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Supply Chain Innovation

Indonesia's Multiple Minimum Wage Standards in the Apparel and Footwear Sectors

Publication date: 
Friday, April 30, 2021

Passage of the Indonesia Omnibus Law (2020 Job Creation Law) introduced significant amendments, including changes regarding minimum wages from Manpower Law 13/2003.

The new provision maintains the obligation of governors to determine the provincial minimum wage under certain conditions including economic growth and the inflation rate. However, the new practice for setting minimum wage weakens minimum wage provisions by eliminating sectoral minimum wages. This change may lead to the imposition of a lower minimum wage across all cities and districts within a province regardless of cost-of-living differences.

Prior to the passing of the 2020 Job Creation Law in Indonesia, there were hundreds of minimum wage standards for different special regions and cities within Indonesia. This created confusion for apparel and footwear brands and suppliers as they worked to uphold minimum wage requirements. Additionally, the existence of sectoral minimum wages for certain labor-intensive industries resulted in conflicting or unclear minimum wage standards in many parts of the country.

The 2020 Job Creation Law eliminates sectoral minimum wages, which were much higher than most provincial and city minimum wages. This brief emphasizes the FLA’s minimum wage standards, clarifies the wage provisions of the 2020 Job Creation Law, and provides the minimum wage for FLA company affiliates to uphold for all regions and cities from which these companies source.

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