The Law defines wage as the right of the worker/laborer that is received and expressed in the form of money as remuneration from the entrepreneur or the employer to workers/laborers, whose amount is determined and paid according to a work agreement, consensus, or laws and regulations, including allowances for the worker/laborers and their family for a job and or service that has been performed or will be performed.
In business, there are obstacles resulted in the disruption of the company’s cash flow. Hence, the employers are late in paying the workers’ wage. Employers should understand the legal consequences in the event of late wage payment.
Article 18 of Government Regulation Number 78 of 2015 on Manpower Wage (GR 78/2015) states:
“Employer shall obligatorily pay the Wage on the date as agreed between the Employer and the Worker/ Laborer.”
Late wage payment may lead to the imposition of fine for employer. What is the mechanism on imposing fine and when can the employer is imposed to pay fine? Employers should understand this mechanism so they would not get sanctions that could harm the company.
Employer who is late to pay wage shall be imposed of fine at minimum 5% for any day of delay. If, on the eighth day, the wage is still unpaid, the employer shall be imposed of additional fine of 1% with no more than 50% of the wage that should have been paid. Article 55 of GR 78/2015 sets out in detail the mechanism on imposing fine.
The provision under Article 53 of GR 78/2015 states, the employer in question is the employer who is late or not paying the wages as cited in Article 5 paragraph (4) of this Law (concerning the components of wage, which are wage without allowance; base wage and fixed allowance; and base wage, fixed allowance and variable allowance, which stipulated under the Work Contract, Company Policy, or Joint Work Agreement) imposed to pay fine, subject to the following provisions:
- Starting from the fourth day up to the eight day as of the date of wage payment, there shall be the imposition of fine at 5% for every day of delay of the wage that should have already been paid;
- after the eighth day, if the wage is still unpaid there shall be the imposition of fine as cited in letter a plus 1% for every day of delay, under a condition that in a month, there should be no more than 50% of the wage that should have already been paid; and
- after one month, if the wage has yet to be paid, there shall be the imposition of fine as cited in letter a and b plus interest at the rate of interest of governmental bank.
In Good Corporate Governance, if there is any late wage payment, it should be communicated between the employer and workers. Convey the reason of delay and give certainty when the wage will be paid to minimize the occurrence of industrial relations dispute.
What if the company does not keep its promise to pay the late wage? Permanent workers have the right to receive unpaid wages plus the imposed fine, and to take legal proceedings such as bipartite or lawsuits in the Industrial Relations Court. On the other hand, the company has to face this problem calmly and put forward the communication method, so the industrial relations dispute will not arise.
To avoid disputes, it is necessary for companies to be able to make approaches and preventive actions. Therefore, companies also need to be active in communication forums and activities that can support harmonious relationship between management and workers. Thus, when there is a problem, the approach taken by worker is to build communication with the employer, rather than taking legal proceeding directly.
What can BP Lawyers do:
We have experience in assisting companies in resolving industrial relations disputes through bipartite, tripartite, or mediation, and through the Industrial Relations Court. In addition, we can help organize legal matters of the company whether in company regulations, contracts, and others related to legal aspects of the company. You can contact us via firstname.lastname@example.org or +62821-1234-1235
Ali Imron S.H.I