Understanding religious holiday allowance (THR) in Indonesia

Everyone in Indonesia must celebrate major religious holidays such as Idul Fitir and Christmas Day. Many significant religious holidays are designated as national holidays, and companies also provide religious holiday allowances, known as Tunjangan Hari Raya (THR), to their employees.

The THR, or the religious holiday allowance, is a mandatory employer-provided benefit for various religious holidays. This policy helps to ensure everyone can participate in the festivities. Let's delve deeper and explore its significance for both employees and the Indonesian economy.

What is a religious holiday allowance in Indonesia?

When talking about THR, Indonesia's Ministry of Manpower has issued Circular Number M/2/HK.04/III/2024. The regulation mandates that this year's religious holiday allowance be paid in full, not in instalments.

The religious holiday allowance (THR) is an annual bonus provided to employees at least one week before the religious holiday they observe, according to their respective faiths. The recognized religious holidays for THR payments include:

• Eid-il-Fitr for Muslims;
• Christmas for Catholics and Protestants (considered two separate religions in Indonesia);
• Nyepi for Hindus;
• Vesak for Buddhists and
• Chinese New Year for Confucianists.

Given that the majority of Indonesian workers follow the Islamic faith, it is customary for many businesses in the country to pay the THR to Muslim employees before the Eid-il-Fitr holiday and to non-Muslim employees before the Christmas holidays.

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Who is eligible to receive THR, and how can it be calculated?

Based on an Employment Agreement, the religious holiday allowance is provided to employees who have worked continuously for at least one month. The amount of THR is determined as follows:

• Employees who have worked for 12 months or more are entitled to a THR equal to one month's wage.
• Those who have worked for between one month and less than 12 months receive a proportional THR based on their working period.

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Casual daily employment agreement

Employees on casual daily employment agreements receive a THR equal to one month's wage. The religious holiday allowance is calculated as the average salary received over the last 12 months if they have worked for 12 months or more or the average monthly salary during their working period if they have worked for less than 12 months.

Production-based agreement

Moreover, employees whose wages are based on production units are entitled to a THR equal to one month's wage, calculated as the average wage received in the last 12 months before the religious holiday.

If a company's employment agreements, regulations, collective labor agreements, or practices stipulate a higher THR amount, the company must pay the higher amount.

Export-oriented & labor-intensive industries

For specific export-oriented, labor-intensive industries affected by global economic changes, such as textiles, footwear, leather goods, furniture, and children's toys, the religious holiday allowance is calculated based on the last wages before any wage adjustments, as per the Minister of Manpower Regulation Number 5 of 2023 concerning Adjustment of Working Time and Wages for such companies.

When should THR be distributed?

THR is a payment directly linked to religious observances. It is disbursed one week before the respective celebrations. The timing is based on the employee's religion and the upcoming holiday.

Employers must ensure timely disbursement of the THR payment. Below are the deadlines for the religious holiday allowance payment per respective religious holidays in 2024:

What are the sanctions for businesses that fail to pay THR?

Employees can report their employer to the Ministry of Manpower if they delay or fail to pay the THR bonus. Only businesses with explicit permission from the Ministry of Manpower can defer this payment. Employers who do not comply may face fines and other administrative sanctions, including:

• A fine of five percent of the total THR owed to the employee;
• Written warnings;
• Restrictions on business activities, such as delays in receiving business permits or limitations on production capacity;
• Temporary suspension of all production and
• Suspension of business activities for a certain period.

These sanctions are applied in stages and do not exempt the employer from the obligation to pay the THR. Additionally, employees who still owe their THR from previous years must be paid in full.

If, after these sanctions, the employer still fails to pay the religious holiday allowance, the employee has the right to take the employer to the Industrial Relations Court.

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