Indonesia Approves a New Employment Protection Law. What Changes?

Indonesia's House of Representatives and the government approved the Employment Protection Bill as a law at a plenary meeting on October 6, 2026. According to the House, the legislation contains 23 chapters and 313 articles covering employment relationships, wages, termination, informal workers, digital-platform workers, and a severance reserve fund.

The approval implements Constitutional Court Decision No. 168/PUU-XXI/2023. The Court instructed lawmakers to separate the employment cluster from the Job Creation Law and establish a stand-alone employment law within two years of the decision issued on October 31, 2024.

Its publication status still requires attention. A review of official legal databases through October 29, 2026 did not locate a numbered and promulgated final text of the Employment Protection Law. A government statement on October 21 said the text was still being processed by the Ministry of State Secretariat.

Without the promulgated text, the exact wording, effective date, transitional provisions, and relationship with existing regulations cannot be determined in full. House summaries show the direction of the reform but do not replace the official enacted document.

Why Was a New Law Required?

Constitutional Court Decision No. 168/PUU-XXI/2023 found that employment rules should be separated from the omnibus structure of the Job Creation Law. The separation was intended to reduce inconsistencies among Law No. 13 of 2003, amendments introduced through the Job Creation Law, implementing regulations, and Constitutional Court decisions.

The Constitutional Court reiterated in 2026 that the two-year period would end on October 31, 2026. The Court also explained that the previous employment law and relevant Court decisions would apply if the separation was not completed by the deadline.

The House and the government reached joint approval before that date. The political approval completed the second-level legislative discussion, while the application of each provision still depends on the official text, law number, and implementing regulations.

The Constitutional Court instructed lawmakers to separate the employment cluster from the Job Creation Law and establish a stand-alone law within two years of October 31, 2024. Source: Constitutional Court Decision No. 168/PUU-XXI/2023 and the Court's 2026 clarification.

The Scope Announced by the House

An official House statement says the new law contains 23 chapters and 313 articles. Its scope extends from the period before a person begins work through the end of the employment relationship.

The announced subjects include:

• Equal opportunity and treatment at work.

• Workforce planning and job-vacancy information.

• Vocational training and apprenticeships.

• Job placement and employment creation.

• Informal workers and vulnerable groups.

• Foreign workers.

• Employment contracts and relationships.

• Wages, welfare, and social security.

• Industrial relations and termination.

• A severance reserve fund.

• Supervision, investigation, and criminal provisions.

The list illustrates the breadth of the legislation. It does not establish the amount of each entitlement, payment formulas, exemptions, deadlines, or penalties under individual articles.

The House says the Employment Protection Law contains 23 chapters and 313 articles covering employment relationships, supervision, and a severance reserve fund. Source: Indonesian House of Representatives, October 8, 2026. 

Four Changes That Require Attention

The official information available so far points to four major directions. Their legal effect will depend on the final wording and secondary regulations.

A. Employment Rules Return to a Stand-Alone Law

Separating employment provisions from the Job Creation Law places the primary rules in a dedicated framework. Workers, employers, labor inspectors, and industrial-relations courts should no longer need to trace every employment rule through an omnibus-law annex.

The consolidation does not automatically repeal every previous regulation. The final and transitional provisions will determine which articles are revoked, which rules remain valid, and how long the government has to replace implementing regulations.

Companies should not remove existing procedures until the status of the new and old rules is clear. Premature changes could create compliance problems if the new framework has not yet taken effect.

B. Protection Extends Beyond Conventional Formal Employment

House statements include informal and vulnerable workers within the law's scope. Digital-platform workers, including drivers and couriers, have also been mentioned in discussions of social protection and emerging employment relationships.

A separate House statement said that the specific partnership relationship between ride-hailing drivers and application companies would be regulated separately. These positions may reflect a division of functions. The new law may provide general protections, while classification, income formulas, algorithmic management, and account deactivation require more specific regulations.

Platform workers should not assume that the law automatically converts them into formal employees. That conclusion depends on definitions in the final text and subsequent regulations.

C. Termination and a Severance Reserve Receive Separate Chapters

The 23-chapter structure places employment termination and the severance reserve fund in distinct sections. A reserve fund is intended to improve a company's ability to meet severance obligations when termination occurs.

The benefit to workers depends on how the funding mechanism is designed. The official text needs to explain which companies must contribute, the contribution rate, where the money is held, how returns are managed, how funds are protected during bankruptcy, and how the reserve interacts with severance and unemployment insurance.

Companies may face a recurring cash-flow effect if they must set aside funds periodically. That impact cannot be calculated until the contribution formula, wage base, transition period, and accounting treatment are available.

D. Supervision and Enforcement Are Expanded

The House has identified supervision, investigation, and criminal provisions as parts of the law. The reform may increase compliance exposure for companies that fail to pay wages, disregard workplace safety, withhold employee rights, or obstruct inspections.

Its effectiveness will depend on the number of inspectors, the allocation of authority between national and regional governments, reporting quality, and the ability to enforce penalties. Stronger statutory language will have limited practical effect if workplace inspection remains weak.

What Cannot Yet Be Confirmed?

Claims about the law have circulated through news reports and social media. Until the promulgated text is available from an official database, the following figures and formulas should not be used as a basis for decisions:

• The minimum-wage formula and wage-scale requirements.

• Severance amounts for each ground of termination.

• The contribution rate and structure of the severance reserve.

• The maximum term for fixed-term employment contracts.

• The categories of work that may be outsourced.

• The legal status of digital-platform workers.

• Apprenticeship allowances and social-security requirements.

• The effective date and transition periods.

• Penalties for specific violations.

Constitutional Court decisions had already changed the interpretation of several employment provisions before the new law was approved. These cover matters such as fixed-term contracts, weekly rest, wage protection, and termination procedures. Employers and workers need to separate rules already effective through Court decisions from changes that will take effect under the new legislation.

What Does It Mean for Workers?

Workers may receive a broader protection framework if the final provisions are implemented as described. The main issues will include contract certainty, non-discrimination, wages, workplace safety, termination procedures, and the reliability of severance payments.

Informal and platform workers may gain clearer access to social protection. The actual effect will depend on eligibility definitions, who pays contributions, and the legal relationship between workers and employers or platform companies.

Workers involved in a current dispute should not rely solely on media summaries. Their employment contracts, company regulations, collective agreements, existing regulations, and Constitutional Court decisions still need to be reviewed.

What Does It Mean for Companies?

Companies need to review recruitment policies, employment contracts, apprenticeship arrangements, wages, outsourcing, workplace safety, termination procedures, and the handling of employee documents. Preparatory reviews can begin, but formal changes to contracts and payroll should wait for the official law and its transitional rules.

The severance reserve may create the largest financial change if companies must make regular contributions. It could affect cash flow, employee-benefit liabilities, labor costs, and profitability.

Listed companies will need to determine whether the new rules create material obligations that require financial-statement recognition or market disclosure. Investors should also distinguish labor-intensive businesses from companies with lighter workforce requirements.

Documents Still Needed

Practical implementation requires several documents:

• The numbered and promulgated Employment Protection Law.

• Its final and transitional provisions.

• Government regulations on employment relationships, wages, termination, and severance.

• Implementing rules for the severance reserve.

• Specific regulation for platform workers and digital partnerships.

• Guidance on labor inspections and penalties.

The promulgation date will help establish when companies must adjust their procedures. Transitional rules will also determine how the law treats existing contracts, company regulations, and collective agreements.

What Changes After Approval?

The clearest change is the creation of a stand-alone employment framework outside the Job Creation Law. The announced scope also extends to informal workers, vulnerable groups, digital-platform work, severance reserves, and stronger supervision.

The practical effect cannot be measured from the number of articles alone. Workers and companies need the official text to identify entitlement formulas, exemptions, effective dates, and obligations that depend on secondary regulations.

Parliamentary approval completes the political stage. Publication of the final text, adoption of implementing regulations, and effective enforcement will determine whether the reform improves actual protection or merely reorganizes the legal framework.

Disclaimer

This material is provided for educational purposes and does not constitute legal, employment, investment, or accounting advice. The analysis uses official information available through October 29, 2026. A numbered and promulgated final text of the Employment Protection Law was not located in the official legal databases reviewed. Workers and companies should consult the official document and qualified professionals before changing contracts, calculating termination benefits, or taking legal action.