Caecilia Mediana, Jakarta – The risk of layoffs (PHK) is expected to continue to expand in 2026 potentially holding back new hiring. This situation will increase the social burden on society.
According to LinkedIn's Global Market Labour 2026 report (January 2026), global hiring is predicted to be 20 percent below pre-Covid-19 pandemic levels. Job transitions have also fallen to their lowest level in a decade.
In the report, LinkedIn revealed that hiring in the hospital and healthcare sectors is expected to remain at 18 percent, education at 8 percent, and consumer services at 7 percent.
Meanwhile, hiring in several other sectors experienced contraction, such as retail at minus 13 percent, accommodation and food services at minus 17 percent and manufacturing at minus 27 percent.
In line with LinkedIn's findings, the Indonesian Employers' Association (Apindo) Business Conditions Survey (March 2025) of 357 member companies found that 52.2 percent of respondents had experienced employee layoffs in the past year.
Companies cited declining demand, rising production costs, changing labour regulations, pressure from imported products and technology and or automation factors.
As many as 67.1 percent of respondents stated they had no plans to make new investments in the next year. Meanwhile, 49.7 percent of respondents saw a potential for employee layoffs in the coming year.
According to the Ministry of Labour (Kemnaker) website satudata.kemnaker.go.id, from January to December 2025, 88,519 workers were laid off – classified as participants in the Job Loss Insurance (JKP) program. The highest number of workers that were laid off during this period were in West Java, accounting for 21.26 percent of the total reported layoffs.
By comparison, from January to December 2024, the same website reported that 77,965 workers were laid off. The largest number of workers that were laid off were in DKI Jakarta (Jakarta province), accounting for approximately 21.91 percent of the reported layoffs.
Apindo's Labour Division head Bob Azam said in Jakarta on Monday February 2 that increases in labour productivity still lags behind wage growth. In the past 10 years, average wages have risen by 7-8 percent, while productivity has grown by around 1.5-2 percent.
This discrepancy has pushed companies to implement efficiencies, one of which is through automation. As a result, even though overall manufacturing performance has shown an expansion, layoffs continue to occur because increased output is not accompanied by an increase in the workforce.
Labour-intensive sectors dominate
Throughout 2025, the highest number of layoffs occurred in labour-intensive sectors. Around 35 percent come from the processing and manufacturing sector, followed by the services sector and then mining.
The region with the highest number of layoffs was West Java. This indicates structural pressure in labour-intensive sectors in that province. "Yes, we hope the risk of layoffs will not increase further in 2026. However, again, we must consider the reality of the challenges currently facing the industry", said Azam.
Looking ahead, if the risk of layoffs continues to rise, it means many companies do not yet have expansion plans. Without expansion, the need for labour recruitment will automatically decrease, especially with increasing investment in technology and automation.
In small-scale sectors, such as micro, small and medium enterprises (MSME), hiring will also be held back if there is no increase in demand. It is also hoped that the government will provide targeted stimulus to sectors with high elasticity.
"Without swift action, the economic downturn and surge in layoffs will actually increase the cost of industrial recovery and slow the creation of new jobs", he added.
Speaking separately, Confederation of the All Indonesian Trade Unions (KSPSI) Central Executive Board Chairperson Jumhur Hidayat said that they are concerned about the risk of widespread layoffs in 2026.
According to Hidayat, the current layoffs reflect weak labour absorption. "We hope the government will think about progressive measures to protect PHK victims by promoting industrial activity. Because, if the industry is not vibrant, not many workers will be absorbed", said Hidayat.
On the other hand, it is also hoped that the safety net for laid-off workers will be strengthened to prevent it from becoming a social problem. These protections includes adequate severance pay, old-age pensions (JHT) and Security Schemes for Terminated Workers (JKP) benefits that allow them to survive for one to two years.
Increase in social burden
Job search platform Glassdoor in its latest Worklife Trends 2026 report likened the risk of more frequent layoffs in 2026 to perpetual "layoffs". This atmosphere creates a culture of anxiety, insecurity and resentment within companies.
Centre of Economic and Law Studies (Celios) Executive Director Bhima Yudhistira Adinegara added that the social burden that will have to be borne if the risk of layoffs remains widespread in 2026 will exceed the economic burden. In addition to declining purchasing power, crime rates, divorce rates, school dropouts and victims of online lending will increase.
"The problem goes beyond the economy. There is depression felt by the unemployed due to the difficulty of finding new jobs as they age. One solution we offer is to immediately reallocate the budget to mitigate the social impact of the risk of widespread layoffs", said Adinegara.
Contacted separately, M. Rizal Taufikurahman, an economist at the Institute for Development of Economics and Finance (Indef), expressed the view that Indonesian household consumption, which currently contributes 54-55 percent of Indonesia's gross domestic product (GDP), is highly dependent on the income stability of formal workers.
As the risk of layoffs grows, particularly in the manufacturing, trade and modern service sectors, the first pressure point will be on the purchasing power of lower- and middle-wage groups.
Citing data from the Central Statistics Agency (BPS), Indonesia's open unemployment rate is indeed around 4.8-5 percent. However, behind this is an increase in underemployed workers and a shift to the informal sector, which now absorbs more than 56 percent of the total workforce.
"Meaning, labour market adjustments are taking place through a decline in job quality, not a recovery in formal employment. In the medium term, this situation will suppress national productivity and reduce the tax revenue base, particularly from personal income tax (PPh) and consumption-based value added tax (VAT)", he said.
From a social and fiscal perspective, Taufikurahman said that the risk of widespread layoffs will directly worsen pressure on the employment social security system. Claims for social security benefits and disbursements of old-age pensions through the Labour Social Security Management Agency (BPJS) are likely to increase, while contributions have the potential to slow due to declining active participation in the formal sector.
At the same time, the need for social assistance will increase. Social protection spending in the state budget already exceeds 450 trillion rupiah per year and is at risk of increasing if labour market pressures worsen.
On the other hand, fiscal space is increasingly limited due to high mandatory spending and the burden of interest payments on government debt, which is approaching 600 trillion rupiah per year, or around 19 percent of state revenue.
"This situation could create double pressure: the state is being pressured to expand social protection, but its financing capacity for productive spending and job creation is actually shrinking", said Taufikurahman.
[Translated by James Balowski. The original title of the article was "Risiko PHK Tahun Ini Diperkirakan Meluas, Rekrutmen Tenaga Kerja Baru Tertahan".]
Source: https://www.kompas.id/artikel/rekrutmen-tenaga-kerja-baru-tertahan-beban-sosial-di-masyarakat-naik
