Indonesia labour market 2025: strong headline numbers, but 2026 hiring needs speed, skills-first, and compliant flexibility.Photo by Canva
As 2025 ends, Indonesia’s labour market looks strong on the surface. However, the details tell a more uncomfortable story for employers.
- Employment is at a record high: 146.54 million people were working in August 2025, up 1.9 million year on year (Human Resources Online, 2025).
- Unemployment is relatively low at 4.85% (Badan Pusat Statistik [BPS], 2025a).
- Formal jobs are rising, with formal employment now 42.20% of the workforce (ETHRWorld, 2025).
- Average wages reached IDR 3.33 million/month in August 2025. Even so, growth was only 1.94% year on year and not even across sectors (BPS, 2025b; Katadata Databoks, 2025).
At the same time, risks remain:
- Around 59.4% of workers are still in the informal sector, with weaker security and protections (Universitas Gadjah Mada, 2025).
- Youth unemployment stays structurally high (mid-teens), or about three times the overall rate (International Labour Organization [ILO], 2025).
- Analysts warn of a “quantity, not quality” jobs boom, with more short-term or temporary roles that do not lead to stable careers (Alpha Southeast Asia, 2025).
Meanwhile, the World Bank expects growth of about 4.8% a year over 2025–2027—resilient, but below long-term potential and under global headwinds (World Bank, 2025; IDN Financials, 2025).
If you’re planning 2026 headcount or expansion, don’t assume “5% growth” and “low unemployment” make hiring easy. Instead, fix the six areas below—and consider how an HR partner like Elitez Indonesia can help.
1) Fix the assumption that “there’s always plenty of talent”
The macro numbers look good. Nevertheless, the real competition is for high-quality, formally employed, properly skilled workers—not just anyone who can fill a shift.
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Total employment has grown strongly. However, many new jobs are in lower-productivity sectors like agriculture, trade, and manufacturing, which dominate labour absorption (HR Asia, 2025).
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Informal employment remains the majority at nearly 60%, a pattern linked to structural poverty and underemployment (Universitas Gadjah Mada, 2025).
What to fix in 2026:
- Segment your talent market. Treat skilled formal workers as a scarce segment with a distinct EVP, salary range, and speed expectations.
- Tighten role design. Move from generic JDs to roles with measurable outcomes.
- Use data in hiring. Base headcount and pay on current labour-market evidence, not last year’s budget.
✅ Where Elitez Indonesia fits: market insights, structured job profiling, and access to tested talent pools.
2) Fix over-reliance on informal / ad-hoc arrangements
In 2025, more “jobs” appeared. However, many were temporary, short-term, or loosely structured.
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Recent analysis warns rising temp roles and jobless youth are straining the market. In other words, formal gains may mask short-term contracts with limited security (Asia News Network, 2025).
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World Bank commentary also flags rising informal employment across East Asia, with Indonesia among the most affected (IntelliNews, 2025).
Implications for employers: higher compliance risk, lower productivity, and weaker retention.
What to fix in 2026:
- Audit your workforce structure. Where are contracts, overtime, or social security contributions unclear?
- Upgrade to compliant flex models: contract staffing, project staffing, or EOR.
- Standardise vendor usage. Define when to use a staffing/EOR partner vs direct hiring.
✅ Where Elitez Indonesia fits: convert informal setups into compliant contract staffing or EOR (contracts, payroll, statutory contributions).
3) Fix weak salary benchmarking and outdated EVPs
On paper, wages rose. In reality, many employees do not feel better off.
- Average wages reached IDR 3.33 million/month in Aug 2025, up only 1.94% year on year (BPS, 2025b; Katadata Databoks, 2025).
- Moreover, wage growth was uneven across sectors (Katadata Databoks, 2025).
- The share of wage workers climbed to 38.74% in Aug 2025, which increases mobility for skilled workers (HR Asia, 2025).
What to fix in 2026:
- Stop guessing salary ranges. Use city- and function-specific data.
- Refresh your EVP beyond pay: progression, learning, and transparent performance.
- Design offers to land quickly. Pre-align ranges with the market.
✅ Where Elitez Indonesia fits: real-time salary intelligence and advice on non-pay drivers of acceptance.
4) Fix the neglect of youth and early-career pipelines
Indonesia has a large youth cohort. Yet, youth unemployment remains stubborn.
- Youth unemployment (15–24) sits in the mid-teens, roughly 3× the overall rate (ILO, 2025; Ulandssekretariatet, 2025).
- Labour-market profiles emphasise structural youth unemployment and too few quality entry-level roles (Ulandssekretariatet, 2025).
What to fix in 2026:
- Build structured graduate or trainee programmes with clear milestones.
- Use temp-to-perm or project staffing to trial young hires while giving formal experience.
- Make early-career roles part of a long-term workforce strategy.
✅ Where Elitez Indonesia fits: designs and runs early-career programmes using compliant contract/project models.
5) Fix under-resourced HR teams by outsourcing the right things
Overall, 2026 looks like a year of careful growth.
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World Bank baseline: around 4.8% growth in 2025 and similar ahead—solid, but below potential (World Bank, 2025; IDN Financials, 2025).
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The government plans stimulus and job-creating programmes, from holiday-season spending to processing investments (Financial Times, 2025).
Therefore, HR must do more with the same budget: manage compliance, support expansion, and upgrade tech—while running recruitment, payroll, and admin.
What to fix in 2026:
- Be honest about capacity. Keep strategy, culture, and sensitive ER in-house.
- Outsource high-volume, rules-based work (payroll, routine recruitment, contract workforce admin).
- Focus HR on workforce planning, leadership pipelines, culture, and change.
✅ Where Elitez Indonesia fits:
• Recruitment & Executive Search • Contract & Project Staffing • Payroll Outsourcing & HR Admin • Employer of Record (EOR)
6) Fix slow, candidate-unfriendly hiring processes
As formal and wage employment rise, good candidates have options. Thus, they will not wait weeks.
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Wage-employment share is rising, and formal employment reached 42.20% (ETHRWorld, 2025; HR Asia, 2025).
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In addition, temporary and contractual roles are more common, so skilled workers move quickly for better offers (Asia News Network, 2025).
What to fix in 2026:
- Shorten decision cycles. Align salary bands and must-have skills before posting.
- Standardise stages with time targets (e.g., 2–3 weeks max).
- Improve candidate experience with timely updates and realistic previews.
✅ Where Elitez Indonesia fits: we own timelines, pre-qualify candidates, and keep them engaged between interviews and approvals.
What smart employers will do before 2026 hiring kicks off
If you only do three things before finalising your 2026 hiring plans, make them these:
- Re-map your workforce
- Where are you relying on informal, unclear, or risky arrangements?
- Which roles should be converted to structured, compliant models?
- Re-price and re-position your offers
- Update salary bands to reflect 2025 data.
- Strengthen your EVP beyond pay, especially for critical and early-career roles.
- Re-design your HR operating model
- Keep strategy and culture in-house.
- Outsource routine, high-volume HR and workforce management to a trusted partner.
If you’re planning to hire or expand in Indonesia in 2026, Elitez Indonesia can help you translate all these labour-market realities into a practical workforce plan – from recruitment and contract staffing to payroll outsourcing and EOR.
📌 Talk to our consultants today
- 🌐 www.elitez.asia/indonesia/
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