How to Calculate Overtime Pay Based on Indonesian Government Regulations

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Indonesia’s overtime pay regulations have been stipulated in Act of the Republic of Indonesia No. 13 Year 2003 concerning Manpower Article 78 Paragraph 1 Letter a. It is stated that employees are entitled to overtime pay when they are required to work beyond normal working hours and they must sign their consent based on their own free will.

Overtime pay must be adjusted to the basic salary of each employee as well as the extra hours spent by them. Therefore, each employee may get different amount of overtime pay. As an employer, you must pay attention to this issue to comply with government regulations and avoid misunderstandings with your employees.

Overtime Eligibility

How to Calculate Overtime Pay Based on Indonesian Government Regulations
Source: queensemploymentattorney.com

Overtime wages are received by employees who work beyond normal working hours and calculated based on the amount of extra hours they spend. Before learning to calculate overtime pay, you need to learn about the overtime eligibility as specified in the Regulation of the Minister of Manpower and Transmigration of the Republic of Indonesia (Kemenakertrans) Decree No. 102/MEN/VI/2004 Article 1:

  • Overtime hours is the: hours longer than 7 (seven) hours a day and 40 (forty) hours a week for 6 (six) work days per one week, or;
  • 8 (eight) hours a day, and 40 (forty) hours a week for 5 (five) work days per one week or work hours during the weekly rest day, or;
  • During the public holiday stipulated by Government

The regulation also states that the maximum permissible overtime is 3 (three) hours a day and 14 (fourteen) hours a week.

Types of Overtime Applied by Companies in Indonesia

In Indonesia, there are at least two types of overtime that are implemented by many companies:

a) Task Force

This type of overtime applies when urgent moments arise, for example during audits and year-end closing.

b) Stand By/Call Out

This one is usually applied by manufacturing companies. Manufacturing employees work according to normal working hours, but they must be ready to work whenever there is an urgent request from factory plants.

Also read the related article: 7 Tips to Determine a Proper Salary Range for Employees

Employer Obligations

How to Calculate Overtime Pay Based on Indonesian Government Regulations
Source: jaburgwilk.com

Before implementing overtime pay, there are several requirements that you, as an employer, should meet:

  • Written instructions regarding the overtime and written approval from the concerned employee
  • Details of the overtime implementation, including a list of employee names, overtime duration, overtime goals, and overtime wages that will be received by employees
  • Agreement letters signed by both the employer and the employee in accordance with the Regulation of the Ministry of Manpower and Transmigration No. 102/MEN/VI/2004 Article 6

After fulfilling those obligations, you must also provide your employees with enough rest periods and breaks as well as adequate food and drink for three hours of work or more, as explained in the regulation of the Ministry of Manpower and Transmigration No.102/MEN/VI/2004 Article 7.

Overtime Pay Calculation

How to Calculate Overtime Pay Based on Indonesian Government Regulations
Source: justworks.com

Overtime pay calculation in Indonesia has been determined by Ministry of Manpower and Transmigration No. 102/MEN/VI/2004 as follows:

  • Overtime pay is calculated based on employee’s monthly salary (including fixed allowances)
  • One hour of overtime is equal to 1/173 employee’s monthly salary

In accordance with the regulations of the Ministry of Manpower and Transmigration, overtime pay during weekdays and holidays is calculated differently. Below is how to calculate it.

During Weekdays

Here is the calculation of overtime pay during weekdays:

Working Time Overtime Pay Calculation Formula
The first hour 1.5 x 1 hour pay rate 1,5 x 1/173 x monthly salary
The next hour 2  x 1 hour pay rate 2 x 1/173 x monthly salary

In order for you to really comprehend the calculation, see this example:

Ali’s normal working hours are 8 hours a day or 40 hours a week. Ali is required to work overtime for 2 hours per day twice. Ali’s monthly salary is Rp. 7,000,000. Then the calculation of Ali’s overtime pay is as follows.

The first hour:

2 hours x 1.5 x 1/173 x Rp 7,000,000 = Rp 121,387

The next hour:

2 hours x 2 x 1/173 x Rp 7,000,000 = Rp 161,849

Ali’s overtime pay is Rp. 283,236

During Holidays

If overtime is imposed during weekends or national holidays, the calculation is as follows.

Overtime on national holidays:

Working Time Overtime Pay Calculation Formula
The first 5 hours 2 x 1 hour pay rate 5 hours x 2 x 1/173 x monthly salary
The 6th hour 3 x 1 hour pay rate 1 hours x 3 x 1/173 x monthly salary
The 7th – 8th hour 4 x 1 hour pay rate 1 hours x 4 x 1/173 x monthly salary

If employees are required to work overtime 8 hours a day and 5 days a week:

Working Time Overtime Pay Calculation Formula
The first 8 hours 2 x 1 hour pay rate 8 hours x 2 x 1/173 x monthly salary
The 9th hour 3 x 1 hour pay rate 1 hours x 3 x 1/173 x monthly salary
The 10th – 11th hour 4 x 1 hour pay rate 1 hours x 4 x 1/173 x monthly salary

Illustration:

Nia works for 8 hours per day or 40 hours per week. Nia doesn’t work on Saturdays and Sundays, but the company asks Nia to work on Saturday for 8 hours. Nia’s basic salary is Rp. 8,000,000 per month. Thus, the calculation of Nia’s overtime pay is as follows:

8 hours x 2 x 1/173 x Rp. 8,000,000 = Rp. 739,884

Conclusion


Provision of overtime pay is a policy that must be carried out in any company that applies overtime systems. Overtime pay is not the same as incentives, so companies are not allowed replace it with incentives such as bonuses, facilities, and THR.

If an employee who works overtime pay is not paid, the company can be subject to a sanction of confinement for 1 – 12 months and/or a fine of Rp.10-100 million, based on the Manpower Act Article 187 Paragraph 1.

Overtime pay calculation is indeed very complex, but it can be simplified with the help of an HRM system. HashMicro provides an HRM system that allows you to manage employee salaries, including their overtime pay. With this software, there will be no more errors in calculating each employee’s salary.

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