Prabowo introduces 2026 minimum wage rule

JAKARTA: President Prabowo Subianto has signed a new government regulation on wages that will serve as the basis for setting minimum wage increases in 2026, the Manpower Ministry reveals, just before the turn of the year.

The regulation introduces a new formula for calculating provincial minimum wages, combining inflation with economic growth multiplied by a factor known as alpha.

The figure represents an index reflecting labour’s contribution to economic growth within a specified range.

The alpha coefficient for next year ranges between 0.5 and 0.9, the statement said.

“Alhamdulillah (praise be to God), the wage regulation has been signed today by President Prabowo,” the ministry said in a statement issued on Tuesday, adding that the rule followed lengthy studies and consultations that had been reported to the president.

Under the regulation, regional wage councils will calculate proposed minimum wage increases using the new formula and submit their recommendations to regional leaders.

Provincial leaders must then determine the size of next year’s minimum wage increase no later than Dec 24.

The rule also requires governors to set provincial minimum wages and allows them to establish sectoral, district and city minimum wages.

“Hopefully, the new wage policy will strike a balance between the interests of workers and businesses and provide greater certainty in wage-setting across regions,” the statement added.

The government missed its Nov 21 legal deadline to publish the minimum wage formula for next year, which is usually followed by district-level wage announcements by Nov 30.

Labour unions have voiced opposition to the newly issued wage regulation.

The groups criticised the rule’s late release, saying the narrow timeline left little time for deliberation and risked turning regional wage council meetings into a procedural formality.

Said Iqbal, president of the Confederation of Indonesian Trade Unions and the Labour Party, said unions had “not been much involved” in drafting the regulation, despite their representation on the national wage council.

“The ministry’s team seems to be imposing the government’s will with minimal public participation in drafting the wage regulation that underpins the 2026 minimum wage,” Said told a press briefing on Tuesday.

Said rejected what he described as the government’s overly broad adjustment range and proposed a narrower alpha range of 0.7 to 0.9, which he said would result in wage increases of around 6.5% to 6.8%, broadly in line with last year’s rise of 6.5%.

He added that if the government proceeds with the regulation, unions would stage protests in several cities on Friday, including demonstrations at the State Palace.

The Indonesian Workers Union Association (Aspirasi) said the proposed figure was “far below workers’ expectations” and could undermine the principle of decent living needs.

A Constitutional Court ruling last year mandated a broad overhaul of the country’s labour law, including its wage-setting framework, after declaring parts of the previous regulations unconstitutional.

The court also ruled that wage adjustments must reflect inflation, economic growth and an adjustment index, while assigning wage councils a central role in shaping the formula.

“Furthermore, we urge the government to review the wage-setting formula and to involve labour unions at every stage of wage policymaking,” Aspirasi president Mirah Sumirat said in a statement. — The Jakarta Post/ANN