Definition“Compensation Management is more than just the

means to attract and retain talented employees…” – (Virginia Tech, 2005)

Another perspective :• Society’s Views• Manager’s Views• Stockholder’s Views• Employee’s Views

Assignment

• Comparison between expatriates’ salaries and local’s salaries in local company

• UU Tenaga Kerja (Labor Laws)• Peraturan Pemerintah (Government Policies)• Peraturan Menteri (Minister Policies)• Peraturan Daerah (Local Government Policies)• Company Regulations

Theoretical Background

“The Pay Model” – George T. Milkovich • Alignment• External competitiveness• Employee Contributions• Management

Common Implementation of the legal aspect in Indonesia Guidance For Standard Salaries of Expatriates per month in some employment (KEPUTUSAN DIREKTUR JENDERAL PAJAK NOMOR KEP-173/PJ/2002) :

“Most of company in Indonesia already respect to things about legal aspect which provisions regarding to labor laws..”

BUT …. < UMR.

it is still need a lot to be improved and enhanced the quality and capacity. Undang-Undang Republik Indonesia Nomor 13 Tahun 2003 Tentang Ketenagakerjaan – Bab X Pasal 88

in order to achieve economic equity and there is no gap both social phenomena and especially in the economic field which is still until recently emerged in Indonesia.

Case Study

Company Profile

PT Garuda Indonesia (Persero) Tbk, known as Garuda Indonesia, is the flag carrier of Indonesia.

Corporate VisionA strong distinguished airline through providing quality services to serve people and goods around the world with Indonesian hospitality.

Corporate MissionThe flag carrier of Indonesia to the world, to support national economic development by delivering professional and profitable air travel services.

Company Profile

Positive Working EnvironmentProductive, Disciplined, Creative, Diligent, Open, Responsive, and which supports good cooperation

Company Profile

Implementation of the legal aspect in the company

PT. Garuda Indonesia, recently, used different wages for expatriates employees salaries and local employees salaries.

Employment status was divided by two different categories, that is “Contract Employee” & “Permanent Employee”

“Contract Employee” : Expatriate Pilot“Permanent Employee” : Local Pilot

Company Profile

Comparison between Local Employees salaries and Expatriates employees salaries

Income Local Pilot Expatriate Pilot

Wages/month Rp. 47,7 Juta Rp. 68,8 Juta

Flight Allowance* Rp. 10 Juta -

Benefit Cash/month** Rp. 13, 9 Juta -

Benefit Non Cash/month - Rp. 2,25 Juta

House Allowance (month) - Rp. 10 Juta

Monthly Revenue Rp. 71 Juta Rp. 68,8 Juta

Yearly Revenue Rp. 860 Juta Rp. 826 Juta

Pension Fund 28 x regular wage -

After 20 years award 4 x regular wage -

Local Pilot Salaries & Expatriate Pilot Salaries (www.ciputraentrepreneurship.com)Critical

Review

Critical review / Analysis

Critical review / Analysis

• This kind of problem will not happen if all employees understand about the company regulations and also about difference cost of living in another countries (maybe it is more expensive than Indonesia cost of living).

at first glance, this salaries looks quite less fair for the local employees . . but in fact Garuda Indonesia Board of Directors has some reason in establish why the expatriates employees got bigger salaries per month

Critical review / Analysis

UNDANG-UNDANG REPUBLIK INDONESIANOMOR 13 TAHUN 2003

TENTANGKETENAGAKERJAAN

BAB X

Pasal 88

(1) Setiap pekerja/buruh berhak memperoleh penghasilan yang memenuhi penghidupan yang layak bagi kemanusiaan.

Local Pilot Salary : Rp. 47,7 Million – Rp. 68,8 Million per month

SALARY

Suggestion

“ If the employees feel can’t enjoying their working condition, it will be give negative effect on the company perfomance.”

Every year, salary must be evaluated because of money inflation.The most important thing is build comfort and fair Pay Model for the employees.

They must have an effective management. Communicate all informations

Conclusion

About the legal aspect and its implementationNot only company’s Board of Directors who must know anything about legal aspect . .

To reduce gap of this problem, socialization about Labor laws for the employees need to held as soon as possible. They must get an explanation about the salary systems, company regulations in order to reduce possibility of conflict in the future between the employees with BoD, CEO, or EVP.

Conclusion

About the assignmentBasically, Garuda Indonesia Airways was commited towards Labor Laws because salaries which given to the employees, especially permanent employee, was included an incentives, bonuses, allowance, pension fund, etc. I think it was quite enough for their daily life (if we compared with average Indonesia people’s cost of living)

The local employees feel discriminated by the company.

The socialization must do by the company, the local employees must be understand the reasons why the different occurs