Reintroduction of Sectoral Minimum Wages

One of the most notable changes is the reintroduction of the Provincial Sectoral Minimum Wage (“UMSP”) and the Regency/City Sectoral Minimum Wage (“UMSK”). 
Governors are now obliged to set the UMSP. They also have the authority to establish UMSK at the regency/city level. These wages apply to specific industry sectors with high productivity, high risk, and specific characteristics (identified by five-digit KBLI codes).

New Minimum Wage Calculation Formula

GR 49/2025 introduces a revised formula for calculating the annual minimum wage adjustment to preserve workers’ overall purchasing power. Specifically, it revises the variables for calculating the minimum wage, by adjusting the value of the "alpha" index (“α”), which represents the contribution of labor to the economic growth.

1. Formula: Adjustment Value = {inflation + (economic growth x α)} x current minimum wage
2. The Alpha (α) Index: The weight given to labor's contribution to economic growth has been increased. For the 2026 wage cycle, the alpha index is set between 0.50 and 0.90, which generally results in higher wage increases than previous years. Previously, under GR 36/2021, the α value was in a range of between 0.10 and 0.30.
   

 

Priority in Bankruptcy

GR 49/2025 strengthens worker protections in the event of a company's insolvency:

1. If a company is declared bankrupt, the payment of workers’ wages must be prioritized over other creditors.
2. Other employment-related entitlements (such as severance pay) are given priority over all creditors except for secured creditors holding property security rights/separatists).
   

 

Wage Structure and Scale (WSPS)

The government now places greater emphasis on the Wage Structure and Scale.

1. Minimum wage applies to workers with less than one year of service.
2. For workers employed for one year or more, companies are required to implement a wage structure and scale that take into account position, length of service, education and competence.
3. Companies must notify their employees of the applicable wage and scale structure to ensure transparency.
   

Administrative Compliance

GR 49/2025 functions as a policy instrument for national economic stability by balancing worker welfare with business continuity. Employers are encouraged to use productivity data for negotiations within regional Wage Councils (Dewan Pengupahan), which now plays a more active role in the wage setting process.
Furthermore, GR 49/2025 also regulates overtime pay, wages payable during certain types of employee absences, and the wage payment mechanism, which must be in a timely manner and denominated in Rupiah. The government emphasizes that any delay or failure in wage payment is subject to administrativesanctions in accordance with applicable laws and regulations.
The UMSP and UMSK for the year 2026 take effect as of January 1, 2026. As the issuance of GR 49/2025 is intended to ensure workers' rights to a decent living across all regions in Indonesia, GR 49/2025 notes that the implementation of UMSP and UMSK shall not contradict the wage policy established by the central government.