Indonesia’s new Labour Protection Law, Law No. 27 of 2026 (Undang-Undang Nomor 27 Tahun 2026 tentang Pelindungan Ketenagakerjaan), took effect on 28 October 2026. It revokes Law No. 13 of 2003 on Manpower (UU Ketenagakerjaan) and the employment provisions of the Job Creation Law. The main changes concern fixed-term contracts, outsourcing, leave, wages, and termination and severance.
On that date, Law No. 13 of 2003 was revoked in full, together with the employment provisions of the Job Creation Law (Article 311). Existing implementing regulations, including Government Regulation No. 35 of 2021 (GR 35/2021), remain in force only where they do not conflict with the new law (Article 310).
Fixed-term contracts and probation
A fixed-term contract (PKWT) may now run for a maximum of two years, and may be extended at most twice, for up to one year each. That makes four years in total, down from five (Article 82).
Probation for permanent employees is still capped at three months, with new conditions (Article 92):
- Pay must be at least 75% of the wage for the position, and not below the minimum wage.
- Social security coverage applies during probation.
- Probation must be stated in writing. If it is not, there is no probation.
Employers are also prohibited from requiring or holding an employee’s diploma or personal documents as security in the employment relationship (Article 78). The only exception is for documents obtained through education or training paid for by the employer under a written employment agreement. Breaches lead to administrative sanctions, and the employer must still return the documents (Article 79).
Outsourcing
Outsourcing is now limited to supporting services that are not directly related to production. Companies may outsource only four types of service: cleaning, catering for employees, security, and transport for employees (Article 95).
Mining and oil companies get one additional category. On top of the four services above, state-owned or private companies in the mining or oil sector may also outsource supporting services in mining and oil. They may only do this through their own subsidiary in the form of a limited liability company (PT) (Article 96), and have one year to comply (Article 308).
State-owned enterprises (BUMN) may outsource supporting work only through a BUMN subsidiary in the form of a PT (Article 97), also within one year (Article 309).
If outsourced workers are used for activities directly related to production, they become employees of the user company by operation of law (Article 98). When the outsourcing vendor changes, the workers’ rights transfer and their length of service is counted cumulatively (Article 99). Other companies also have one year to adjust. Existing outsourcing agreements remain valid until they expire (Article 306).
Leave and working time
- Long service leave is mandatory for all employees: 30 calendar days after every five years of continuous service (Article 118).
- Collective leave (cuti bersama) set by the government may not reduce annual leave (Article 118).
- Overtime is calculated on basic wage plus fixed allowances, divided by 173 (Article 116).
- Maternity leave is at least three months, extendable by up to three more months for medical conditions. Full pay applies for the first four months, and 75% for months five and six (Articles 121 and 123).
- Paternity leave is two days, extendable by up to three more days (Article 124).
Termination and severance
Before terminating, employers must first try to avoid it, for example by cutting overtime, shifts or working days, or offering voluntary early retirement. They must then negotiate with the employee or union for up to 30 working days. Without agreement, a termination is valid only after a final and binding decision of the industrial relations court. Otherwise it is void, and the employee must be reinstated (Article 228).
Refusing to reinstate is punishable by up to two years’ imprisonment (Article 294).
Two grounds are no longer valid reasons for termination (Article 231):
- Efficiency, whether to cut losses or prevent them
- Urgent misconduct, which allowed dismissal without notice
Most severance multipliers go up. The figures show severance pay / long-service pay.
| Reason | GR 35/2021 | New law |
|---|---|---|
| Merger, employer won’t keep employee | 1 / 1 | 2 / 1 |
| Closure after 2 years of losses | 0.5 / 1 | 1 / 1 |
| Permanent closure by owner | 1 / 1 | 1 / 1.5 |
| Force majeure | 0.5 or 0.75 / 1 | 1 / 1 |
| Bankruptcy, or PKPU due to losses | 0.5 / 1 | 1 / 1 |
| Resignation over employer misconduct | 1 / 1 | 2 / 1 |
| After three warning letters | 0.5 / 1 | 1 / 1 |
| Illness or disability over 12 months | 2 / 1 | 2 / 2 |
| Retirement | 1.75 / 1 | 2 / 1 |
If company rules do not set separation pay for resignations, it can be set at a minimum of one month’s wage (Article 233). Employer pension contributions can offset severance only on retirement, and only to the extent the employer paid them (Article 248).
This article is a general overview of the new law and is not legal advice. For advice on how it affects your company, contact us.
This article is general information on Indonesian law as at 9 November 2026. It is not legal advice, and reading it does not create a lawyer–client relationship.