2026 Minimum Wage in Indonesia: Employer Guide for Jakarta, Bali, and Lombok

Indonesia’s minimum wage framework is updated annually and directly affects payroll structures, employment contracts, and statutory contributions.

For employers in Jakarta, Bali, and Lombok, the 2026 adjustments introduce higher baselines, revised calculation formulas, and stricter enforcement expectations. These changes significantly affect employment cost planning.

At ILA Global Consulting, helping clients comply with these new rates is essential to maintaining smooth operations and avoiding legal penalties.

In late December 2025, provincial governors finalized the 2026 Provincial Minimum Wage (UMP) and Regency or City Minimum Wage (UMK) figures. These changes go beyond base salary increases, affecting payroll compliance, social security contributions, and overall employment risk exposure under Indonesian manpower regulations.

How Does the 2026 Minimum Wage Formula Affect Employers?

The 2026 minimum wage adjustments follow a revised calculation formula:

($Inflation + (Economic\ Growth \times \alpha)$)

In 2026, the government increased the alpha coefficient to 0.5–0.9, resulting in higher-than-average wage increases across multiple regions.

This policy shift signals a stronger focus on wage growth and purchasing power, while also increasing employers’ compliance responsibilities in all sectors.

What Is the New Minimum Wage Baseline for Jakarta in 2026?

Jakarta continues to record the highest minimum wage levels in Indonesia.

• 2026 Jakarta UMP: IDR 5,729,876 per month
• Increase: 6.17%
• Effective date: 1 January 2026

Along with wage adjustments, the Jakarta provincial government has announced supplementary worker incentives, such as public transport and water subsidies.

These measures aim to mitigate rising living costs but do not reduce or replace employer wage obligations under manpower law.

How Do Minimum Wages Differ Across Bali in 2026?

Bali saw a 7.04% increase in its provincial minimum wage. Employers should note the difference between UMP and UMK rates, since regency and city minimum wages often override the provincial baseline, especially in tourism-driven areas.

Strategic note: Employers operating in areas such as Badung (Kuta, Seminyak, Canggu) must apply the higher UMK, not the provincial rate.

What Are the 2026 Minimum Wage Levels in Lombok (West Nusa Tenggara)?

Lombok continues to offer more competitive labor costs than Jakarta or Bali, reflecting the region’s economic structure and sectoral composition.

However, for 2026, minimum wage rates in West Nusa Tenggara (NTB) increased by approximately 2.73% at the provincial level, which directly affects payroll calculations.

• NTB Provincial (UMP): IDR 2,673,861
• Mataram City (UMK): approximately IDR 2,820,000
• Central and West Lombok (UMK): IDR 2,712,254 – IDR 2,741,526

Although lower in absolute terms, these adjustments still trigger corresponding increases in statutory contributions and long-term employment costs.

What Compliance Issues Should Employers Review for 2026?

Minimum wage compliance in Indonesia goes beyond headline salary figures. Employers should review the following areas:

Tiered Wage Systems (SUSU)

The statutory minimum wage applies only to employees with less than one year of service. Those with longer tenure must be paid under a Scale of Wages (SUSU) based on seniority, role, and performance.

Sectoral Minimum Wages (UMSK)

Some industries, such as high-end hospitality and construction, may be subject to sectoral minimum wages that exceed standard UMK rates.

Penalties for Non-Compliance

Paying below the applicable minimum wage is a criminal offense under Indonesian law and can result in criminal and administrative sanctions.

If you operate under a PT PMA framework, ensure your wage policies, staffing, and regulatory practices comply with current investment and manpower regulations. For detailed requirements, visit our guidance on PT PMA in Indonesia.

How Does the Minimum Wage Increase Affect Payroll Contributions?

In Indonesia, many social security and insurance premiums are calculated as a percentage of the employee’s monthly salary. When the minimum wage rises, the employer’s cost of these contributions increases proportionally.

• BPJS Ketenagakerjaan (Employment Social Security)
  Work Accident Protection (0.24%–1.74%), Death Security (0.3%), Old Age Security (3.7%)
• BPJS Kesehatan (Health Insurance)
  Employer contribution of 4%, subject to statutory salary caps
• Pension Guarantee (JP)
  Employer contribution of 2%

For example, if a worker in Jakarta now earns the new 2026 minimum of IDR 5,729,876, the employer’s total contribution for BPJS and Pension will rise significantly compared to 2025, as the “calculation base” has shifted upward.

Why Do Employers Need to Implement a Wage Structure and Scale (SUSU) in 2026?

A common misconception among employers is that the minimum wage applies to all employees. Legally, this is incorrect. Under Indonesian labor regulations, the minimum wage applies only to employees with less than 1 year of service.

For all other employees, Government Regulation No. 49 of 2025 requires companies to implement a Wage Structure and Scale (Struktur dan Skala Upah – SUSU).

Companies cannot simply adjust all salaries to the new minimum wage level. Employers must maintain a clear and justifiable wage gap between entry-level employees and more experienced staff. Failure to do so creates two key risks:

• Wage compression
  When entry-level salaries increase but mid-level salaries remain unchanged, the pay gap narrows, undermining internal equity.
• Employment and industrial relations disputes
  Wage compression often leads to declining morale, complaints to manpower authorities, and increased exposure to labor disputes.

Proper SUSU implementation is therefore not optional. It is a core compliance requirement linked directly to minimum wage adjustments.

How Do Sectoral Minimum Wages (UMS) Affect Employers in 2026?

Under the 2026 regulatory framework, Sectoral Minimum Wages (Upah Minimum Sektoral – UMS) have been reintroduced.

If a company operates in a high-risk or high-productivity sector, it may be legally required to apply a wage level higher than the standard UMK. This commonly affects sectors such as:

• Five-star hospitality and tourism in Bali
• Construction and infrastructure projects in Jakarta
• Other designated strategic or labor-intensive industries

Employers must verify whether their business classification is subject to sectoral wage requirements, as applying only the general UMK may result in non-compliance, even if the base minimum wage appears correct.

What Are the Sanctions for Non-Compliance in 2026?

The Ministry of Manpower has intensified enforcement across multiple regions. Non-compliance may result in:

Summary Checklist for ILA Global Consulting Clients

1. Update payroll systems to reflect 2026 UMP and UMK rates
2. Review employment contracts, including PKWT agreements
3. Audit SUSU implementation to prevent wage compression
4. Check that the reported salaries to BPJS match the new 2026 payroll figures to avoid audit flags.

Professional Legal Support for Wage Compliance

Indonesia’s wage regulations include overlapping provincial, regency, and sectoral rules that affect employers. Misinterpreting minimum wage obligations, SUSU implementation, or sectoral rates can expose companies to disputes, financial penalties, and criminal liability.

ILA Global Consulting assists employers with employment law compliance, payroll structuring, contract review, and regulatory risk assessment to ensure wage policies align with current manpower regulations.

Engage ILA Global Consulting to review your 2026 payroll framework and employment structure before enforcement actions disrupt business operations.