Indonesian Minimum Wage Policy for 2026 Sparks Controversy

New Formula Introduced Amid Mixed Reactions

The Indonesian government has introduced a new formula for calculating the 2026 Provincial Minimum Wage (UMP), set as inflation + (economic growth x alpha) with alpha ranging between 0.5 and 0.9. This policy decision has triggered mixed reactions from various stakeholders, including employers, labor unions, and government officials ¹

Employer Concerns: Potential Layoffs and Financial Strain

The Indonesian Employers' Association (Apindo) has expressed strong concerns about the potential financial burden this new formula could impose on businesses. According to Subchan Gatot, Chairman of Apindo's Labor Committee, the alpha range is far above employer expectations. The association is particularly worried that this could lead to mass layoffs in labor-intensive industries ¹

Labor Union Demands: Higher Alpha Value

On the other hand, labor unions, led by the Indonesian Workers' Confederation (KSPI), are pushing for a higher alpha value of 0.9, despite the government's flexibility in setting the alpha between 0.5 and 0.9. KSPI President Said Iqbal has warned of mass protests continuing until January 2026 if their demands are not met. The union is also concerned about governors potentially altering the recommended alpha values submitted by local wage councils ²

Government Assurance: No Wage Reduction

Labor Minister Yassierli has provided assurance that the new formula will not result in a decrease in wages, even if economic growth is negative. He explained that the formula ensures wages will always increase by at least the rate of inflation. The minister expressed confidence that governors will announce the new minimum wages by the December 24, 2025 deadline ³

Implementation Timeline

The new minimum wage regulations will take effect on January 1, 2026. The government has urged governors to finalize the UMP announcements by December 24, 2025, to ensure a smooth implementation process. This timeline has been communicated by both the Labor Ministry and the Ministry of Home Affairs ⁵