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Legal Updates | New Ministry of Employment Regulation on Religious Festivity Allowance

On 8th March 2016 the Minister of Employment issued Regulation No. 6 of 2016 on Religious Festivity Allowance for Employees in Companies (“Regulation 6”). Regulation 6 replaces Regulation No. PER-04/MEN/1994 of 1994 on the same matter ("Regulation 4").

Regulation 6

Regulation 6 regulates the Religious Festivity Allowance (i.e., Tunjangan Hari Raya or as it is commonly known "THR"). THR is a mandatory benefit that must be provided to all employees in conjunction with the religious holiday observed by the employee (based on the employee's religion).

Similar to Regulation 4, Regulation 6 states that:

  1. all employees (i.e., both definite period and indefinite period employees) are entitled to THR; and
  2. THR is not paid to a definite period employee if the definite period employment agreement ends prior to the date the THR is payable to the employee.

Changes and New Matters

Changes and new matters of note under Regulation 6 are:

  1. Chinese New Year (Imlek) is now included as one of the recognised religious holidays under Regulation 6. The four other recognised religious holidays remain, i.e.:
    • Idul Fitri (end of the fasting month of Ramadhan) for Muslims
    • Christmas for Christian Protestants and Catholics
    • Seclusion (Nyepi) for Hindus
    • Vesak (Waisak) for Buddhists
  2. All employers are now obliged to provide THR to employees who have worked continuously for one month. Under Regulation 4, the period was three months.

    The amount of THR to be paid remains the same as it was in Regulation 4, i.e., based on the employee's service period as follows:
    1. An employee with a service period of 12 continuous months or more is entitled to THR in an amount equal to one month's salary.
    2. An employee with a service period of one month or more but less than 12 months is entitled to a prorated amount of THR calculated using the following formula:

      (service period/12) x 1 month's salary
  3. For daily freelance workers, the one month's salary is determined as follows:
    1. For those who have worked for 12 months continuously or more, the one month's salary is calculated based on the average salary for the past 12 months.
    2. For those who have worked for less than 12 months, the one month's salary is calculated based on the average salary received each month during employment.
  4. THR must be provided in the form of money in Indonesian Rupiah. Under Regulation 4, as long as an employee had agreed, up to 25% of the THR could be provided in forms other than money.
  5. If an employee's religious holiday occurs more than once in the same calendar year, the employee will be entitled to THR for each occurrence.
  6. Employers who are late in providing THR will be fined 5% of the THR amount. The fine will be managed and utilised for the employees' welfare in accordance with the company regulations or the collective labour agreement of the employer. This sanction does not waive an employer's obligation to provide THR to its employees.
  7. Employers who do not provide THR for their employees will be subject to the administrative sanctions under prevailing laws and regulations. Regulation 6 does not state what these administrative sanctions are. However, under Government Regulation No. 78 of 2015 on Wages ("Regulation 78"), the administrative sanctions that can be imposed on an employer who does not provide THR for their employees may be in the following forms:
    1. Written warning
    2. Restriction of business activities
    3. Temporary or permanent suspension of some or all production facilities
    4. Suspension of business activities.

      It is not clear from Regulation 6 and Regulation 78 exactly how these administrative sanctions will be imposed, e.g., whether a number of written warnings will be issued or just one, whether the sanctions will only be imposed in the order above, etc. However, typically these sanctions are imposed in the order above, e.g., at least one warning letter is issued before business activities are restricted or a suspension imposed.

Unlike Regulation 4, Regulation 6 no longer allows an employer who is unable to provide THR to apply for a deviation from the amount of THR to the Ministry of Employment.

Transition Period and Implementation

There is no “transition period” under Regulation 6. Regulation 6 became effective on the date it was issued, i.e., 8th March 2016.

Hadiputranto, Hadinoto & Partners, Member of Baker & McKenzie International - 8th April 2016

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Population: 259 million (2016)
Currency: Indonesian Rupiah
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