Executive Summary

Key insights and market outlook

The Indonesian government is revising its minimum wage policy for 2026, moving away from a uniform 6.5% increase used in 2025 ¹

². New regulations will allow provincial governors to set wages based on local economic conditions, addressing growing disparities between regions ³. Labor unions have been advocating for a more nuanced approach, citing significant differences between Rp2.1 million in low-wage areas like Banjarnegara and Rp5.6 million in high-wage areas like Bekasi ².

Full Analysis

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Deep Dive Analysis

Indonesian Minimum Wage Policy Evolution for 2026

Shift from Uniform Percentage Increase

The Indonesian government has decided to change its minimum wage calculation method for 2026, abandoning the uniform 6.5% increase applied across all regions in 2025 ¹

. This change comes as labor unions and business associations have been voicing their concerns about the existing system's limitations ²³.

Addressing Regional Disparities

The current system has created significant disparities between regions, with minimum wages ranging from Rp2.1 million in areas like Banjarnegara to Rp5.6 million in cities like Bekasi ²

. Labor unions argue that a uniform percentage increase exacerbates these differences, creating unfair conditions for workers performing similar tasks in different regions.

New Regulatory Framework

The Ministry of Manpower, led by Minister Yassierli, is drafting new regulations through a Government Regulation (PP) that will delegate more authority to provincial governors to determine minimum wage adjustments based on local economic conditions ⁴

. This move is in response to the Constitutional Court's decision No. 168/2023, which mandated considering the Decent Living Needs (KHL) of workers in wage calculations.

Stakeholder Perspectives

Labor Unions' Concerns

Ristadi, President of the Indonesian Workers Confederation (KSPN), has been vocal about the need for a more nuanced approach. He suggests that areas with lower minimum wages should experience more significant increases compared to regions with already high wages ²

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Business Community's Response

Bob Azam from Apindo welcomed the government's move to revisit the wage formula, hoping it will return to the mechanism outlined in Government Regulation No. 51/2023 ¹

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Implementation Timeline

The new minimum wage policy for 2026 will be announced by provincial governors following the implementation of the new regulations. This delay has pushed the announcement from the original date of November 21, 2025 ¹

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References