Indonesia’s House of Representatives approved the Labor Protection Bill into law in Jakarta on Tuesday, October 6, 2026. The legislation raises severance benefits, tightens layoff restrictions, and establishes a severance security program, reversing several pro-business provisions introduced under the 2020 Job Creation Law.
The new legislation passed during the ninth plenary meeting of the House’s first sitting period for the 2026–2027 parliamentary year, clearing the floor about three weeks ahead of the deadline set by the Constitutional Court. House Speaker Puan Maharani put the question to the assembly, drawing approval from the parliamentary factions present in the capital.
The enactment follows a 2024 ruling by the Constitutional Court that instructed lawmakers to excise labor provisions from the 2023 omnibus package and draft a standalone statute within two years. Trade union petitions had challenged the prior rules, setting up the overhaul.
Manpower Minister Yassierli Details New Protections for Workers and Gig Economy
Manpower Minister Yassierli represented the government during the plenary session, describing the statute as the dawn of a new era for domestic labor regulations. According to reports, the comprehensive text spans 23 chapters and 313 articles, consolidating provisions previously scattered across different regulations.
The revised framework targets multiple layers of the workforce. It introduces strict anti-discrimination safeguards covering recruitment, remuneration, and career development. It also establishes mandatory transparency in job market information for jobseekers, formalizes legal certainty for apprentices and interns, and reinforces occupational safety standards.
Crucially, the legislation extends formal social protections to informal laborers and digital platform workers. Law firm Assegaf Hamzah & Partners noted in a client advisory that gig and platform workers will gain entitlement to fair pay, algorithmic transparency, and safeguards against unjustified account deactivations.
“This bill not only consolidates and harmonizes labor provisions that were previously scattered across different regulations, but also protects employment to better respond to the dynamics of the world of work. This is what we hope will become part of a new era of labor law in Indonesia.”
Manpower Minister Yassierli, via Independent Observer
Employers Warn of Surging Costs While Unions Raise Gig Worker Concerns
While labor advocates celebrate the expansion of rights, industry groups have sounded alarms over potential economic friction. The Indonesian Employers Association warned that the new approach could lift costs and chill investment.
Textile and garment manufacturers expressed pessimism. Danang Girindrawardana, executive of the Indonesian Textile Association, argued that the rules add pressure to the labor-intensive industry.
“The situation has not improved, it has actually been aggravated by this bill. So, we add double the concern for this year’s and future years’ projections.”
Danang Girindrawardana, Executive of the Indonesian Textile Association, via Voi
Danang estimated that while the textile and garment industry showed production growth in the range of 3 percent during the second semester of 2026, the strict rules could make the momentum stagnate and trigger factory collapses within one to two years.
Controversy also surrounds the classification of digital labor under Article 49, which labels gig and platform work as flexible. Lily Pujiati, chair of the Indonesian Transportation Workers Union, cautioned that online drivers and couriers still face penalties, including account suspensions and partnership terminations, if an order is not completed.
Structural Shifts in Severance Pay and Layoff Rules
The statute makes fundamental adjustments to corporate financial liabilities during staff reductions. Parliament removed a provision that, in certain cases, allowed severance to be calculated at 50 percent of the standard amount.
Employers also face higher hurdles when attempting to dismiss workers on efficiency grounds. To cushion the impact, the government is instituting a severance guarantee scheme requiring corporate contributions, which local media reports indicate will involve contributions to BPJS.
Deputy Commission IX Chair Putih Sari reported to the plenary that the text was refined through public consultations held between September 16 and 22, 2026, incorporating feedback from workers, employers, academics, and community organizations before securing final legislative ratification.