Note: The official text of the law had not been published at the time of issuance of this article. Accordingly, the detailed provisions, final wording, effective date, transitional provisions, and its implications for the revocation or amendment of existing regulations remain subject to verification against the official text of the law.
On 6 October 2026, the House of Representatives of the Republic of Indonesia (Dewan Perwakilan Rakyat or DPR) officially passed the Draft of Employment Protection Law into the Employment Protection Law (the “Employment Protection Law”), following Constitutional Court Decision No. 168/PUU-XXI/2023. Among other things, the Constitutional Court decision called for employment-related provisions to be separated from the Job Creation Law.
Previously, employment matters in Indonesia were primarily governed by Law No. 13 of 2003 on Manpower, as amended by Law No. 6 of 2023 on the Enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation into Law (the “Manpower Law”), together with its implementing regulations, including Government Regulation No. 35 of 2021 on Fixed-Term Employment Agreements, Outsourcing, Working Hours and Rest Periods, and Termination of Employment (“GR No. 35/2021”). Upon the entry into force of the Employment Protection Law on the date of its promulgation, the Manpower Law will be revoked and cease to apply.
This article highlights the key changes introduced by the Employment Protection Law and their implications for businesses.
Fixed-Term Employment Agreements
Under GR No. 35/2021, a fixed-term employment agreement (Perjanjian Kerja Waktu Tertentu or “PKWT”) based on a specified period may be entered into for a maximum initial term of five years and extended by mutual agreement, provided that the total term, including all extensions, does not exceed five years. The regulation does not expressly limit the number of extensions.
By contrast, the Employment Protection Law limits a PKWT to an initial term of no more than two years, with a maximum of two extensions, each for a period of up to one year. Accordingly, the total term of a PKWT, including extensions, may not exceed four years.
The Employment Protection Law also provides a more detailed classification of specific work that may be performed under a PKWT, where the nature or characteristics of the work or its activities indicate that it will be completed within a certain period. Such work includes: (i) work that can be completed once or is temporary in nature; (ii) work expected to be completed within a relatively short period, not exceeding two years; (iii) seasonal work; (iv) work relating to new products, new activities, or additional products that are still in the trial or exploratory stage; and (v) other work that is temporary by its nature, characteristics, or activities.
Probation Periods under Indefinite-Term Employment Agreements
The Employment Protection Law provides that an indefinite-term employment agreement (Perjanjian Kerja Waktu Tidak Tertentu or “PKWTT”) may stipulate a probationary period of up to three months. During the probationary period, employers are required to: (i) pay wages of at least 75% of the applicable wage for the relevant position within the company, provided that such wages are not below the applicable minimum wage; and (ii) provide social security. Under the previous regulatory framework, employers were prohibited from paying wages below the applicable minimum wage during the probationary period, but there was no express requirement to pay at least 75% of the applicable wage for the position.
Outsourcing
Under the Manpower Law, as amended by the Job Creation Law, the types of work that may be outsourced are not expressly restricted to supporting activities or activities unrelated to the production process. The Employment Protection Law reinstates the restriction on the scope of outsourced work that applied under the original version of the Manpower Law before its amendment by the Job Creation Law.
Under the Employment Protection Law, outsourced work must constitute supporting services or activities that are not directly related to the production process. These include: cleaning services, catering services for workers, security services, supporting services in the mining and oil industries, and transportation services for workers.
Termination of Employment
The Employment Protection Law requires employers to undertake efforts to prevent termination of employment before proceeding with a termination. It also sets out the stages of preventive measures that may be undertaken. If such efforts have been made but termination of employment cannot be avoided, the proposed termination must be discussed through bipartite negotiations between the employer and the relevant trade union or the affected employee. This differs from the previous Manpower Law framework, under which bipartite negotiations were required where a disagreement arose regarding the termination of employment.
Severance Payment
The Employment Protection Law regulates that in the event of termination of employment, employers are required to pay severance pay and/or long-service pay, as well as compensation for any outstanding entitlements to which the employee is entitled.
The minimum severance pay entitlement is determined based on the employee’s length of service, as follows:
- Less than 1 year: 1 month’s wages;
- 1 year or more but less than 2 years: 2 months’ wages;
- 2 years or more but less than 3 years: 3 months’ wages;
- 3 years or more but less than 4 years: 4 months’ wages;
- 4 years or more but less than 5 years: 5 months’ wages;
- 5 years or more but less than 6 years: 6 months’ wages;
- 6 years or more but less than 7 years: 7 months’ wages;
- 7 years or more but less than 8 years: 8 months’ wages; or
- 8 years or more: 9 months’ wages.
In addition to severance pay, employees are entitled to long-service pay based on their length of service, calculated as follows:
- 3 years or more but less than 6 years: 2 months’ wages;
- 6 years or more but less than 9 years: 3 months’ wages;
- 9 years or more but less than 12 years: 4 months’ wages;
- 12 years or more but less than 15 years: 5 months’ wages;
- 15 years or more but less than 18 years: 6 months’ wages;
- 18 years or more but less than 21 years: 7 months’ wages;
- 21 years or more but less than 24 years: 8 months’ wages; or
- 24 years or more: 10 months’ wages.
As for the compensation for rights to which an employee is entitled, shall includes:
- accrued annual leave that has not been taken and has not expired;
- repatriation costs for the employee and their family to the place where the employee was originally recruited;
- housing, medical treatment, and healthcare compensation, calculated at 15% of the severance pay and/or long-service pay for employees who meet the applicable requirements; and/or
- other entitlements stipulated in the employment agreement, company regulations, or collective labour agreement.
The Employment Protection Law removes the 0.5-times severance pay multiplier for certain grounds of termination. Under the Employment Protection Law, the severance pay entitlement for the relevant grounds may be higher than that available under the previous Manpower Law framework.
Severance Security Benefit (Jaminan Pesangon) and Job Loss Security Benefit (Jaminan Kehilangan Pekerjaan)
Based on the Employment Protection Law, every employees and their family shall be entitled to social security protection, comprising national health insurance, work accident insurance, death benefits, old-age benefits, pension benefits, job loss benefits, and/or severance pay benefits. Employers shall be required to pay contributions to the severance pay insurance program, under which benefits shall be payable to workers upon termination of employment. Further provisions governing the job loss insurance program shall be set out in a Government Regulation.
Employers shall also be required to enrol their workers in the job loss insurance program. Contributions to the program shall be payable on a monthly basis and funded by the Central Government and other designated funding sources. Such funding sources shall comprise initial government capital, the reallocation of contributions from social security programs, and/or BPJS operational funds. Further provisions governing the job loss insurance program shall be set out in a Government Regulation.
Foreign Workers
The Employment Protection Law introduces additional exemptions from the obligation to obtain approval for a foreign worker employment plan (Rencana Penggunaan Tenaga Kerja Asing or “RPTKA”). The exemption applies to foreign workers who: (i) are legally married to Indonesian citizens; and/or (ii) are children of a legally recognised marriage between a foreign worker and an Indonesian citizen.
The Employment Protection Law also requires employers engaging foreign workers for technology and expertise transfer activities to employ foreign workers who are proficient in the Indonesian language. Such proficiency must be evidenced by a competency certificate issued by an accredited Indonesian-language educational or training institution.
Child Labour
The Employment Protection Law introduces a revised age range for children permitted to perform light work. Under the new provisions, children aged 15 to under 18 may perform light work. Under the previous regulatory framework, the relevant exception applied to children aged 13 to 15.
In addition, medium-sized and large companies are required to ensure and audit their production and distribution supply chains to verify that they are free from child labour.
Rights of Female Workers
The Employment Protection Law strengthens protections for female workers, including maternity leave and miscarriage-related leave with full wage protection, as well as the right to receive appropriate opportunities and facilities for breastfeeding or expressing breast milk during working hours.
Prohibition on Retaining Diplomas and Personal Documents
When entering into an employment agreement, an employer is prohibited from requiring or retaining an employee’s diploma and/or personal documents as security in connection with the employment relationship.
An exception applies to diplomas and/or personal documents obtained through education or training funded by the employer, provided that the arrangement is based on a written employment agreement and falls within the legally permitted circumstances.
Digital Platform Workers
The Employment Protection Law introduces provisions governing Digital Platform Workers, characterised by: (i) flexibility in terms of working hours, task organisation, and workplace; and (ii) remuneration based on task completion, the application’s algorithmic system, and performance-related incentives or bonuses.
The Employment Protection Law grants Digital Platform Workers the right to social security protection, transparency regarding algorithms and changes to algorithms that affect work assignments, and membership in trade unions. Further provisions are to be regulated under a separate law, which must be enacted no later than two years after the promulgation of the Employment Protection Law.
Workers with Disabilities
The Employment Protection Law requires companies to employ persons with disabilities at a minimum of 1% of their total workforce. Under the previous employment regulatory framework, the relevant disability employment quota was not specifically regulated.
Disclaimer: This report is solely for general information only and never constitutes as legal or tax advice. The user shall further consult with any qualified advisor before referring to any or entire part of this report. Any available copyrights are reserved.
For further information, please contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
general@metalaw.id
