Indonesia’s workforce exceeds 153 million, mainly in Java; wages vary by province, significantly impacting labor costs, with mandatory contributions and allowances adding fixed costs to employment expenses.

Indonesia’s Workforce and Industrial Regions

As of February 2025, Indonesia’s labor force consisted of approximately 153 million people, with 145.77 million employed. The majority of this workforce, about 56–58 percent, is concentrated on the island of Java, which serves as the country’s economic hub. Java hosts the primary manufacturing and service corridors, especially in the Jakarta metropolitan area, West Java, Central Java, and East Java, making it central to Indonesia’s industrial activity and labor markets.

Variations in Minimum Wages Across Provinces

Minimum wages in Indonesia are set at the provincial level and act as mandatory cost floors for employers. In 2026, Jakarta’s minimum wage is IDR 5,729,876 (US$339) monthly, about 130–150% higher than wages in key Java provinces like West Java (IDR 2,317,601), Central Java (IDR 2,327,386), and East Java (IDR 2,446,880). This wage disparity can significantly impact payroll expenses, especially for labor-intensive businesses with large entry-level workforces, potentially adding over IDR 20–22 billion (US$1.3–1.4 million) annually.

Long-term Employment Costs and Statutory Contributions

Beyond base wages, employers must account for additional statutory costs that elevate employment expenses. Mandatory social security contributions include the Old Age Security (JHT) at 3.7% and the Pension program (JP) at 2%, along with an annual religious holiday allowance (THR) equal to one month’s wage. These fixed-multiplier costs must be incorporated into operating budgets from the start, influencing the total cost of employment and workforce planning.