Indonesia: Religious Holidays Allowance

Last year the Ministry of Manpower issued an important regulation regarding religious holiday allowances, in the form of Minister of Manpower Regulation No. 6 of 2016 (Regulation 6/2016). Regulation 6/2016 revoked and replaced the previous regulation governing the issue, which was issued in 1994.

Regulation 6/2016 expands the scope of the entitlement by reducing the service period threshold for the entitlement. Regulation 6/2016 also eliminates religious holiday allowance reliefs and adds sanctions for the late payment for religious holiday allowances.

Who is entitled to receive a religious holiday allowance?

Regulation 6/2016 confirmed that the entitlement to receive a religious holiday allowance extends to both employees hired on a permanent basis and those hired on a temporary basis. This includes freelance employees. Special provisions also provide that:

• permanent employees whose employment will be terminated within 30 days prior to the relevant religious holiday; and
• employees who are being transferred to another company with a continuing service period, who have not yet received the religious holiday allowance from the current employer,

are also entitled to a religious holiday allowance.

New service period threshold

Regulation 6/2016 sets out the new service period threshold for an employee to receive a religious holiday allowance. Previously, only employees who had been working at least 3 months were entitled to the religious holiday allowance; now employees with at least 1 month's service are entitled to the allowance.

Calculating the allowance

The amount of the religious holiday allowance will vary according to the employee's length of service, as follows:

• employees who have been working consecutively for 12 months or more are entitled to an allowance of 1 month's salary; and
• employees who have been working for at least 1 consecutive month, but for less than 12 months, are entitled to a pro-rated amount in accordance with the following formula:

                                            service period    x 1 month's salary

                                                    12

The monthly salary component for the purposes of calculating the religious holiday allowance for both permanent and temporary employees will consist of base salary as well as any fixed allowances.

Regulation 6/2016 also provides that employees may receive a higher religious holiday allowance than the statutory minimum if there is a specific provision regarding this in the relevant employment agreement, company regulation or collective labour agreement, or if the company has a customary practice regarding the determination of the religious holiday allowance amount. Unfortunately, Regulation 6/2016 is silent on how to assess whether a customary practice has been established at a particular company. This could potentially mean that employers who had previously granted religious holiday allowances higher than the statutory minimum will be bound by that practice.

Regulation 6/2016 also eliminates the ability for companies to seek relief from the Ministry of Manpower in order to reduce the amount of religious holiday allowances payable where the company is in a bad financial condition.

Payment Mechanism

Regulation 6/2016 states that the religious-holiday allowance shall be paid once in a year, at least 7 days before the relevant religious holiday of the employee (e.g. Eid Al-Fitr Day for Muslim employees; Christmas Day for Christian and Catholic employees; Seclusion Day for Hindu employees; Vesak Day for Buddhist employees; and Chinese New Year’s Day for Confucian-belief employees) or on a specifically agreed religious holiday.

It also has expressly provided that employers will need to pay the religious holiday allowance in cash and in Indonesian Rupiah, for consistency with the obligation to use Indonesian Rupiah within the Indonesian territory.

Sanction

Regulation 6/2016 provides that an employer who is late to make payment wil be liable for a fine of 5% of the outstanding religious-holiday allowance. It is unclear, however, to whom the fine should be paid to (i.e. the employee or a labour union), as Regulation 6/2016 states that the fine will be utilised for employee welfare as set out in the company regulations or a collective agreement.

Written by Narendra Adiyasa, Ardyan Winanshah Pulungan and Luthfi Sahputra