New Manpower Law in Indonesia: What It Means for Employers

The new manpower law in Indonesia is the Manpower Protection Law, Undang-Undang (UU) No. 27 of 2026 (Pelindungan Ketenagakerjaan). It took effect on 28 October 2026, the day it was promulgated (Article 313), and replaced the Manpower Law, UU 13/2003. For an employer, the duties it sets include fixed-term contracts, probation, outsourcing, ending employment and severance. Each section below states the rule briefly and points to the MAM guide that covers it; our map of employment law in Indonesia shows where each rule sits.

What the new manpower law in Indonesia replaces

• The old statute: the law revokes UU 13/2003, and Articles 80 letter a and 81 of the Job Creation Law, UU 6/2023 (Article 311).
• Regulations already made: those made under the old laws stay in force where they do not conflict with the new one (Article 310).
• New regulations: the government must issue the regulations the law calls for within a year of 28 October 2026 (Article 312).

The law is published in the Audit Board’s legal database.

What the law asks of employers

Fixed-term contracts and probation

A fixed-term contract (PKWT, perjanjian kerja waktu tertentu) may last at most 2 years, and be extended at most twice, each time for up to 1 year, with written notice at least 7 days before it ends (Article 82(2) and (3)). The employer registers it with the government within 3 working days of signing (Article 87(3)). It is only for work that is not permanent in nature (Article 87(1) and (2)). A fixed-term contract not made in writing, or made for permanent work, becomes a permanent contract by law (Articles 85 and 87(5)). When it ends, the employee is owed compensation (Article 88).

Probation belongs only in a permanent contract and lasts at most 3 months. During it, the employer pays at least 75% of the wage for the position, never below the minimum wage, and provides social security (Article 92(1) and (2)). Our guide to types of employment contracts in Indonesia covers both.

Outsourcing

The general rule is that a company may hand part of its work to another company under a written outsourcing agreement, for supporting services not directly linked to production (Article 95(1) and (2)). The list of supporting services covers cleaning, catering for workers, security and transport for workers (Article 95(3)); mining, oil and state-owned companies have their own routes (Articles 96 and 97). An outsourced worker used on work directly linked to production becomes the user company’s employee by law (Article 98(1)). A company that employs outsourced workers must bring its arrangements into line with the law within a year of 28 October 2026; an outsourcing agreement made before then runs until it ends (Article 306).

Ending employment and severance

The law lists steps to try before ending anyone’s employment. Where it cannot be avoided, the employer negotiates with the union, or with the employee where they are not a member, for at most 30 working days (Article 228(1) to (4)). If the talks fail, the dispute procedure follows, and the termination goes ahead after a final decision. A termination that needed the talks but went ahead with neither an agreement nor a final decision is void, and the employee returns to work (Article 228(5) to (7)). No talks are needed where the employee resigns, a fixed-term contract ends or the employee reaches the retirement age set in the contract, company regulations or collective agreement (Article 229).

The law sets the two scales itself, except that micro and small businesses agree the amounts with the employee (Article 250). Severance pay is at least 1 month’s wages for under a year’s service, rising to at least 9 months for 8 years or more; long-service pay is 2 months from 3 years’ service, rising to 10 months for 24 years or more (Article 232(2) and (3)). The reason for ending employment sets the multiple of those scales that is paid, on basic wage plus fixed allowances (Articles 232(1), 234(1) and 236 to 249).

How many times each scale is paid, by reason

	Severance pay	Long-service pay
Retirement	2 times	1 time
Owner closes	1 time	1.5 times
Warnings	1 time	1 time

The rows come from Articles 247, 238 (the owner’s decision to close permanently) and 244. An employee who resigns and meets the conditions in Article 231(i) is entitled to a separation payment (uang pisah) and the rights payment (Article 242(1)). The employer also pays out rights such as untaken annual leave (Article 232(4)). Employers must also keep a severance reserve fund, managed by a government institution; micro and small businesses are exempt, and a Government Regulation will set out how it works (Article 253). Our guide to severance pay and termination in Indonesia covers the reasons and the steps.

Working time, rest and leave

Standard hours, overtime limits and overtime pay rates are written into the law itself (Articles 115 and 116). The employer gives long rest of 30 calendar days after every 5 years of continuous service, with no annual leave in that year (Article 118(2)(c) and (4)). Annual leave is at least 12 working days after 12 months’ service (Article 118(5)).

Maternity leave is at least 3 months, extendable by up to 3 more where a doctor’s letter shows a medical need (Article 121(2)).

Company regulations and the wage scale

An employer with at least 10 employees must have company regulations, unless it has a collective agreement (Article 175). They last at most 2 years and must be renewed (Article 179(3)). An employer must draw up and apply a wage structure and scale (Article 146(1)), and attach it to the company regulations or collective agreement (Article 146(3)). Our guide to company regulations covers both.

Other duties

• Protection at work: employers protect staff’s personal data and safety, prevent violence, discrimination and bullying, and offer an internal complaints channel that is easy to reach (Article 46(8)). An employer with women on staff sets a zero-tolerance policy on sexual harassment and provides a lactation room (Article 114(1)(b) and (c)).
• Minimum wage: minimum wages are set at provincial level, and the governor may also set district or city and sectoral rates (Article 137(2) and (3)).
• Foreign workers: Article 62(1) requires an employer of a foreign worker to hold a foreign worker plan approved by the manpower minister (RPTKA, rencana penggunaan tenaga kerja asing) and the minister’s approval to use the worker; Article 62(4) lists the cases where that duty does not apply. An employer may not place a foreign worker in a personnel or human resources post (Article 62(3)). Our guide to hiring a foreign employee covers the process.

What to do now

Start with the papers the law touches:

1. Fixed-term contracts: written, for non-permanent work, and registered within 3 working days.
2. Probation clauses: in permanent contracts only, within 3 months.
3. Outsourcing agreements: in line with the law within a year of 28 October 2026.
4. Company regulations and the wage scale, where you have 10 or more employees.
5. A termination you start: the prevention steps and the talks first, as set out above (Article 228).

Our HR consulting team drafts employment agreements and company regulations to Indonesian law, and works through any termination with you before the employee is told. Our payroll service handles BPJS social security (Badan Penyelenggara Jaminan Sosial) and PPh 21 employee income tax. With no entity of your own here, our employer of record service makes MAM the legal employer.