Each of the official religion in Indonesia has their own Religious Holidays, which in turn is recognized by the Government. For each Religious Holidays, Companies must make sure to conduct their obligation to distribute Religious Holiday Allowance, otherwise known as THR. Learn all you need to know about THR in our article below.
Pursuant to Minister of Manpower Ministerial Decree No. 16 Year 2016 on Religious Holiday Allowance (Tunjangan Hari Raya or “THR”) for Employees working in the Company (”Ministerial Decree 16/2016”), THR is an obligation that must be carried out by the Employer to the Employee. THR is a tradition and is also considered as part of the Company’s efforts to fulfill the needs of their Employees and their families in celebrating their religious holidays.
Article 1 Number 1 of Ministerial Decree 16/2016 defines THR as non-wage income to be paid by the Employer to the Employee or the Employee’s family before the religious feast, in the form of money or other forms. This definition confirms that THR is a separate part of the salay received by Employee, and is considered additional to basic salary and allowances, hence the non-wage status.
TYPE OF RELIGIOUS HOLIDAY
The Ministerial Decree 16/2016 further elaborates on what day can be determined as Religious Holidays for the official religions recognized in Indonesia:
WHO HAS THE OBLIGATION TO PAY THR
The party which has the obligation to pay THR is the Employer. Article 1 number 3 of Ministerial Decree 16/2016 stipulates that, an Employer can be in the form of a person, partnership or legal entity, who:
Representatives of foreign companies in Indonesia can also be considered as Employers.
HOW TO CALCULATE THE AMOUNT OF THR
The Employer is only obligated to pay THR for their permanent Employees (employed under Permanent Contract or PKWTT), and their temporary Employees who have worked for at least 1 (one) month (employed under Temporary Contract or PKWT).
Pursuant to Article 3 of Ministerial Decree 16/2016, the amount of THR for Permanent Employees is determined as follows:
The 1 (one) month salary referred above consists of the fixed take home pay paid to the Employee each month, consisting of at least the Basic Salary (Gaji Pokok) and Fixed Allowances (Tunjangan Tetap), if any.
Meanwhile, the amount of THR which must be given to Non-Permanent/Temporary Employeesis as follows:
In the event that the Company has already determined in their Employment Agreement, Company Regulation, or Collective Labor Agreement a higher amount of THR, the THR shall be given pursuant to such agreements and regulations.
WHEN DO YOU HAVE TO PAY THR
Pursuant to Circular Letter of the Ministry of Manpower No. 1/MEN/VI/2016 concerning the Payment of THR, THR is given 1 (one) time in 1 (one) year, and must be paid no later than 7 (seven) days prior to the Religious Holiday.
There are sanctions applicable to Employers who are late to pay THR, in the form of 5% fine of the total THR which should have been paid to the Employee. Whereas for Employers who do not pay THR at all to their Employees, can be subjected to administrative sanctions.
HOW CAN SMART CONSULTING HELP YOU?
To ensure a smooth investment and business operation from the legal perspective, but also still focus on maintaining your business in Indonesia and reach your revenue target, it is advised for you to find capable and trusted lawyers or legal consultants for advice and assistance in ensuring your legal compliance with prevailing laws and regulations.
SMART Consulting is an Indonesian Corporate Legal Services firm. SMART has assisted Clients in dealing with matters related to Manpower Law, such as drafting, reviewing and registering the Employee Toolkit, including Employment Agreement, Collective Labor Agreement, and Company Regulations. We also provide advisory services regarding Employment matters, as well as assistance in conducting termination of employment and manpower dispute resolutions.
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