Statutory Holiday Allowance (THR): Only negligible relief for employers!

19 April 2021

On 12 April 2021, the Manpower Ministry (MM) issued Circular Letter M/6/HK.04/IV/2021 to all governors in Indonesia on the Implementation of Payment of Religious Holiday Allowances in 2021 for Company Employees (new THR policy)

What does the new THR policy mean for you?

In brief, the new THR policy provides “guidance” on the payment of the 2021 THR to employees by:

reaffirming the current regulated position that employers must pay the full THR amount to their employees at least seven days before the relevant religious holiday date (Holiday Date); and

providing an option for employers who have been impacted by the Covid-19 pandemic to cause them to be financially unable to pay employees the 2021 THR at least seven days before the Holiday Date, to negotiate a written agreement with employees to defer such payment (Agreement), provided that the payment deferral date is no later than the Holiday Date.

Despite the very limited flexibility given to employers under the new THR policy, the flexibility is narrowed even further by the following measures, also set out in the new THR policy:

Employees cannot be forced or obliged to accept an employer’s delayed THR payment proposal, which means they have the option to reject such proposal.

Employers:

(a)  cannot reduce the amount of THR to be paid and may only negotiate a THR payment schedule that must be fully realised by no later than the Holiday Date;

(b)  who wish to enter into an Agreement are obliged to “prove” to employees their inability to pay the 2021 THR on time (that is, at least seven days before the Holiday Date) based on their financial statements; and

(c)  are required to report any Agreement to the local Manpower Office at least seven days before the Holiday Date.

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