Whether you’re setting up a PT PMA, hiring your first local employee, or scaling your Indonesia operations — understanding Indonesia’s 2026 labor regulations is non-negotiable. This guide covers everything foreign employers need to know, updated to reflect the latest government regulations including Permenaker No. 7/2026.
Why 2026 Is a Critical Year for HR Compliance in Indonesia
Indonesia’s employment landscape has shifted significantly entering 2026. Three major regulatory changes have taken effect simultaneously:
- Permenaker No. 7/2026 — the most sweeping outsourcing restriction in years, enacted 30 April 2026
- PP No. 49/2025 — a new minimum wage mechanism raising UMP by 5–8% across all 38 provinces
- PP No. 6/2025 — an updated Job Loss Guarantee (JKP) that strengthens worker protections post-layoff
For foreign companies expanding into Indonesia — particularly those from China, Singapore, and the broader Asia-Pacific region — failing to align with these changes carries real risk: fines, operational disruptions, and reputational damage with local talent.
1. Minimum Wage (UMP) 2026
Effective 1 January 2026, all 38 Indonesian provinces have set new minimum wages. The national average increase is 5–8% compared to 2025.
| Province | UMP 2026 | Change |
| DKI Jakarta | Rp 5,729,876 | +6.17% — highest nationally |
| Papua regions | ~Rp 4,500,000 | +5–7% |
| Sulawesi Tengah | ~Rp 3,200,000+ | +9.08% — highest % increase |
| Jawa Barat | Rp 2,310,000 | ~+5% — lowest nationally |
| Jawa Tengah | ~Rp 2,100,000+ | ~+5% |
UMP applies only to workers with less than 1 year of service. For employees with over 1 year of tenure, companies must implement a formal Wage Structure and Scale (SUSU) — a flat salary approach is no longer compliant under PP No. 49/2025.
Paying below the minimum wage carries criminal penalties: fines of up to Rp 400,000,000 and/or imprisonment of 1–4 years. This applies equally to PT PMA companies.
Always verify the UMK (district-level wage) for the specific city where your employees are based — industrial areas like Karawang, Bekasi, and Batam often have UMK values that rival DKI Jakarta’s UMP.
2. Permenaker No. 7/2026 — The New Outsourcing Rules
Effective 30 April 2026, outsourcing (alih daya) is permitted only for supporting, non-core job categories:
- Cleaning services
- Food and beverage provision (catering)
- Security services
- Driver and worker transportation
- General operational support services
- Supporting roles in the mining sector
What is no longer permitted:
Core business functions — sales, marketing, engineering, IT, customer service, finance, HR, and legal — can no longer be fulfilled through outsourced arrangements.
Workers in these roles must be directly employed under PKWT or PKWTT contracts.
Sanctions apply to both the client company and the outsourcing provider, including:
- Written warnings
- Restriction of business activities
- Suspension of business permits
If you currently use outsourcing vendors to staff core roles, this must be reviewed and restructured immediately.
3. Employment Contracts: PKWT vs PKWTT
PKWT (Fixed-Term Contract)
Suitable for time-bound or project-based work.
Key rules:
- Maximum total duration: 5 years including all extensions
- Must be in writing
- Must be registered with the local Manpower Office within 3 working days of signing
- No probation period allowed
- Employer must pay uang kompensasi at contract end
- Early termination requires payment of remaining salary for unserved period
PKWTT (Permanent Contract)
Suitable for ongoing and continuous roles.
Key rules:
- No maximum duration
- Probation allowed up to 3 months
- Termination requires valid legal grounds such as efficiency, merger, or serious misconduct
- Employer must pay severance (pesangon), capped at 9 months’ salary
An unregistered PKWT risks being deemed invalid — automatically converting the employee to permanent status with full severance entitlements.
Always register PKWT contracts within 3 working days.
4. BPJS Social Security Obligations
All companies in Indonesia — including PT PMA — must enroll employees in both BPJS Kesehatan and BPJS Ketenagakerjaan.
Non-compliance may result in denial of government business services and administrative sanctions.
| Program | Employer | Employee | Coverage |
| BPJS Kesehatan | 4% | 1% | Healthcare |
| JKK — Work Accident | 0.24–1.74% | — | Workplace injury |
| JKM — Death Benefit | 0.30% | — | Death coverage |
| JHT — Pension Savings | 3.70% | 2% | Retirement fund |
| JP — Monthly Pension | 2% | 1% | Pension |
| JKP — Job Loss | 0.36% | — | Layoff support |
In 2026, BPJS Kesehatan is transitioning away from its class-based tier system.
Review any supplemental health insurance packages your company offers to ensure they remain compliant and competitive.
5. Working Hours & Overtime
Standard working hours under PP No. 35/2021:
- 6-day workweek: 7 hours/day (40 hours/week)
- 5-day workweek: 8 hours/day (40 hours/week)
Overtime rules:
- First overtime hour: 1.5× hourly wage
- Subsequent overtime hours: 2× hourly wage
- Public holiday work: 2×–4× depending on day type
Maximum overtime:
- 4 hours/day
- 18 hours/week
FAQ
Do Indonesia’s labor laws apply to PT PMA (foreign-owned companies)?
Yes — fully and without exception. UMP, PKWT rules, severance, and BPJS obligations apply equally to PT PMA and locally-owned companies.
Can we hire in Indonesia without setting up a local entity?
Yes, through an Employer of Record (EOR).
The EOR becomes the legal employer, handling contracts, payroll, and BPJS — while your team works operationally for you. This is the fastest and most compliant route to market.
Our outsourcing vendor handles our customer service team. Is this still allowed under Permenaker 7/2026?
No. Customer service is considered a core business function and is no longer permitted under outsourcing arrangements.
These workers must be directly employed or transitioned through an EOR structure.
Is SUSU mandatory for small foreign companies?
Yes.
Any company with employees who have more than 1 year of service must have a documented Wage Structure and Scale (SUSU).
A simple grade-based structure tied to role and tenure is sufficient for early-stage companies.
2026 HR Compliance Checklist for Foreign Employers
- Review all outsourcing arrangements against Permenaker 7/2026
- Update salaries to reflect UMP 2026 (effective 1 January 2026)
- Implement or document a formal SUSU for employees with 1+ year of service
- Register all PKWT contracts with the local Manpower Office within 3 working days
- Ensure all employees are enrolled in BPJS Kesehatan and BPJS Ketenagakerjaan
- Verify RPTKA and KITAS validity for all expatriate employees
- Audit overtime records for compliance with the 4-hour daily / 18-hour weekly cap
How Big Fish Global Can Help
Big Fish Global has supported 1,000+ international enterprises in expanding compliantly into Indonesia since 2018.
Our bilingual team (English, Bahasa Indonesia, Mandarin) covers:
- Employer of Record (EOR) — hire in Indonesia without a local entity
- Payroll & BPJS Management — accurate, compliant payroll across all provinces
- HR Consulting — contract structuring, SUSU design, and compliance audits
- Work Visa & Immigration — KITAS, RPTKA, and business visa processing
- Legal Services — PT PMA registration, company amendments, regulatory filings
