Working Remotely, Which Minimum Wage Applies?

PERTANYAAN

I work remotely for a company which is located in Jakarta, and I am assigned to live in Yogyakarta. There are no branch offices in Yogyakarta. However, my salary follows the Provincial Minimum Wage (Upah Minimum Provinsi/ “UMP”) in Yogyakarta instead of Jakarta. The problem is that the Provincial Minimum Wage in Yogyakarta is low and I feel disadvantaged. What are the regulations on salary for remote working employees like me? Do I follow the Provincial Minimum Wage where my company is located or follow the Provincial Minimum Wage where I live and work?

INTISARI JAWABAN

With the development of technology and the post-COVID-19 pandemic, remote working has been widely adopted by companies and businesses. In the conventional work system in which employees work in offices, the wage system is adjusted to the minimum wage where the company is located. However, under the remote working system, which minimum wage applies? Is it based on the location where the company is located or the location of the employees?

Please read the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Bekerja Jarak Jauh, Upah Minimum Mana yang Berlaku? which was written by Leli Veronica Lumban Gaol, S.H., and was published on Tuesday, 31 January 2023.

All legal informations which are available through Klinik hukumonline.com have been prepared for educational purposes only and are general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.

Applicable Minimum Wage for Remote Working Employees

With the development of information technology and the post-COVID-19 pandemic, a lot of work is not only done in the office but also from home (work from home) or more often referred to as remote working. What is remote working? Remote working is working with remote work controls where the implementation of work can be done anywhere.

Then, in order to answer your question, according to our research based on the relevant manpower laws and regulations, there are no explicit and detailed provisions about which minimum wage applies to remote working employees, whether the minimum wage at where the company is located or at the location of the employees.

Under the laws and regulations, for example under Government Regulation 36/2021, employers/entrepreneurs are prohibited from paying wages lower than the minimum wage.[1] The minimum wage is the lowest monthly wage, i.e., wages without allowances or basic wages and fixed allowances.[2] Furthermore, the minimum wage shall consist of Provincial Minimum Wage (Upah Minimum Provinsi/ “UMP”) and Regency/city-level Minimum Wage (Upah Minimum Kabupaten atau Kota/ “UMK”) with certain conditions, which are determined based on economic and manpower conditions.[3]

Also read: Which is the Reference, the UMP or the UMK?

This is also reaffirmed in Article 81 number 28 Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation which contains new Article 88C section (4) and (5) Law 13/2003 which states that the minimum wage is determined based on economic and manpower conditions based on data from an authorized statistics agency.

However, neither the Regulation on the Government in Lieu of Law 2/2022 nor the Government Regulation 36/2021 explicitly states which minimum wage applies. In addition, In addition, it is also not explicitly regulated regarding the determination of the minimum wage based on economic and manpower conditions, that is based on where the company is located, or the location of the employees.

In our opinion, in determining which minimum wage regulations apply to remote working employees, this needs to be determined according to agreements between employers and employees which are made into work agreements.

However, it should be noted that the minimum wage shall apply to workers/laborers or employees with a work period of less than 1 (one) year. Meanwhile, wages for workers/laborers with a work period of 1 (one) year or more shall refer to the wage structure and scale.[4] Therefore, if you have been working for more than 1 year, your wage will no longer be based on the minimum wage but will be based on the wage structure and scale that is determined by the company you are working for.

Also read: Want to Formulate Wage Structures and Scales? Pay Attention to These 5 Things

Steps That Could Be Taken

If the determination of wages made by the company is deemed detrimental, then you as an employee may take legal action.

Disputes over the determination of wages are classified as industrial relations disputes, as regulated under Law 2/2004. You may file a lawsuit of a dispute of interest, which occurs in the course of the employment relationship due to the absence of agreement concerning the drawing up, and or amendment of work requirements which are established under the employment agreement, or company regulation, or collective agreement.[5]

However, prior to filing a lawsuit to the Industrial Relations Court, you must first conduct bipartite and tripartite negotiations. You can read more details in article entitled 3 Mechanisms on Industrial Relations Dispute Settlement.

These are the answers we can provide, we hope you will find them useful.

Legal Basis:

1. Law Number 13 of 2003 on Manpower;
2. Law Number 2 of 2004 on Industrial Relation Dispute Settlements;
3. Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation;
4. Government Regulation Number 36 of 2021 on Wages.

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[1] Article 23 section (3) Government Regulation Number 36 of 2021 on Wages (“Government Regulation 36/2021”).

[2] Article 23 section (1) Government Regulation 36/2021.

[3] Article 25 section (1) and (2) Government Regulation 36/2021.

[4] Article 24 Government Regulation 36/2021.

[5] Article 1 number 3 Law Number 2 of 2004 on Industrial Relation Dispute Settlements (“Law 2/2004”).