Indonesia's 2026 Minimum Wage to Rise 5.8% on Average

New Regulation for Minimum Wage Determination

The Indonesian government has introduced a new formula for determining the provincial minimum wage (UMP) for 2026, as outlined in Government Regulation No. 49/2025 ¹

. The formula combines inflation rate and economic growth multiplied by an alpha index, ranging from 0.5 to 0.9, as set by the Ministry of Manpower ³

Source 3

https://nasional.kontan.co.id/news/ump-2026-harus-ditetapkan-24122025-ini-daftar-khl-di-38-provinsi-untuk-hitung-ump

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Average Wage Increase Slows Down

According to a Mercer survey, the average salary increase for Indonesian employees is expected to be 5.8% in 2026, down from 6.3% in 2025 ²

. This slowdown reflects the country's economic conditions and inflation rates. Despite this, all surveyed companies plan to maintain salary increases in 2026, driven by factors such as individual performance, salary ranges, and company performance ²

Source 2

https://newssetup.kontan.co.id/news/tak-sekencang-2025-rata-rata-gaji-karyawan-2026-diprediksi-naik-58

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Provincial Minimum Wage Determination

As of December 23, 2025, only 7 provinces have announced their UMP 2026, with the deadline for determination set on December 24, 2025 ⁶

. North Sumatra has set a 7.9% increase, raising its UMP from Rp 2,992,559 to Rp 3,228,971 ⁶

Source 6

https://nasional.kontan.co.id/news/besok-2412-terakhir-tapi-baru-7-provinsi-yang-tetapkan-ump-2026-ini-daftarnya

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Labor Unions' Demands

The Indonesian Workers Confederation (KSPI) has urged governors to use the maximum alpha index of 0.9 when calculating the minimum wage, citing the need to maintain workers' purchasing power ⁷

. Several regencies have already set their minimum wages above 6.5%, including Kabupaten Bekasi at 6.89%, Kabupaten Pasuruan at 7.33%, and Kabupaten Serang at 6.61% ⁷

Source 7

https://finance.detik.com/berita-ekonomi-bisnis/d-8273168/buruh-tuntut-ump-jakarta-naik-jadi-rp-5-8-juta

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Implications

The new minimum wage regulation aims to create a more flexible and fair wage system, tailored to each province's economic conditions. The Ministry of Manpower has adopted an international standard methodology developed by the International Labour Organization (ILO) to calculate the Decent Living Needs (KHL), which serves as a reference for determining the minimum wage ⁵

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