Andrew Tito, Jakarta – The Indonesian government has given all governors one week to finalize provincial minimum wages under a newly issued regulation, with a deadline of December 24, Home Affairs Minister Tito Karnavian said on Wednesday.

The instruction came just hours after the government announced new rules governing minimum wage adjustments, which link annual increases to regional economic conditions.

Tito said governors play a central role in determining minimum wages, including the authority to set district- or city-level minimum wages if deemed necessary.

"Governors may set minimum wages at the district or city level – may, not must," Tito said.

He added that regional wage councils are tasked with determining key variables in the wage-setting process, based on local inflation and economic growth.

According to Tito, the guiding principle of the policy is balance: minimum wage decisions must safeguard workers' welfare without placing excessive burdens on employers.

To achieve this, he stressed the importance of tripartite dialogue involving the government, labor unions, and business groups, so that wage decisions can gain broad acceptance.

The Home Affairs Ministry will closely monitor the process across all 38 provinces, Tito said, tracking which regions have completed their wage decisions and which may require acceleration.

"We will conduct intensive monitoring of the minimum wage-setting process nationwide," he said.

Under the new regulation signed by President Prabowo Subianto, Indonesia's minimum wage is expected to rise by around five to seven percent next year, paving the way for higher provincial minimum wages in 2026.

Manpower Minister Yassierli said the regulation was signed on Tuesday after months of studies and consultations, including discussions with labor unions.

Under the new scheme, minimum wage adjustments will be calculated using a formula that combines inflation and economic growth, multiplied by a coefficient known as alpha. The value of alpha determines how much of economic growth is passed on to wages and will be set by provincial or district wage councils, taking into account factors such as labor absorption and average wage levels.

"The calculation of the minimum wage increase will be carried out by the Regional Wage Council and submitted as a recommendation to the governor," Yassierli said at a press conference on Wednesday.

While outcomes will vary by region, Jakarta's minimum wage is expected to rise by around five to seven percent. With the capital's current minimum wage at Rp 5.4 million per month, inflation at 2.65 percent, and economic growth at 5.04 percent, the new formula suggests an increase of roughly 5.2 to 7.2 percent, depending on the alpha applied. This would lift Jakarta's 2026 minimum wage to an estimated Rp 5.68 million to Rp 5.79 million per month.

Source: https://jakartaglobe.id/business/indonesia-orders-governors-to-set-minimum-wages-by-december-2