Religious Holiday Allowances in Indonesia: Enhancing Partnership Work Relationships

Understanding Religious Holiday Allowances

Over quite many years, the Indonesian government has mandated that employers provide religious holiday allowances (Tunjangan Hari Raya – “THR”) to their employees based on their respective religions. The compulsory provision of religious holiday allowances is outlined in several regulations concerning employment matters, including Law Number 13 of 2003 concerning Employment, partially amended by Government Regulation in Lieu of Law Number 2 of 2022 and subsequently ratified through Law Number 6 of 2023, Government Regulation No. 36 of 2021 partially amended by Government Regulation Number 51 of 2023 on Wages, and Regulation of the Minister of Manpower of the Republic of Indonesia No. 6 of 2016 on Religious Holiday Allowances for Employees in Companies (“MOM Reg 6/2016”).

Fundamentally, THR is a non-wage income that employers are obligated to pay to their employees prior to religious holidays. This allowance is designed to ensure that employees and their families can fully participate in the festivities of their respective faiths.

In Indonesia, each individual adheres to one of the six recognized religions: Islam, Protestantism, Catholicism, Buddhism, Hinduism, and Confucianism. Therefore, companies typically disburse THR before the religious holidays commemorated by each employee, including:

Eid al-Fitr for Muslim employees;
Christmas for Protestant and Catholic employees;
Day of Silence (Nyepi) for Hindu employees;
Vesak Day for Buddhist employees; and
Chinese New Year for Confucian employees;

Religious Holiday Allowances

How to Calculate THR

Calculating THR involves a fair and proportional approach. Unless stipulated otherwise in the employment contract, company regulation, collective labor agreement, and/or established common practice within the company, employees with varying lengths of continuous employment receive THR based on their tenure (service period), thereby ensuring fairness across the board.

Article 3 of MOM Reg 6/2016 sets out the THR calculation formula. Employees who have been continuously employed for at least 12 (twelve) months are entitled to THR equivalent to 1 (one) month’s wage, while those continuously employed for less than 12 (twelve) months are proportionally entitled to THR according to their length of employment, calculated by dividing the length of employment by 12 (twelve) and multiplying by one month’s wage.

Meanwhile, the one month’s wage in calculating THR for employees under the daily wage or output basis will be calculated differently, that is, by averaging their earnings over the last 12 (twelve) months prior to religious holidays.

Religious Holiday Allowances

When to Pay the THR

The deadline for the payment of THR (religious holiday allowance) is crucial and must be adhered to by employers. While there might be variations allowed by specific agreements such as employment contracts, company regulations, or collective labor agreements, it is imperative that the payment be made no later than 7 (seven) days before the religious holiday.

Failure to comply with this deadline carries consequences, and that indicates the importance the Government of Indonesia places on accommodating religious practices in the workplace. Employers who neglect the obligation to pay THR on time are subject to sanctions, which can range from fines to administrative penalties.

For instance, if a company misses the THR payment deadline, the company could be liable for a penalty equivalent to 5% (five percent) of the total outstanding THR amount. It is essential to note that this fine does not absolve the company from its obligation to pay THR to its employees; rather, it serves as a punitive measure to enforce timely compliance.

Religious Holiday Allowances

Changes to the Basic Principles of THR Distribution – Specifically for Partnership Work Relationships

On 18 March 2024, while announcing Circular Letter Number M/2/HK.04/III/2024 regarding the Implementation of Religious Holiday Allowances for Employees in Companies, the Director-General of Industrial Relations Development and Employment Social Security of the Ministry of Manpower, Indah Anggoro Putri, urged companies to give THR to online motorbike taxi drivers and logistics couriers (i.e., Grab, Gojek, and the like) although the work relationship between the online motorbike taxi drivers or logistics couriers and the online application service companies is based on a partnership arrangement. She argued that this “partnership arrangement” actually falls under a fixed-term employment contract (PKWT) arrangement. ¹

In response, Gojek’s Senior Vice President of Corporate Affairs, Rubi W Purnomo, clarified that the work relationship between Gojek and its drivers is indeed a partnership and does not fall under the PKWT category or any other employment relationship. Therefore, Gojek stated that it will not provide THR to its partner drivers but will instead offer benefits such as homecoming (mudik) and bazaar programs. Similarly, Grab, as an online application service company, announced that it will provide incentives for its partner drivers on the first and second days of Eid al-Fitr. ²

Despite the contradiction between the Director-General’s argument and the prevailing regulations as there is currently no formal legal basis underlying such an argument at the moment, the Ministry of Manpower in the days leading up to Eid al-Fitr 2024 indicated that the government is paying attention to current developments and considering establishing a legal framework to govern matters related to THR. ³ However, it is unlikely that these regulations will be immediately applicable this year. Nevertheless, companies operating under partnership arrangements should be prepared for the possibility of future regulations issued by the government. ⁴

As with other changes to any legal framework, there are likely to be both advantages and disadvantages. The implementation may have various impacts, akin to two sides of a coin.

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