Indonesia's Minister of Manpower on March 8, 2023, issued MOM Regulation No. 5 of 2023 regarding the Adjustment of Working Hours and Wages in Certain Export-Oriented, Labor-Intensive Companies Affected by Changes in the Global Economy ("MOM 5").

MOM 5 was issued to help certain export-oriented, labor-intensive companies facing continuity of work and continuity of business issues as a result of weaking global demand.

The regulation allows companies that qualify to adjust their working hours and wages based on a mutual agreement with the company's labor union. The executed mutual agreement must be registered at the local manpower office and is only valid for a maximum of 6 months.

Under MOM 5, export-oriented, labor-intensive companies that qualify to adjust their working hours and wages must:

  • Have a minimum of 200 employees;
  • Have labor costs make up at least 15% of production costs; and
  • Be dependent on orders from the United States and Europe for production, as evidenced by purchase orders.

MOM 5 also states that to qualify, the export-oriented, labor-intensive company must be in one of the following industries:

  • Textile and apparel;
  • Footwear;
  • Leather and leather goods;
  • Furniture;
  • Children's toys.

The Ministry of Manpower has emphasized that any wage adjustment under MOM 5 will not affect the basis for calculating social security contributions and benefits for employees, termination of employment, and other rights of workers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.