Arya News - Fostering a positive work environment, offering clear career paths and investing in training programs are crucial to boosting employee engagement and long-term retention, experts say.
JAKARTA – Despite a vast labor force, local businesses continue to struggle with hiring and retaining top talent. As the government looks to prohibit arbitrary practices like withholding employees’ graduation certificates, companies must find better ways to navigate a labor market marred by low productivity and educational gaps.
Private-sector companies argue that a dynamic job market, where workers can easily switch jobs and employers quickly fill vacancies, is the ideal situation, but experts emphasize that fostering a positive work environment, offering clear career paths and investing in training are crucial to boosting employee engagement and long-term retention.
On May 5, Statistics Indonesia (BPS) reported that the country’s labor force has grown to 153.05 million, with 145.77 million people employed, full-time or part-time, marking a 2.52 percent increase year-on-year (yoy).
However, despite a slight dip in the unemployment rate from 4.82 percent to 4.76 percent, the number of unemployed individuals rose by 1.11 percent to 7.28 million.
According to a survey conducted from the Indonesian Employers Association (Apindo) published in Apindo’s Economic Roadmap 2024-2029, 30 percent of local companies struggle to find high-quality talent.
The challenge largely stems from the composition of the workforce, where 36.54 percent have no degree beyond elementary school, if any at all, while only 12.66 percent hold a university degree.
Furthermore, the country’s GDP per labor force member is just US$23,870, slightly below the Southeast Asian average of $24,270.
Apindo labor affairs deputy chair Bob Azam said Indonesia’s manpower law remained too rigid, creating high barriers for employees to enter and leave jobs. A more dynamic market, where professional workers actively sought new opportunities, he argued, would lead to a healthier labor environment.
“Some skills take time to develop, and we need to retain people for that. However, the ideal market is fluid, where we constantly develop successors for each position. Building a successor [pipeline] is the best retention strategy,” he told The Jakarta Post on Tuesday.
Some companies have resorted to controversial tactics to retain employees, such as holding onto workers’ graduation certificates, even after they have left the company. The Manpower Ministry has acknowledged that this practice remains prevalent in some regions, having received thousands of complaints about similar cases.
The issue came to a head after an investigation ordered by Surabaya Mayor Armuji in April revealed that a company had been holding onto the graduation certificates of dozens of employees, sparking widespread public outrage.
In response, the ministry is now preparing regulation to ban such practices. Deputy Manpower Minister Immanuel Ebenezer stated on April 27 that the government would actively track down businesses holding certificates and take legal action against them.
The initiative is backed by the House of Representatives, with lawmaker Arzeti Bilbina of House Commission IX, which oversees manpower and social welfare, calling for strict penalties.
“Companies that are proven to have retained graduation certificates must be subject to administrative sanctions for minor offenses, such as temporary revocation of their business permits or progressive fines,” Arzeti said on April 25, as quoted by Kompas.com .
Yosminaldi, chairman of the Association of Indonesian Human Resource Practitioners (ASPHRI), insists Indonesian talent is of high quality but points out that many local companies fail to provide job security, a comfortable work environment or clear career paths, pushing some skilled workers to seek opportunities abroad instead.
He noted that companies often struggle to offer what is needed to motivate a workforce that wants more than just financial rewards, especially since many employees now belong to Generation Z, a cohort known for being critical, open-minded and rational.
“With a large pool of potential employees compared to the available [number of] jobs, some companies have become arrogant in their recruitment practices,” he told the Post on Friday. “They operate with a ‘one falls, a thousand rise’ mentality, which leads to a dismissive attitude toward employees.”
Yosminaldi stressed that, while salary undoubtedly mattered, companies should focus on making employees feel genuinely connected to their workplace. This meant implementing a fair reward and punishment system, offering clear career planning and providing continuous training opportunities.
Despite a slowdown in GDP growth in this year’s first quarter, Arsjad Rasjid, chairman of the board of trustees at the Indonesia Business Council, remains optimistic about the resilience of the private sector. While some industries may face challenges, the overall business landscape remained robust, he told the Post on Wednesday.
Supporting this view, a survey published by employment portal jobstreet . com last year found that Indonesia’s job market remained active despite global economic uncertainty, with 94 percent of companies still hiring at the time, although demand for part-time and contractual roles had risen markedly.
Arsjad pointed out that significant gaps still existed between skills available in the labor force and the qualifications companies needed, largely due to persistent issues within the country’s education system.
This challenge was only set to grow with the rise of technology and artificial intelligence, which could automate many routine jobs while creating new roles in the digital and tech sectors.
“If we don’t improve the quality of our talent through education, companies will continue to struggle to find high-quality employees, even as AI becomes more integrated into business operations,” Arsjad said.