Indonesia's House of Representatives passed the Labour Protection Law on 6 October 2026, creating a standalone employment statute after the Constitutional Court ruled in October 2024 that labour provisions must be separated from the 2020 Job Creation Law within two years.
According to Bloomberg, Manpower Minister Yassierli told parliament the new law removes a clause that, in some cases, allowed severance pay to be calculated at half the standard rate. It also raises the bar for dismissing workers on efficiency grounds and introduces a severance reserve : a fund employers must maintain to cover payouts when they do lay off staff.
The legislation tightens rules on outsourcing and fixed-term contracts, partially reversing changes that former president Joko Widodo introduced to give companies more hiring flexibility. The bill was passed by a parliament dominated by President Prabowo Subianto's coalition, following several weeks of peaceful union demonstrations.
Indonesian law firm Assegaf Hamzah & Partners, in a note to clients cited by AsiaOne, flagged stricter dismissal rules, higher severance for certain terminations, and the introduction of sectoral minimum wages as the most significant employer-facing changes. The firm advised clients to review planned terminations, employment costs and wage structures.
Digital platform and informal workers gain statutory protections under the new law, including social security coverage, fair pay entitlements, algorithm transparency and protection against unjustified account deactivation, the law firm noted.
The law's 313 articles also cover fixed-term employment agreements, wages, working hours and foreign workers. While the full legislative text had not been made public at time of reporting, the Indonesian Employers Association had not yet responded to requests for comment on cost implications.
Source: Bloomberg
