News & Announcements

W&P Newsletter – Wage Regulation Update: Key Impacts on the Newly Enacted Government Regulation on Employers

February 2, 2026 News

In implementation of the Constitutional Court’s mandate under its Decision No. 168/PUU-XXI/2023, on 17 December 2025, the Indonesian Government enacted Government Regulation No. 49 of 2025 (“GR 49/2025”), which further revises Government Regulation No. 36 of 2021 on Wages, previously amended by Government Regulation No. 51 of 2023. The new regulation establishes a new framework for wage determination in Indonesia, as highlighted below, which is expected to result in a higher year-on-year increase in the minimum wage for employers.

  1. Introduction of Provincial and Regency/City Sectoral Minimum Wages
    Governors, whose government areas have companies with sector-specific characteristics and work risks that differ from those of other sectors operating on a medium or large scale, are now authorized to set the Provincial and Regency/City Sectoral Minimum Wages, but in doing so, the applicable rate must be higher than the prevailing rate  stipulated by the regulation. As a near-term priority, businesses should prepare for imminent wage adjustments under GR 45/2025 as Governors are required to announce all their 2026 Provincial and Regency/City Minimum Wages and Sectoral Minimum Wages shortly if they have not already done so as of the date of this newsletter.
  2. Set a significantly higher alpha index range (α) used in the formula for determining the minimum wage
    GR 49/2025 raises the α threshold, previously between 0.10 and 0.30, to 0.50-0.90. Such an increase is expected to result in a higher year-on-year minimum wage than prior practices.
  3. Protection of unpaid employees’ wages and other entitlements in the bankruptcy process
    GR 49/2025 strengthens employees’ rights to claim unpaid wages and other entitlements in the bankruptcy process by explicitly stating that such rights take priority over all creditors, including preferred creditors, and rank second only to creditors holding material security rights (i.e., secured creditors).

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