The average wage in Indonesia as of August 2024 is around IDR 3.27 million per month. This figure is crucial for businesses looking to expand here. (Reference)
Why? Understanding this wage average helps with cost planning, benchmarking, and ensuring compliance with labor regulations.
In this article, we’ll dive into the factors that influence wage variations across Indonesia, compare them with other countries, and explore what this means for businesses operating in or entering the Indonesian market.
Understanding the average wage in Indonesia is crucial for international business owners and companies considering expansion into Indonesia.
Let’s take a closer look at why this figure matters and how it can influence your expansion strategy in the country.
Average Wage in Indonesia: Why It Matters for Business Expansion?
In recent years, Indonesia’s economy has grown rapidly, as has its job market, with wages varying widely across different sectors and regions.
Understanding the average wage in Indonesia is crucial for businesses planning to expand here. It helps you estimate labor costs, manage talent acquisition, and make more informed decisions about your expansion strategy.
What is the Average Wage in Indonesia?
On a national scale, Indonesia’s average monthly wages vary greatly among industries and regions with estimates of around IDR 3 million to IDR 7 million.
But, it is also essential to learn that there are significant variations between Indonesia’s average and median salaries.
What’s the difference? Let’s examine further!
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Difference Between Average Wage and Median Wage
The average wage is calculated by adding all individual wages in a given group and dividing by the number of individuals.
In contrast, the median wage is the middle value when all wages are ordered from lowest to highest. In Indonesia, the median salary is typically lower than the average wage.
For example, according to the median wage reported by ILO, the median wage in 2024 was IDR 1,425,000, significantly lower than the average, which starts at IDR 3 million.
This difference occurs because a few high earners can skew the average upward, while the median wage is unaffected by these outliers.
Average Salary of Employees in Indonesia in 2024
A survey conducted by Badan Pusat Statistik (BPS) in February and August 2024 found that the average wage in Indonesia is approximately IDR 3,27 million.
This number represents an increase of 2,81% over the previous year and covers payments in cash or goods for employees permanently.
The Lowest Paying Sectors in Indonesia (2024)
Despite the increasing number, not all sectors were showing the same trend.
Some sectors still offer lower than average salaries due to low productivity. This is supported by BPS data demonstrating seven industries that pay below the minimum wage in Indonesia.
The seven sectors are:
- Manufacturing industry: ± IDR 3,25 million.
- Water treatment, waste treatment, and waste recycling: ± IDR 2,95 million.
- Education field: ± 2,86 million.
- Trade sector: ± IDR 2,85 million.
- Agriculture sector: ± IDR 2,41 million.
The Highest Paying Sectors in Indonesia (2024)
On the contrary, several industries were gaining higher salaries than the national average wage in Indonesia due to the high demand for specialized talents.
All of these industries include:
- Mining sectors: ± IDR 5.23 million.
- Insurance and financial sectors: ± of IDR 5.08 million.
- Communication and information sectors: ± IDR 4,98 million.
- Gas and electricity sectors: ± IDR 4,83 million.
- Real estate salary sectors: ± IDR 4,3 million
Wage Variations Across Different Factors
Variations of the average salary in Indonesia are based on several elements, including geographic location, industry, and education or experience level.
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Wages by Geographic Location
Each province may set its minimum wage regulations (UMP) in Indonesia by considering the regional economic condition, cost of living, and labor demand.
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Wages by Industry
The industry where a person works can highly affect the individual’s wages. Sectors with high profitability and demand for specialized skills may have higher rates than the average minimum wage in Indonesia.
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Wages by Education and Experience Level
Although it may differ across industries and geographic locations, individuals with higher education and advanced experience levels tend to have higher wages.
How do Indonesia’s Wages compare to Other Countries?
While the average salary in Indonesia remains lower than in Southeast Asian countries like Malaysia, Singapore, and Thailand, the wages are still higher and competitive with Vietnam and the Philippines.
However, the lower costs of living, strong economic growth, and competitive wages in specific industries continue to be an attractive destination for foreign business investments compared to its regional neighbors.
5 Benefits of Outsourcing to Indonesia
Indonesia has a lot to offer to the global economy, specifically for valued outsourcing solutions, with these five benefits.
1. Competitive Labor Costs with a Skilled Workforce
The country’s relatively competitive labor costs and skilled professionals provide cost-effective solutions for businesses, especially for labor-intensive tasks.
2. Rapid Digitalization and Industrial Growth
Industrial growth and rapid digitalization are driving great significance to the country’s economic development. It can provide foreign businesses access to a more connected and innovative workforce.
3. Attractive Tax and Business Incentives
With attractive tax and business incentives such as tax holidays and allowances, Indonesia offers a compelling destination for business expansion and foreign investment.
Learn more about the Types of Taxes on Employee Income in Indonesia.
4. Strong Economic Growth and Stability
Over the past decade, Indonesia has experienced huge economic growth with the most promising markets in Southeast Asia. The growing middle class and its diverse economy also support long-term stability.
5. Cost-Effective Business Operations
Because competitive labor costs and affordable operating expenses allow foreign businesses to reduce costs while maintaining the output quality.
How Can Abhitech’s Employer of Record Services Help?
The average wage in Indonesia is generally competitive with cost-effective labor costs compared to other Southeast Asia regions.
Rapid digitalization and industrial growth further enhance the compelling elements for companies looking for opportunities in the region.
Abhitech is here to provide EOR services to leverage your business expansion in Indonesia. Let us handle the local employment process with our leading outsourcing solution while you can focus on your core target.
Get started now and learn more about what we can do for you or get more insights by exploring our blogs.
