Indonesia’s Latest Wage Regulation Update What Companies Need to Know for 2026 and Beyond скачать в хорошем качестве

Indonesia’s Latest Wage Regulation Update What Companies Need to Know for 2026 and Beyond

In early December 2025, the Indonesian Government issued Government Regulation No. 49 of 2025 (“GR 49/2025”), which serves as the second amendment to Government Regulation No. 36 of 2021 on Wages (“GR 36/2021”). GR 36/2021 functions as Indonesia’s national wage framework, governing key aspects of wage policy, including minimum wage components, classifications, and determination mechanisms. The issuance of this Second Amendment was largely driven by Constitutional Court Decision No. 168/PUU-XXI/2023, as well as the Government’s broader objective of safeguarding workers’ purchasing power while maintaining business sustainability and macroeconomic stability. The Constitutional Court reaffirmed the constitutional mandate to ensure a decent standard of living for workers and their families. As a result, GR 49/2025 marks a significant recalibration of Indonesia’s wage-setting regime and carries direct implications for employers starting from the 2026 wage year. Overall, the Second Amendment substantially strengthens worker protection by reinforcing the decent living standard principle, revising the minimum wage adjustment mechanism, and reintroducing sectoral minimum wages. From 2026 onward, minimum wage increases will more closely reflect workers’ living needs through higher adjustment factors and the mandatory inclusion of inflation across all regions. At the same time, employers face heightened expectations in relation to wage transparency and sectoral compliance. For companies operating in Indonesia—particularly those in manufacturing and other high-productivity sectors—an early assessment of sector classification and wage structures will be critical to ensure regulatory compliance while maintaining operational stability. Revision of the Minimum Wage Adjustment Formula Both GR 36/2021 and the Second Amendment apply the same basic formula for calculating annual minimum wage adjustments: UM(t+1) = UM(t) + [Inflation + (Economic Growth × α)] × UM(t) However, a key change lies in the revision of the α (alpha) index, which represents labor’s contribution to economic growth. Under GR 36/2021, the alpha index ranged from 0.10 to 0.30, determined based on labor absorption levels and average or median wage indicators. The Second Amendment significantly increases this range to 0.50–0.90, placing stronger emphasis on proportionality in order to better fulfill decent living standards, while still balancing the interests of workers and employers. Another notable development is the removal of the previous exception applicable to regions where the prevailing minimum wage exceeded average household consumption. Under the prior regime, inflation could be excluded from the calculation in such regions. The Second Amendment abolishes this exception, ensuring that inflation is always factored into minimum wage adjustments, including in higher-wage regions. Read more, click at https://schinderlawfirm.com/blog/indo.... Follow our social media platforms: LinkedIn: https://www.linkedin.com/company/schi... Twitter:   / schinderlf   Instagram:   / schinderlf   Facebook:   / schinder.slf   Visit our website https://schinderlawfirm.com/ #SchinderLawFirm #IndonesianLawyers #LegalServicesIndonesia #JakartaLawyers #LegalUpdateIndonesia #JakartaLawPractice #Regulation #Schinder #LawFirmJakarta