When Maya, an HR manager in Jakarta, received multiple requests for employee loans, she faced a dilemma. How much could be deducted from salaries each month? And what legal limits apply under Indonesian labor law? Cases like this highlight the importance of clear policies on employee loans and salary deductions.

Legal Framework

According to Indonesia’s Manpower Law (UU No. 13/2003 as amended by UU Cipta Kerja) and Government Regulation No. 35/2021, salary deductions are strictly regulated.

• Employers may deduct wages only for specific reasons: taxes, BPJS contributions, loan repayments, or penalties agreed in writing.
• The maximum deduction is 50% of monthly wages, ensuring employees still receive at least half their salary.
• All deductions must have written employee consent and be recorded transparently in payroll.

Real Case in Indonesia

A manufacturing company in West Java once deducted nearly 70% of salaries for employee loan repayments. Workers filed a complaint with the labor office, and the company was ordered to refund the excess deductions. Since then, the company revised its loan policy and capped deductions at 50%, restoring compliance and employee trust.

Best Practices for Employers

• Written Agreement: Ensure loan terms and repayment schedules are signed by both parties.
• 50% Rule: Never deduct more than half of the monthly wage.
• Transparency: Provide detailed payslips showing deduction amounts.
• Fair Interest (if any): Apply reasonable or zero interest to avoid exploitation.
• Alternative Support: Consider financial wellness programs or cooperative savings schemes.

Conclusion

Clear and compliant loan and salary deduction policies protect both employees and employers. By respecting the legal 50% rule and ensuring transparency, companies in Indonesia can support their workforce without risking disputes or penalties.

References

1. Law of the Republic of Indonesia No. 13 of 2003 on Manpower, as amended by Law No. 11 of 2020 on Job Creation (Omnibus Law).
2. Government Regulation No. 35 of 2021 on Fixed-Term Employment, Outsourcing, Working Hours, and Termination of Employment.
3. Ministry of Manpower of the Republic of Indonesia – Official Guidelines on Wage Protection and Deductions. https://kemnaker.go.id
4. International Labour Organization (ILO) – Indonesia: Wages and Working Conditions. https://www.ilo.org/jakarta