KSP LEGAL UPDATES
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KSP LEGAL UPDATES
Obligation For The Employer To Prepare Wage Structure and Wage Scale
One of new regulations as the implementation of Government Regulation Number 78 of 2015 on Wage is Ministry of Employment Regulation Number 1 of 2017 regarding Wage Structure and Wage Scale (“MOE Reg 1/2017”).
The requirements under the MOE Reg 1/2017, i.e. preparing wage structure and wage scale as well as informing them to the employees in person, should be completed at the latest 23 October 2017.
Article 1 of the MOE Reg 1/2017 defines:
1. Wage Structure is a structure of wages from the lowest amount to the highest amount or from the highest amount to the lowest amount.
2. Wage Scale is a range of wages from the lowest amount to the highest amount that is applicable for a particular level of employees.
Wage structure and wage scale prepared by employer based on classification, position, years of service, education and competency of the employees. Further, Article 3 of the MOE Reg 1/2017 provides wage is set out in wage structure and wage scale are basic wage only.
The Employer is obliged to make wage structure and wage scale by way of a ‘decree’. As the decree is not specifically elaborated in the MOE Reg 1/2017, the decree could be issued by the Board of Directors (BOD) or Human Resources department with approval from the BOD.
Attachment of the MOE Reg 1/2017 provides example of determining wage structure and wage scale such as simple ranking method, two-point method and so on. However, the Employer is not obliged to apply any of such method if they have different one.
It is also required to present wage structure and wage scale once the Employer submit application for i) ratification and renewal of company regulation; ii) registration, extension and renewal of collective labor agreement.
Failure of preparing wage structure and wage scale leads to administrative sanction to the Employer. The sanction could be in the form of warning, written warning, freezing of business activities, cancellation of approvals, cancellation of registrations or revocation of company license.
The requirements under the MOE Reg 1/2017, i.e. preparing wage structure and wage scale as well as informing them to the employees in person, should be completed at the latest 23 October 2017.
Article 1 of the MOE Reg 1/2017 defines:
1. Wage Structure is a structure of wages from the lowest amount to the highest amount or from the highest amount to the lowest amount.
2. Wage Scale is a range of wages from the lowest amount to the highest amount that is applicable for a particular level of employees.
Wage structure and wage scale prepared by employer based on classification, position, years of service, education and competency of the employees. Further, Article 3 of the MOE Reg 1/2017 provides wage is set out in wage structure and wage scale are basic wage only.
The Employer is obliged to make wage structure and wage scale by way of a ‘decree’. As the decree is not specifically elaborated in the MOE Reg 1/2017, the decree could be issued by the Board of Directors (BOD) or Human Resources department with approval from the BOD.
Attachment of the MOE Reg 1/2017 provides example of determining wage structure and wage scale such as simple ranking method, two-point method and so on. However, the Employer is not obliged to apply any of such method if they have different one.
It is also required to present wage structure and wage scale once the Employer submit application for i) ratification and renewal of company regulation; ii) registration, extension and renewal of collective labor agreement.
Failure of preparing wage structure and wage scale leads to administrative sanction to the Employer. The sanction could be in the form of warning, written warning, freezing of business activities, cancellation of approvals, cancellation of registrations or revocation of company license.
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