Widescale job cuts have rocked Indonesia’s labour market, with over 60,000 workers from 50 companies losing their jobs between January and February 2025.

According to the Labour Party and the Indonesian Workers’ Confederation (KSPI), the situation is poised to worsen, with estimates suggesting that job losses could climb into the hundreds of thousands.

The textile, garment, footwear, electronics, and automotive sectors – traditionally reliant on labour-intensive operations – have borne the brunt of these layoffs.

KSPI President Said Iqbal revealed that 30% of affected companies, including textile giant Sritex, have gone bankrupt, highlighting the severity of the crisis.

Iqbal has urged the government to step in, calling for the commissioning of a task force to address the crisis.

“With government intervention, it is hoped that the wave of layoffs can be prevented and managed for the remainder of 2025,” he told CNBC Indonesia.

A deeper look into Indonesia’s layoff crisis

While the immediate impact of these layoffs is distressing, the root causes paint a more complex picture. A slowdown in domestic manufacturing, declining consumer purchasing power, and strategic shifts in business operations have all played a role.

PT Sanken Indonesia, for example, was not forced to close due to market volatility, but rather a strategic move by its Japanese parent company to focus on semiconductor production, as Antara reported.

Similarly, Sritex’s collapse was not solely due to market conditions but was largely driven by its inability to service debts exceeding 25 trillion rupiah or US$1.4 billion.

Adding to the pressure, Indonesia’s textile industry has been inundated with imported products, which have significantly reduced demand for locally manufactured goods. This influx has contributed to the shutdown of 62 textile factories over the past two years, putting thousands out of work.

Also Read: Textiles giant Sritex fights bankruptcy

Despite the mass layoffs, Indonesia’s manufacturing sector is still growing. The Ministry of Industry reports that job creation in the sector has outpaced layoffs. In 2024, the national industrial sector absorbed 1,082,998 new workers, dwarfing the 48,345 layoffs reported by the Ministry of Manpower.

The ratio of new hires to layoffs has improved significantly – from 1:5 in 2022 to 1:20 in 2024. This suggests that for every worker laid off, the manufacturing sector is creating 20 new jobs. The trend indicates a broader shift in the labour market rather than an outright decline.

The number of employees in the non-oil and gas processing industries has also increased, growing from 17.43 million in 2020 to 19.96 million in 2024, adding 2.53 million workers. This suggests that while some industries are struggling, others are expanding and absorbing displaced workers.

Government responses: policy shifts and protection measures

To cushion the impact of these layoffs, the government is introducing several measures to stabilise industries and protect jobs. One key intervention is the extension of the industrial gas subsidy policy through the Decree of the Minister of Energy and Mineral Resources Number 76K of 2025.

Although the subsidy price has risen by US$0.5 to US$7 per million British thermal units (MMBTU), industrial leaders believe the policy will bolster the performance of key sectors such as fertilisers, petrochemicals, oleochemicals, steel, ceramics, glass, and rubber gloves.

The Indonesian Ceramic Industry Association (Asaki) expects the subsidy to boost productivity, allowing the sector to move forward with a $237 million expansion plan. This investment is projected to increase domestic ceramic tile production by 45 million square metres and create 5,000 jobs.

To combat the influx of imported goods that have destabilised the textile and electronics industries, the Ministry of Trade is revising Minister of Trade Regulation Number 8 of 2024.

The updated policy aims to introduce stricter import controls, particularly on ready-to-wear clothing, which has flooded the market and undercut local producers.

Reintegrating displaced workers

Beyond economic policy adjustments, efforts are being made to re-absorb workers affected by layoffs. The Central Java Provincial Government is working with businesses to employ former Sritex employees, while PT Sanken Indonesia is offering job relocation opportunities in companies within similar sectors.

This strategy is not new. Other companies facing closures have employed similar workforce transition measures. However, these initiatives highlight the government’s commitment to mitigating job losses and ensuring affected workers have pathways to re-employment.

Also Read: Inside Indonesia's push for green jobs

Lessons for business and HR leaders

Mass layoffs are often viewed as an ominous sign of economic distress, but they can also signal structural shifts within industries.

Indonesia is moving through a turbulent period, so business leaders must remain agile and anticipate changes in market dynamics and technological advancements. Companies that fail to adapt risk facing the same fate as Sritex and Sanken.

For HR professionals, this crisis underscores the importance of workforce planning and reskilling initiatives.

The ability to redeploy talent within and across industries will be critical in maintaining economic stability and ensuring Indonesia’s workforce remains resilient in the face of future disruptions.

While no one welcomes layoffs, they remain an unfortunate reality in the business world. The challenge now is to curb the impact of job losses and foster industrial development to ensure Indonesia’s economy remains robust in the long run.