Indonesia & Labour Relations
From Suharto’s single union to hundreds competing in the world’s fourth most populous country
Indonesia’s labour relations were transformed by the Reformasi democratic transition that followed the collapse of Suharto’s New Order regime in 1998. Where previously a single state-controlled union operated, dozens of competing federations emerged almost overnight. The result is one of the most fragmented union landscapes in Asia — with significant energy spent on inter-union competition — in a country where most workers remain in the informal economy and collective bargaining is the exception rather than the rule.
10 Things That Stand Out About Labour Relations in Indonesia
- Under Suharto’s New Order regime (1966–1998), the All-Indonesia Workers Union (SPSI) was the sole legally permitted union, operating under close government supervision. Independent union organizing was suppressed, and activists faced imprisonment. Labour policy was subordinated to the regime’s goal of attracting foreign investment through low-cost, controlled labour.
- The Reformasi era following Suharto’s 1998 resignation produced an explosion of union pluralism. Trade union legislation was liberalized, and dozens of federations emerged, reflecting Indonesia’s extraordinary regional, ethnic, and political diversity. By the 2000s, Indonesia had hundreds of registered unions at various levels.
- One of the most significant figures in Indonesian labour history is Muchtar Pakpahan, who founded the Indonesian Prosperity Trade Union (SBSI) as an independent union challenging the Suharto regime in the 1990s. Pakpahan was imprisoned for his activism and became an internationally recognized symbol of labour rights under authoritarian rule. After Reformasi he continued to advocate for Indonesian workers in a democratic context.
- Indonesia’s Labour Law of 2003 (Manpower Act) established a comprehensive framework for employment and collective bargaining but was criticized by employers for its strong severance and protection provisions and by unions for inadequate enforcement. The Omnibus Law of 2020 significantly revised these provisions, reducing severance pay, easing dismissal, and expanding flexible employment — changes fiercely opposed by unions.
- The 2020 Omnibus Law triggered massive demonstrations by Indonesian unions, with hundreds of thousands of workers protesting in Jakarta and across the archipelago. The protests were among the largest in Indonesia since Reformasi and reflected the depth of union opposition to reforms that unions argued would significantly weaken worker protections.
- Indonesia’s minimum wage system, set annually by provincial governors after consultation with regional wage councils, is the primary mechanism for setting wages for most formal sector workers. The national formula for minimum wage determination has been repeatedly contested, with unions arguing for inflation-plus-growth increases and employers seeking more restraint.
- Union density in Indonesia is approximately 7–10% of formal sector workers, but given that the informal economy employs approximately 60% of the workforce, organized workers represent a small fraction of total employment. The fragmentation of the union movement among competing federations further weakens collective bargaining capacity.
- Indonesia’s garment, footwear, and electronics sectors — major suppliers to global brands — have attracted international labour rights attention. The Clean Clothes Campaign, Workers’ Rights Consortium, and international brand codes of conduct create pressure for standards improvement that supplements weak domestic enforcement.
- Regional variation in labour market conditions — between Java’s dense industrial zones and the outer islands, between export manufacturing and domestic service — means that collective bargaining outcomes vary enormously across Indonesia. Labour relations in the Batam export processing zone, for example, operate quite differently from those in Central Javanese small enterprise manufacturing.
- Indonesia’s gig economy — Gojek and Grab, both Indonesian-origin platforms, have millions of drivers and delivery workers — has created one of Asia’s largest populations of platform workers. Their legal status, organizing rights, and access to labour protections are contested questions that will shape Indonesian labour relations as the digital economy grows.
