Indonesia's 2026 Layoff Wave: Structural Pressures and Government Intervention
27 June 2026 (closed)
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Indonesia’s 50,000-Worker Warning: The Structural Pressures Driving the Latest Layoffs
Indonesia’s State Secretary and the Ministry of Manpower met with the House of Representatives (DPR) and labor union leaders on 26 June 2026 to form a Layoff Mitigation Task Force. The goal of this task force is to map out industries facing financial turmoil and identify what their specific operational challenges are. This would enable the implementation of early mitigation measures to prevent layoffs.
The business environment in Indonesia is currently under severe pressure due to (inter-related) factors that include weak demand from abroad, higher prices of imports of raw materials amid rupiah weakness, the impact of the Iran War (that heavily disrupted logistics), and an unstable yet expensive supply of industrial gas.
At the meeting, Andi Gani Nena Wa, President of the Confederation of All Indonesian Trade Unions (Konfederasi Serikat Pekerja Seluruh Indonesia, or KSPSI), stated that, based on his association’s data, around 55,000 Indonesian factory workers are currently at risk of being fired as a consequence of companies facing a heavy storm.
It is interesting to take a closer look at a couple of recent cases where companies (employing thousands of workers) were -and some still are- on the brink of collapse.
Several Companies in Trouble
Feng Tay, an athletic footwear manufacturing company that produces for global brands (such as Nike) and is located in Bandung (West Java), reportedly almost had to fire 4,000 workers (out a total workforce of around 15,000) after its factory hit a temporary ‘gap order’ (a period where a major production contract had concluded, but the next cycle of global orders had not yet kicked in). This decline in external demand was exacerbated by supply chain disruptions and geopolitical tensions stemming from the war in the Middle East, which delayed both shipping and order timelines for international brands.
After the newly appointed Special Advisor to the President on Labor, Said Iqbal, alongside representatives from the Ministry of Manpower, conducted an urgent on-site inspection at the factory in Bandung to mediate between management and the labor union, Feng Tay’s management officially agreed to cancel the planned layoffs.
Instead, management implemented a temporary cost-saving strategy to weather the gap order. To help the company sustain its workforce until global orders normalize, the government is currently reviewing tax relaxation measures for Feng Tay to lower its immediate production overhead.
Second, Pakerin in Mojokerto (East Java) is a company that has two main business lines: (1) the production of cardboard for packaging and (2) the production of caustic soda (NaOH). Reportedly, this company has mostly stopped its operational activities.
However, the root cause is different from the Feng Tay case. The immediate trigger for Pakerin’s insolvency is that its main working capital, which is estimated between IDR 800 billion and IDR 1 trillion, is completely frozen after the Financial Services Authority (OJK) -the regulatory body responsible for overseeing the financial services industry- revoked the license of Bank Prima (in East Java). This bank was placed into liquidation due to operational insolvency. As Pakerin kept its operational funds deposited at this bank, the company’s reserves became trapped under the administration of the Deposit Insurance Corporation (LPS), starving the factory of the liquidity needed to buy raw materials and pay its workforce. Around, 2,500 are threatened to be laid off.
Reportedly, the Ministry of Industry and presidential labor advisors have intervened to mediate between Pakerin and LPS. Pakerin needs roughly IDR 250 billion injected immediately to resume its basic operations. Government agencies are currently working with the LPS to see if a portion of Pakerin’s frozen deposits can be fast-tracked for release specifically to cover worker salaries and prevent a full-scale corporate bankruptcy.
Third, there were also reports of two automotive companies located in East Java wanting to relocate to Vietnam, a move that could lead to an estimated 11,000 layoffs. While government officials only mentioned the companies’ initials, analysts quickly managed to identify them as Jatim Autocomp Indonesia (located in Pasuruan) and Surabaya Autocomp Indonesia (located in Mojokerto). Both companies, which are part of major Japanese automotive component conglomerate Yazaki Group, are manufacturers of wiring harnesses (cables that transmit electrical power and signals throughout a vehicle). The two companies produce components almost entirely for export purposes and global Japanese auto brands. Considering these wires are more prominent in electric vehicles (than their conventional counterparts), Japanese headquarters wanted to have the factories move to Vietnam where the electric vehicle manufacturing industry is developing rapidly.
On June 26, 2026, members of the newly formed Layoff Mitigation Task Force announced that the planned relocation to Vietnam has been postponed. Following immediate, direct mediation between labor unions, local management, and government representatives, Indonesia successfully convinced the Japanese principals to postpone the move. The Industry Ministry of Indonesia confirmed that both factories are currently running completely normal production lines, with zero active layoffs. The Indonesian government is currently analyzing what structural adjustments, tax reliefs, or investment climate improvements can be offered to the Yazaki Group over the next 1 to 2 years to convince them to keep their long-term manufacturing footprint in East Java permanently.
Supply of Industrial Gas
Another crucial issue that is putting financial pressure on many companies across Indonesia is the higher price they have to pay for industrial gas. Prasetyo Hadi, Minister of St