Indonesia's new labour law is in force, with severance fund rules still pending

Indonesia's Law No. 27 of 2026 on Labour Protection has been in force since 28 October 2026. That is the day it was promulgated after President Prabowo Subianto signed it, according to the state news agency Antara. On Monday 9 November, Manpower Minister Yassierli said the full text can now be downloaded from the State Secretariat's legal documentation network (JDIH).

The law moves labour rules out of the 2023 Job Creation Law, as the Constitutional Court had ordered. For employers, the change drawing most attention is a requirement to set aside a dedicated severance reserve fund. Indonesian outlets report that payments into the fund begin in October 2027. The contribution rate and the body that will manage the money have not been announced, so companies in Indonesia, including foreign-owned ones, face a new obligation whose cost is not yet known.

What the law covers

The law has 313 articles in 23 chapters, Antara reported. The chapters cover topics including industrial relations, dismissal, the severance reserve fund, criminal provisions and transitional provisions.

Implementing regulations issued under the 2003 Manpower Law (Law No. 13 of 2003) and the Job Creation Law (Law No. 6 of 2023) stay in force as long as they do not conflict with the new law, according to Antara. The Manpower Ministry's legal database lists the new law as repealing the 2003 Manpower Law.

Some changes affect workers directly. Under Article 118(6), collective leave days set by the central government no longer count against a worker's annual leave, detikTravel reported. CNN Indonesia reported on 10 November that minimum wage setting under the new law involves regional governments and wage councils.

How the severance reserve fund is meant to work

Article 253 requires employers to set aside money for future severance payouts. Katadata, Kumparan and Liputan6 all report that Article 253(3) places the fund under management by a government institution.

Liputan6 and Waspada reported that the Manpower Ministry has said a government body will soon be appointed to run the fund. According to those reports, pension funds (Dapen) and financial institution pension funds (DPLK) will not be allowed to manage it. The two outlets also report that companies must start paying in from October 2027. That date reflects their reading of a one-year deadline in the law for issuing implementing regulations. It is not a date set out in a published regulation.

Summaries of the text report that micro and small businesses are exempt from the fund under Article 253(4), and that employers who fail to set one up face administrative sanctions. Kumparan reported that the fund is separate from the job-loss benefit (JKP) programme run by BPJS Ketenagakerjaan, the state social security agency. These provisions have not been checked against the published text for this article.

Still unknown: how much employers must contribute, which institution will hold the money, and how payouts will be made.

What reportedly changes in severance payouts

On 6 October, Kompas.com, Media Indonesia and other outlets reported that the law removes the option, allowed under Government Regulation 35/2021, of paying 0.5 times the statutory severance for some dismissals. They cited the manpower minister.

That does not mean every dismissed worker now receives the same multiple. Reports on the text say the multiplier still depends on the reason for dismissal, and some outlets report a 1.5 times multiplier for company closures. These figures have not been verified against the law's text for this article.

How the law passed

The House of Representatives (DPR) approved the bill at a plenary session on Tuesday 6 October 2026. Speaker Puan Maharani chaired the session, 326 members were recorded as present and all factions approved, IDN Times reported. Putih Sari, deputy chair of House Commission IX and head of the working committee on the bill, delivered the committee's report. Deputy Speaker Sufmi Dasco Ahmad called the law the "kado terindah" (finest gift) for workers, according to the DPR's website.

The government handed its list of issues on the bill to the DPR on 14 September, according to the Manpower Ministry.

The bill followed Constitutional Court ruling No. 168/PUU-XXI/2023, as cited by IDN Times. Read on 31 October 2024, the ruling gave lawmakers two years to separate labour rules from the Job Creation Law. The vote came about three and a half weeks before that 31 October 2026 deadline.

Early reactions from unions and employers

The KSPI union confederation said it accepted the law with three critical notes, according to Media Indonesia and Monitor Indonesia. The content of those notes has not been verified for this article.

The employers' association Apindo has raised concerns since the text was published. Kontan reported that Apindo warned the law should not hamper job creation. Katadata reported that employers are worried the new severance scheme could weaken pension provision for workers. Suara.com reported on 10 November that Apindo argued larger pension funds were the better option.

What to watch next

The next steps are the implementing regulations due within a year of promulgation, the appointment of the fund manager and the setting of a contribution rate. Employers and workers will also need guidance on how the new severance rules apply to dismissals that began before 28 October.