Business players were asking for assurance that minimum wages at resident/city level each year be reasonably measurable. Certainty of pay was today necessary to save labor intensive industry in Indonesia. If there was no certainty of wages standard, labor cost in Indonesia was no longer competitive compared to that of other countries. Government urged the Government to be realistic in increasing salary level of small business [UMP/UMK] could be realistic or be considerate about company’s condition.
As told, labor unions demanded salary in crease of 50% in 2014. The demand was made as compensation on increasing commodity prices in 2013. The increase was rated as jacking up 30% salary increase of works. However, sofjan Wanandi of Apindo stated in Jakarta on Friday [23/8] that UMP could not possibly increase by 50% in 2014. If UMP increased at that amount companies would go out of business and mass dismissal of workers would continue. “increased wages of 50% was most unrealistic at the present condition” Sofjan said.
According to Sofjan, increase of UMP would be discussed by workers and some big labor unions. Apindo would not stop labor unions who refused company’s condition to stage demonstrations. In principle, Apindo would not come to terms with labor unions considering companies’ condition at the moment. He disclosed further the increase of oil price had not only reduce workers’ purchasing power, but also companies’ capacity. Sofjan said that increased oil price had also increased production cost.
About tax incentives, Sofjan claimed that workers might feel that the incentives offered no benefit for them. This was because taxes had always been paid by the company for the workers, so it seemed as if workers receive their salaries in full. From the company’s viewpoint, tax incentive would only be known to be beneficial after the company calculated profit and loss account. He also asked that the Government’s plan to offer incentive to labor intensive industry be accompanied by legal certainty in terms of salary.
Sofjan was of opinion that three Government proposition to allow exemption for income tax for workers would have no significant impact on the effort to prevent mass dismissals. He said that today industrial players needed certainty of formula on minimum wages each year. If this was not made clear, if was feared that Indonesian companies of other countries. The result was that investment might drop. To illustrate the average wages in Cambodia was only one third of that in Indonesia.
Previously the Ministry of Industry M.S. Hidayat the Government was today considering three options of incentive giving for labor intensive industry. The three options were: the Government temporarily take care of workers taxes, making tax cuts of company’s tax income, and increase level of nontaxable income [PTKP]. The Ministry of Industry tend to tend to chose the option of tax suspension by Government.
This proposal was in the process of fine tuning at the Ministry of Finance and was to be released soonest so it could be put in effect as payroll formula next year. Sofjan did not deny that the three incentive proposal could enlighten business people’s burden. However, tax incentive would only be effective if companies considered profit and loss. He added on that increase of minimum wages early this year, had caused 60,000 workers employed at Korean companies to be dismissed. The workers were of three industrial sectors: electronics, footwear, and textile.
Business News - August 28, 2013