Religious Holiday Allowances in Indonesia Still Obligatory Despite COVID-19
- Indonesia’s Ministry of Manpower has reminded employers that payment of the religious holiday allowance (THR) is still obligatory despite the pandemic.
- The Ministry issued Regulation M/6/HK.04/IV/2021 on April 12, 2021, which obligates employers to pay THR in full.
- Failure to pay the THR can result in fines and the suspension of business activities.
In April 2021, Indonesia’s Ministry of Manpower issued M/6/HK.04/IV/2021 on the implementation of the payment of the religious holiday allowance (Tunjangan Hari Raya – THR) no later than one week before the start of the religious holiday.
The THR is a yearly bonus given to employees at least one week before the start of the religious holiday observed by the employee (based on the employee’s religion), equivalent to one month’s salary (based on the period of employment). The recognized religious holidays for THR payments are:
- Eid-il-Fitri for Muslims;
- Christmas for Catholics and Protestants (considered as two different religions in Indonesia);
- Nyepi for Hindus;
- Vesak for Buddhists; and
- Chinese New Year for Confucianists.
The practice of many businesses in the country has been to pay the THR of Muslim employees before the Eid-il-Fitri break and non-Muslim employees prior to the Christmas holidays.
Employers that are unable to pay the THR must prove their inability to pay by providing transparent financial evidence to the local government. If this is approved, the company is still obliged to pay the THR either one day before the start of the religious holiday or at a later date, depending on the negotiations between the related parties.
Businesses should consult the advice of qualified legal advisors to better understand how this regulation impacts their HR policies.
Who is eligible to receive THR and how is it calculated?
All employees, whether permanent or contract-based are eligible for THR and it must be paid using Indonesian rupiah.The amount paid is based on the employees’ service period. For employees working for more than 12 continuous months, they are entitled to THR equivalent to one month’s salary.
For employees who have served one month or more but less than 12 months, the THR is calculated on a pro-rata basis using the following formula:
(service period/12) x 1 month’s salary
Freelance workers are also entitled to THR. Those working for more than 12 continuous months must receive the equivalent of one month’s salary, which is calculated on the average salary they received throughout this period.
For those working more than one month and less than 12 months, the THR is calculated based on the average monthly salary throughout the employment period.
What about employers who are unable to pay?
Regulation M/6/HK.04/IV/2021 states that the THR payment is still obligatory despite businesses being impacted by the economic downturn caused by the pandemic.
Businesses that are unable to pay the THR are first obligated to enter negotiations with their workers and agree to pay this bonus no later than one day before the start of the religious holiday. Such an agreement must be done in writing and reported to the local Ministry of Manpower office no later than seven days before the start of the religious holiday.
If this is not possible, businesses must provide transparent financial reports to the local government (governors, mayors, regents), which shows their inability to pay the THR. The local government must then ensure the affected business pays the THR at a date agreed upon by the relevant parties (employers, workers, labor unions, local governments).
Establishment of command posts
The government has mandated governors, mayors, and regents to establish command posts in every province for the implementation of the 2021 religious holiday allowance.
These command posts are teamed by members from the labor unions and the employers’ organization to handle complaints from employees. Further, employees can also make complaints via the Ministry of Manpower website.
Fines for non-compliance
The regulation reiterates that businesses who fail to pay the THR will be fined five percent of the THR amount, which will be used for the employees’ welfare. Further, this sanction does not waiver the employer’s obligation to pay the THR.
In addition to financial sanctions, employers will be subject to administrative sanctions for failure to pay the THR. These are:
- Restriction of business activities;
- Permanent or temporary suspension of production facilities; or
- Suspension of business activities.
This article was originally published on May 12, 2020, and has been updated on April 28, 2021, as per the latest developments.