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Bandar Lampung — The establishment of the 2026 Provincial Minimum Wage (UMP) for Lampung at Rp3.04 million, representing a 5.35 percent increase and effective as of January 1, 2026, has drawn a cautious response from the business community.

In principle, employers accept the government’s decision, but have raised several important notes regarding its potential impact on business sustainability, particularly in labor-intensive sectors and micro, small, and medium enterprises (MSMEs).

Chairman of the Lampung Provincial Board (DPP) of the Indonesian Employers Association (APINDO), Ary Meizari Alfian, stated that employer representatives within the Provincial Wage Council had initially proposed a more moderate increase.

“During deliberations, employers advocated for the use of an alpha coefficient of around 0.5, which would have resulted in an increase of approximately 3.7 to 3.8 percent. However, the government’s final decision set the increase at 5.35 percent, using a higher alpha coefficient in accordance with the Wage Regulation,” Ary said on Tuesday (January 6, 2026).

According to Ary, this difference reflects divergent perspectives between the regional government and the business sector in assessing Lampung’s real economic conditions.

Nevertheless, employers continue to respect the decision as part of national policy.

He noted that while the minimum wage increase is intended to preserve workers’ purchasing power, a relatively high increase within a single year could add pressure to production costs.

This impact is particularly felt in labor-intensive industries such as agricultural processing, light manufacturing, and MSMEs, which generally operate with relatively thin profit margins.

“The minimum wage should serve as a floor, not the sole wage standard. We hope there will remain room for bipartite dialogue at the company level so that wage adjustments align with business capacity and productivity,” he explained.

Regarding the implementation of the 2026 UMP, Ary revealed that not all companies in Lampung have applied it simultaneously.

“This is not due to rejection, but rather influenced by various technical factors and company readiness,” he said.

One of the main reasons is that the determination of district and municipal minimum wages (UMK) has not yet been finalized across all regions.

In practice, the UMK serves as the primary reference for companies within their respective areas. When the UMK has not been finalized, many companies choose to wait to avoid repeated changes to their wage structures.

In addition, an increase in the UMP affects the overall wage structure and scale within companies. Adjustments are necessary to prevent wage compression, where the wage gap between new and long-serving employees becomes too narrow.

“Reorganizing wage structures requires careful calculation, including considerations of tenure, competence, and the company’s financial capacity. This cannot be done instantly,” he said.

Financial Constraints and MSMEs as Key Factors

Ary also highlighted varying levels of financial readiness among companies. A 5.35 percent increase in the UMP directly affects labor costs, which constitute the largest cost component in many sectors.

“Not all companies have the same financial flexibility, particularly MSMEs and labor-intensive industries that are still in recovery or highly dependent on market fluctuations,” he said.

Moreover, labor regulations provide special provisions for micro and small enterprises that meet certain criteria.

Legally, these businesses are not fully required to implement the UMP, as long as wages are determined through bipartite agreements and in accordance with prevailing laws and regulations.

“In Lampung, micro and small enterprises dominate the business landscape. This is also why UMP implementation appears uneven on the ground,” he added.

Despite adopting an accommodating stance, the business community hopes that the regional government will continue to monitor the impact of the 2026 UMP policy, particularly the risks of workforce reductions, delayed business expansion, and pressure on the investment climate.

Employers also encourage the introduction of accompanying policies, such as incentives for MSMEs, programs to enhance labor productivity, and flexibility in implementation for vulnerable sectors.

“Our goal is the same: to safeguard workers’ welfare without compromising business sustainability. A realistic and gradual approach is essential to ensure that the labor market and investment climate in Lampung remain healthy,” Ary concluded.

Source: kupastuntas.co