Indonesian minimum wage | Practical measures that companies should take
As November approaches each year,
Discussions regarding Indonesia's next year's minimum wage revision will become more active.
Although there is a legal deadline for determining the minimum wage in Indonesia,
In practice, delays in announcements are common.
However, going along with the uncertain situation and delaying the company's response is
This can lead directly to serious management risks.
In this column, we will look at the process and trends in determining the minimum wage that are repeated every year.
We will summarize the issues and explain practical defensive measures that companies should start taking now.
1. Statutory schedule and actual situation in determining minimum wage
Under Indonesia's current laws and regulations, it will be applied from January 1st of the following year.
The deadline for determining the minimum wage is set as follows:
| subject | Decision deadline | Grace period until implementation |
| State Minimum Wage (UMP)） | 11Month 21until the day | 40 days before enforcement |
| prefecture/Municipal minimum wage (UMK） | 12Month 1until the day | 30 days before enforcement |
Actual situation: Risk of delay in decision deadline
Looking back at past cases,
There are cases where these legal deadlines are not met.
Both labor and management recognize that schedule delays are within expectations.
Although it is becoming pervasive,
In the past, uniform increases were decided without prior basis due to the strong will of the president.
An unusual situation has also occurred where each state governor has followed suit.
It is important not to place too much faith in the customs of the past year and to remain vigilant against unpredictable events.
2. Trends in labor union demands and their background
From around August every year,
A federation of labor unions said, ``Next year's minimum wage should be increased by 10% to 15%.''
He begins to make such strong arguments.
At first glance, this may seem like an excessive request, but a clear trend can be seen in this series of developments.
| 8Mon-October (request presentation period) | A tendency to demand high rates of increase without a clear rationale. It has a strong meaning as a stepping stone to advance negotiations in an advantageous manner, and there have been cases in the past of demands for significantly higher wage levels (e.g. 6 million rupiah, etc.) in Jakarta province, and outrageous claims such as ``applying a unique minimum wage to foreign-affiliated companies.'' |
| 11Mid-month (return to reality) | As the decision date approaches, there are moves to tone down the required level and arrive at an ``increase rate equivalent to the current rate.'' |
The true aim of the labor union is to
"Avoid situations where the increase rate (%) is lower than the previous year's rate"It is considered to be at the point.
The government also has a strong desire to avoid large-scale labor disputes and demonstrations, so
It is extremely likely that it will ultimately be settled on ``the same level of increase rate as last year.''That is the reality.
3. 3 things companies should prepare forpractical support
Even under these uncertain circumstances,
Companies need to proceed with calm preparations based on laws and regulations.
To avoid last-minute confusion, we recommend that you check the following three points at this stage.
① Accurate understanding of the “laws and regulations” to be promulgated
Even if the government's announcement changes again and again,
It is essential to check the exact wording of the final official promulgation of the law (decision).
“Which category does the minimum wage that should apply to your company fall under?”of
Understanding it correctly is the starting point for everything.
② Confirm the regulations of employment regulations and collective bargaining agreement (PKB)
As a basis for annual wage revisions (annual salary increases),
What conditions are specified in your company's internal regulations?Please check.
``Inflation rate'', ``company's solvency (performance)'', ``trends of other companies in the same industry and the market'', etc.
While many companies specify this as a consideration factor,
In some cases, there are agreements with labor unions regarding individual considerations.
③ Preparation of objective data to support “company’s ability to pay”
In labor-management negotiations, consider the “company’s ability to pay”
Evidence data for logical explanations is extremely important.
Until nowWhat indicators does your company use (financial statement numbers, productivity, and other management indicators)?
Reconfirm whether the standard has been set.And make sure you have the latest data.
4. “Advance agreement” holds the key to smooth labor-management negotiations
Why not start negotiations with labor unions only after the minimum wage is officially announced?
Ensure sufficient discussion timedifficult to do.
For companies that have concluded a collective bargaining agreement (PKB),
Share basic data and company policies with the labor union in advance,
Forming a certain common understanding (prior agreement)What you should do is
This can be said to be the most important key to smooth labor-management negotiations at the end of the year.
Start preparing to solidify your company's foundation today, without being influenced by the turmoil around you.
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[Related site]
Indonesian Ministry of Labor: Beranda
Indonesian Ministry of Labor: Upah Minimum Provinsi (UMP) Tahun 2025
