employers affected by the Covid-19 pandemic to make THR payments through installment schemes or gradual payments.

Furthermore, despite there are possibility for employers and employees to renegotiate and make a SKB concerning potential late payment of THR, the Government still specifically limits the delay payment must be made at the latest before the Holiday Date.

In 2021, for Muslim religious holiday date is at the end of Ramadhan, which most likely to occur on 13 May 2021. Meaning, for employers who are under a SKB with their employees, the THR payment must be made at least on 12 May 2021.

The SKB must be reported to the government office in the field of local employment no later than 7 (seven) days before the Holiday Date.

 

  • Sanction

According to Indonesian Minister of Manpower Regulation Number 6 of 2016 concerning Statutory Holiday Allowance for Employee (“MR 6/2016”), employers who failed to comply to this policy, may be subject to pay 5% (five percent) fines from the total amount of THR, and administrative sanctions from the Ministry of Manpower RI.

 

DISCLAIMER:

Any information contained in this Article is provided for informational purposes only and should not be construed as legal advice on any subject matter.  You should not act or refrain from acting on the basis of any content included in this Legal Update without seeking legal or other professional advice.  This document is copyright protected. No part of this document may be disclosed, distributed, reproduced or transmitted in any form or by any means, including photocopying and recording or stored in retrieval system of any nature without the prior written consent of SIP Law Firm.

 

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