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Minister of Manpower Regulation No.5 of 2023: Companies Can Adjust Labor Wages

Recently, the Ministry of Manpower issued a regulation in Indonesia intended to maintain the sustainability of the industrial climate in Indonesia amidst global economic uncertainty. This is the Minister of Manpower Regulation No. 5 of 2023 concerning Adjustment of Working Time and Wages in labor-intensive export-oriented industrial Companies that Affected by Changes in the Global Economy ("MOMR 5/2023").

According to Article 2 of MOMR 5/2023, this regulation is created to provide protection and maintain the employment of workers, as well as to sustain the operations of certain labor-intensive export-oriented industrial companies from the impact of global economic changes that result in a decline in market demand. Article 3 of MOMR 5/2023 defines labor-intensive export-oriented industrial companies as companies that have at least 200 workers, where labor costs account for at least 15% of production costs, and production is dependent on orders from the United States and countries in Europe, as evidenced by order request letters. These companies include, but are not limited to, the textile and garment industry, footwear industry, leather and leather goods industry, furniture industry, and children's toy industry.

To achieve this goal, MOMR 5/2023 grants the authority to business actors to adjust the wages of their workers accordingly. Article 5 of MOMR 5/2023 explains that labor-intensive export-oriented industrial companies affected by global economic changes may adjust their working hours. This adjustment is made by reducing the regular working hours in the company. In detail, the adjustment of working hours can be less than 7 (seven) hours per day and 40 (forty) hours per week for 6 (six) working days in 1 (one) week, or less than 8 (eight) hours per day and 40 (forty) hours per week for 5 (five) working days in 1 (one) week.

Furthermore, labor-intensive export-oriented industrial companies affected by global economic changes may adjust the wage of their workers. This is done with the provision that the wage paid to the workers is at least 75% (seventy-five percent) of their usual wage.

It is important to note that companies cannot unilaterally establish this policy without the approval of their workers. As stated in MOMR 5/2023, whether it is an adjustment of working hours or wages, employers must first reach an agreement with their workers. Article 9 of MOMR 5/2023 explains that such an agreement must be made in writing and must at least include: adjustment of working hours, wage rate, and the duration of the agreement. Moreover, the agreement is prohibited from having a duration exceeding the predetermined time, which is a maximum of 6 (six) months from the date MOMR 5/2023 is established. Additionally, employers must convey the agreement to their workers or labor unions and to the local district/city Manpower Office, which will be copied to the provincial Manpower Office and the Ministry of Manpower.

If you need consultation concerning labor issues, Schinder Law Firm is one of many corporate law firms in Indonesia. Our professional civil lawyers strive to understand your unique needs and concerns; we will develop creative, cost-effective ways to assist you. Contact us at info@schinderlawfirm.com today to schedule a consultation to discuss your situation and how we can help.

Author: Dewi Susanti

Schinder Consultant London Ltd.


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