Wage Structure and Scale in Indonesia: Employer Duties

A wage structure and scale (struktur dan skala upah, or struktur skala upah) is a company’s own table of pay: its positions grouped into grades, with a range of base pay for each grade. Every employer in Indonesia must prepare one and apply it. Management sets it in writing, tells each employee at least the part that covers their grade, and it guides pay once an employee has a year’s service.

What a wage structure and scale is

The terms come from Minister of Manpower Regulation (Permenaker) 1/2017, Article 1. The structure is the ladder of pay levels, from the lowest to the highest. The scale is the range of pay, from the smallest to the largest amount, within each grade. A grade groups positions by the value or weight of the job.

The figures in it are base pay (Permenaker 1/2017, Article 3(1)), and which allowances count as fixed is covered in fixed and non-fixed allowances.

Every employer needs one

The duty sits in Article 92(1) of the Manpower Law (UU) 13/2003, as replaced by the Job Creation Law (UU) 6/2023, and in Government Regulation (PP) 36/2021, Article 21(1). That article now reads, as rewritten by PP 49/2025: the employer must prepare and apply a wage structure and scale, taking into account the company’s ability to pay and productivity, and grade, position, length of service, education and competence.

Permenaker 1/2017, Article 2(1), already listed those five factors. The Constitutional Court brought them into the law itself: in decision 168/PUU-XXI/2023 of 31 October 2024 it held that Article 92(1) stands only if it is read to include them. The explanatory notes to PP 49/2025 describe them as part of the factors, called compensable factors, that a company weighs to decide what each position is worth.

The duty falls on every employer (UU 13/2003, Article 92(1); PP 36/2021, Article 21(1)). The exemption for micro and small businesses in Article 90B(1) of the Manpower Law and Article 36(1) of PP 36/2021 is an exemption from the minimum wage.

If a company has not set one, or has not told staff, the law provides for administrative sanctions, which follow a labour inspector’s examination (PP 36/2021, Articles 79(1) and 80(2); UU 13/2003, Article 190(1)).

Struktur dan skala upah: how it is set and shared

Three steps the law asks of the employer:

1. 1

   Management sets it

   The company’s management issues it as a decree (Permenaker 1/2017, Article 5).

2. 2

   Management tells each employee

   Individually, and at least the part for their own grade (PP 36/2021, Article 21(2) and (3)).

3. 3

   The labour office sees it

   Shown to the labour office when company regulations or a collective agreement are submitted, then handed back (PP 36/2021, Article 22).

Because the notice covers at least the employee’s own grade, a company does not have to share the full table with every member of staff (PP 36/2021, Article 21(3)).

The labour office sees the document when a company applies to have its company regulations ratified or renewed, or a collective agreement registered, extended or renewed: the company attaches the structure.

The official looks at it and must hand it back on the spot; the office documents a statement from management that one has been set (PP 36/2021, Article 22(2) to (5)).

Who it covers, and what changes after one year

The document applies to every employee of the company (Permenaker 1/2017, Article 7(1)).

For an employee with less than a year’s service at the company, the reference is the minimum wage (PP 36/2021, Article 24(1)). For an employee with a year or more, pay is guided by the structure (UU 13/2003, Article 92(2); PP 36/2021, Article 24(2)).

The aim, in the words of the explanatory notes to UU 6/2023, is certainty of pay for each employee and a narrower gap between the lowest and the highest pay in the company.

How a wage structure and scale is built

Permenaker 1/2017, Article 4, describes three stages a company can use. Job analysis turns what each role involves into a job description. Job evaluation assesses, compares and ranks the positions. The structure and scale are then set from that ranking.

The annex to the regulation works through three methods as examples: simple ranking, the two-point method and the point-factor method. A company may use one of them or another method that suits it (Article 6).

You do not need to choose a method on your own: we advise on which fits your roles.

Reviewing pay over time

The employer reviews wages periodically, taking into account its ability to pay and productivity (UU 13/2003, Article 92A; PP 36/2021, Article 48(1)). The review is set out in the employment contract, the company regulations or the collective agreement (Article 48(2)). “Periodically” means a fixed period, or a period the company sets by its own policy (explanatory notes to Article 48(1)).

The structure itself may also be reviewed. The result of a review is told to the employees whose grade has changed (Permenaker 1/2017, Article 10).

What this means for you

Our HR consulting team advises on the grades and ranges for your company. In short, management sets the document in writing, every employee is told at least the part for their own grade, and the labour office sees it when company regulations or a collective agreement are submitted.

Frequently asked questions