Indonesia has enacted Law No. 27 of 2026 concerning Employment Protection (Undang-Undang Pelindungan Ketenagakerjaan), introducing significant changes to the country’s employment regulatory framework.
The law was signed and promulgated on 28 October 2026 and became effective on the same date.
The new legislation replaces Law No. 13 of 2003 concerning Manpower and repeals specified employment-related provisions of Law No. 6 of 2023 concerning Job Creation.
The reform follows Constitutional Court Decision No. 168/PUU-XXI/2023, which called for a separate employment law to consolidate and harmonise Indonesia’s employment legislation.
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KEY REGULATORY DEVELOPMENTS
1. Consolidation of Employment Legislation
Law No. 27 of 2026 establishes a new statutory framework governing employment relationships, worker protection, employment contracts, outsourcing, working conditions, remuneration and termination of employment.
Existing implementing regulations remain applicable insofar as they do not conflict with the new law.
Further implementing regulations must be established within one year following promulgation.
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2. Revised Fixed-Term Employment Contracts
The law introduces revised provisions for fixed-term employment contracts (Perjanjian Kerja Waktu Tertentu, PKWT).
Under Article 82, a fixed-term employment contract may initially run for up to two years and may be extended twice, with each extension limited to one year.
The regulation also establishes requirements concerning written contracts, registration and advance notification of extensions.
Fixed-term employment contracts cannot include probationary periods.
The new statutory framework therefore changes the previous arrangements governing the duration and administration of fixed-term employment.
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3. Outsourcing Arrangements
The law establishes restrictions on outsourcing arrangements.
Under Article 95, outsourcing is limited to supporting services or activities not directly connected with the production process.
The legislation identifies certain categories of supporting services and establishes additional provisions for specific industries.
Companies employing outsourced workers are provided with a one-year adjustment period, while existing outsourcing agreements concluded before promulgation remain valid until their expiry.
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4. Annual Leave and Collective Leave
Article 118 establishes employees’ entitlement to at least 12 working days of annual leave after 12 consecutive months of employment.
The legislation also stipulates that government-designated collective leave implemented by companies must not reduce employees’ annual leave entitlement.
Additional provisions address extended rest periods, maternity leave and other employment-related leave entitlements.
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5. Workplace Protection and Employment Administration
The new law includes provisions governing workplace protection, equal employment opportunities, occupational health, employee documentation and employment administration.
Employers are prohibited from retaining employees’ diplomas or personal documents as security in an employment relationship, subject to limited statutory exceptions.
The legislation also addresses worker welfare, workplace harassment prevention and certain employer obligations.
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6. Implementation and Transitional Arrangements
Law No. 27 of 2026 has been effective since 28 October 2026.
Existing implementing regulations remain applicable to the extent that they do not conflict with the new law.
Further implementing regulations are required within one year of promulgation.
Specific transitional provisions apply to outsourcing arrangements and other matters identified in the legislation.
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IMPLICATIONS FOR SWISS COMPANIES OPERATING IN INDONESIA
Manufacturing and Industrial Operations
The revised provisions concerning fixed-term employment and outsourcing may affect workforce arrangements in manufacturing and industrial operations.
Professional Services and Corporate Operations
Companies employing staff in Indonesia are affected by the statutory framework governing employment agreements, workplace policies, leave entitlements and employment administration.
Human Resources and Workforce Management
The new legislation is particularly relevant to HR administration, including employment contracts, outsourcing arrangements, company regulations and employee benefits.
Investment and Business Expansion
Employment regulations form an important part of the operating environment for companies investing in Indonesia.
The new law establishes the statutory framework governing employment relationships and workforce arrangements across business sectors.
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REGULATORY STATUS
Law No. 27 of 2026 is enacted and in force.
The law became effective on 28 October 2026.
Further implementing regulations remain to be issued, and existing implementing provisions continue to apply where consistent with the new legislation.
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OFFICIAL SOURCE
Ministry of State Secretariat — Law No. 27 of 2026 concerning Employment Protection.
Supreme Audit Agency (BPK) — Official legal database, Law No. 27 of 2026.
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DISCLAIMER
This article is provided by SwissCham Indonesia for general information purposes only and does not constitute legal, regulatory, financial, or professional advice. Information is based on official government announcements available at the time of publication. The full promulgated text and detailed implementation provisions should be consulted to confirm applicable legal requirements. Businesses are encouraged to seek professional advice regarding their specific circumstances.