Indonesia's Labor Protection Law (UU Pelindungan Ketenagakerjaan) was passed by the House of Representatives on 6 October 2026. It consolidates employment rules that were previously scattered, covering fixed-term contracts, outsourcing, severance, and worker protection. For HR teams, this is not just regulatory news. It is a concrete to-do list.
Why can't HR wait?
The law takes effect only after a one-year transition period from its enactment. But it touches what HR manages every day: contract end dates, severance calculations, and the documents requested during hiring. Waiting for the final text before mapping your data only forces rushed adjustments later.
Which provisions matter most?
Based on statements from the Minister of Manpower and the House, key provisions include:
- Fixed-term contracts (PKWT) capped at 2 years, extendable up to twice, with each extension lasting no more than 1 year.
- Outsourcing limited to five categories of support services.
- Working hours remain at 40 hours per week.
- Severance: the 0.5 multiplier is removed, and layoffs must begin with mitigation and bipartite negotiation.
- Withholding diplomas and workers' personal documents is now prohibited at the statutory level.
- Protection extended to apprentices, digital platform workers, and informal workers.
Where should HR start?
The most realistic approach is to map first, then adjust. Start by auditing contract status and extension history, simulating severance liabilities under several scenarios, and reviewing hiring and apprenticeship processes. These findings become the basis for decisions once the official text and implementing regulations are published.
The business impact
Planned adjustments protect two things at once: compliance and operational continuity. Companies with well-organized data can estimate cost impact early, avoid industrial relations disputes, and keep teams productive throughout the transition.
Regulations change, operations must keep running
The law signals a clear direction: stronger worker protection and more certain employment relationships. For HR, the key is having the data, processes, and systems ready to adapt without disrupting the business.
Frequently asked questions
When does the Labor Protection Law take effect? After a one-year transition period from its enactment. For wages, the 2027 provincial minimum wage will still follow Government Regulation No. 51 of 2023.
Do existing contracts need to be changed immediately?
Not necessarily. Map the contracts that may be affected first, then adjust once the official text and implementing regulations are issued.
Find the right approach for your HR operations with KPSG at www.kpsg.com www.kpsg.com
Source: Ministry of Manpower of the Republic of Indonesia (Kemnaker RI), 2026
