In Indonesia, the THR is among the most sought-after benefits that every employee within the country looks forward to receiving. Indeed it is not a coincidence that the THR, which is a one-time salary increase for all Indonesian employees, is tied into the surrounding religious holidays; so that employees should use this one time salary increase to fund their trip back home to their home village and on the various festivities that ensue. With these benefits, employees can use them to support their religious holiday activities, of which there are many during that time of year. During the initial year of the pandemic, the dissemination of the THC proved to be quite difficult because of the restrained conditions caused by Covid. However, due to how coveted such benefits were, and how tied in they were to the festivities to come, the Indonesian Ministry of Manpower had emphasized that all employers would still be required to provide the THR to their workers, although this would only be applied to companies that could afford it. Indeed, if a company is able to provide their internal financial statements which prove their losses, such entities would not be required to provide THR payments to their staff. Fast-forward to 2022, and now the pandemic has been gradually waning down, in addition to an overall economic improvement in Indonesia. Therefore, this year, companies will be required to pay THR to their employees without delay.
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THR stands for Hari Raya Allowance, which is a non-wage based one-time monetary allowance that is required to be paid by all employers operating within Indonesia to their workers before the upcoming religious holidays. This THR is given once a year in accordance with the religious holidays of each employee. Based on the Minister of Manpower Regulation Number 6 of 2016 (Permenaker 6/2016), the religious holidays referred to here are as follows:
- Eid al-Fitr for employees who are Muslim
- Christmas for employees who are Catholic and Protestant Christians
- Nyepi for Hindu employees
- Vesak for Buddhist employees
- Chinese New Year for Confucian employees
However, it is important to note that the THR during the holidays, all employees will be eligible to receive the THR benefits regardless of what religion the employee embraces. This is regulated in Permenaker 6/2016 in Article 5 paragraph (3) which reads:
The Religious THR as referred to in paragraph (1) is paid in accordance with the religious holidays of each Worker/Laborer, unless otherwise stipulated in accordance with the agreement between the Employer and the Worker/Laborer as stated in the work agreement, company regulations or collective work agreement.
Who is Eligible for the THR?
Employees who are entitled to receive the Hari Raya Allowance are workers or laborers who have worked for at least 1 month continuously within the company. Additionally, providing the THR is also a mandatory benefit to be given to all employees, both in regards to permanent employees (Indefinite Time Work Agreement) or contract based employees (Specific Time Work Agreement).
However, in the event that a worker’s employment was terminated, the regulations for providing THR between permanent employees and contract employees may differ. Article 7 of the Minister of Manpower 6/2016 explains that permanent employees (Indefinite Work Agreements) who have been terminated from work within 30 days before the religious holidays ensue are still entitled to receive THR. Meanwhile, contract based employees (Specific Time Work Agreement) are not entitled to THR in the case that their employment ends within a 30 day period before the start of the religious holidays.
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Calculating and Distributing THR
The amount of THR given can be calculated through the following:
- Workers or laborers who have worked for 12 (twelve) months continuously or more, are given 1 (one) month’s wages.
- Workers or laborers who have a continuous working period of 1 (one) month but less than 12 (twelve) months, are given proportionally according to the period of service with the calculation of working period / 12 x 1 month wages.
- As we explained earlier, employee THR is given once a year. These benefits must be paid to employees no later than 7 days before the arrival of the religious holiday.
There are differences in how to calculate employee THR for employees who have worked for 12 months with employees who have worked less than 12 months. For Employees with more than 12 months of service, the formula used to calculate THR for employees who have worked for more than 12 months is: 1 month basic salary + Fixed allowance.
Further, a fixed allowance is a payment provided by the company to employees on a regular basis and generally with a fixed nominal value for workers and their families. Examples include child allowances, housing allowances, regional allowances, and others. Meanwhile, non-fixed allowances are payments given by the company to employees on an irregular basis with a nominal that is not fixed because it is based on hourly, daily, or according to an agreement. Examples include transportation allowances, lunch allowances, and others.