DPR Begins Reforming Employment Regulations: What Will Change for Workers?

On Wednesday, 26 August 2026, the Legislative Body (Badan Legislasi or “Baleg”) of the House of Representatives of the Republic of Indonesia (DPR RI) officially approved the results of the harmonization, consolidation, and refinement of the conception of the Draft Law on Employment Protection (Rancangan Undang-Undang or “RUU”) at a Plenary Meeting held at Nusantara I Building, Parliamentary Complex, Senayan, Jakarta. This approval marks the completion of the harmonization stage of the RUU proposed by Commission IX of the DPR RI, which will subsequently be brought before the Plenary Session of the DPR RI for approval as a Draft Law proposed as a Legislative Initiative of the DPR RI, as reported through the official JDIH DPR RI website.

The Plenary Meeting was chaired by the Chairperson of the Baleg DPR RI, Bob Hasan, after hearing the mini faction views and statements from the proposing party. As reported by E-Media DPR RI, Deputy Chairperson of Commission IX of the DPR RI, Putih Sari, emphasized that this approval constitutes an important foundation for strengthening the legislative function in order to establish employment regulations that provide greater legal certainty. On the same day, ANTARA reported that Deputy Minister of Manpower (Wamenaker) Afriansyah Noor, when opening the National Working Meeting of the Confederation of All-Indonesian Trade Unions (KSBSI), stated that the Government and the DPR are targeting completion of the drafting of the new Employment Law by October 2026.

Background and Urgency: Why Has This RUU Emerged Now?

The initiative to establish the RUU on Employment Protection is driven by a combination of constitutional legal obligations and the dynamics of transformation in the world of work:

1. Mandate of the Constitutional Court (MK) Decision:
   Through Decision Number 168/PUU-XXI/2023, the Constitutional Court partially granted the petition for judicial review of Law Number 6 of 2023 concerning Job Creation. In its considerations, the Constitutional Court requested that the lawmakers immediately establish a new employment law and separate employment regulations from the Job Creation Law. The Constitutional Court considered that such separation was necessary, among other reasons, due to the potential overlap of norms between Law Number 13 of 2003 concerning Manpower and the Job Creation Law.

2. Transformation of the World of Work and the Digital Economy:
   As reported by SIN Indonesia, Deputy Minister of Manpower Afriansyah Noor stated that the complexity of the world of work today is influenced by technological developments, automation, changes in global supply chains, the green economy, and the dynamics of international regulations. According to him, these conditions require comprehensive national employment regulations capable of serving as a future legal architecture in providing protection to workers.

What Does This RUU Actually Seek to Change?

The RUU on Employment Protection introduces a number of substantive changes designed to strengthen workers’ normative rights while clarifying the limits of employers’ obligations. The principal changes include:

• Outsourcing and TUPE:

Outsourcing is one of the matters included in the Employment RUU as a follow-up to Constitutional Court Decision Number 168/PUU-XXI/2023. The DPR discussion materials also expressly record labor protection through the principle of TUPE (Transfer of Undertaking Protection of Employment), including in the context of the relationship between outsourcing companies and employers.

• Wages, Minimum Wages, Decent Living Needs (KHL), and Wage Structures and Scales:

Wage-related issues constitute one of the principal subjects of the RUU on Employment Protection. In the discussion on 26 August 2026, Baleg member I Nyoman Parta specifically highlighted the minimum wage formula, which to date has taken into account economic growth, inflation, and the company’s capacity. He also highlighted the disparity between minimum wages and decent living needs (KHL) in the regions.

In addition, the Center for the Drafting of Laws of the DPR RI records that wages, as well as wage structures and scales, are among the matters specifically regulated in the Employment RUU.

• Fixed-Term Employment Agreements (PKWT) and Certainty for Contract Workers:

The Employment RUU provides for a restructuring of the provisions governing Fixed-Term Employment Agreements (Perjanjian Kerja Waktu Tertentu or “PKWT”), including the term of the employment relationship and the consequences where the employment relationship ends before its stipulated term.

• Severance Pay and Termination of Employment (PHK):

Workers’ groups are advocating for the Employment RUU to strengthen protection in cases of termination of employment (PHK), including ensuring entitlement to severance pay, Long Service Appreciation Payment (Uang Penghargaan Masa Kerja or “UPMK”), and Compensation for Rights (Uang Penggantian Hak or “UPH”). Another demand is that termination of employment be treated as a last resort after efforts to maintain the employment relationship through dialogue and negotiations have been exhausted.

• Platform Workers and the Gig Economy:

The RUU on Employment Protection also accommodates protection for digital platform workers in response to changes in work patterns resulting from technological developments. These provisions are also intended to provide certainty of protection for workers in the informal sector and gig workers.

• Supervision and Legal Sanctions:

Deputy Chairperson of Commission IX of the DPR RI Putih Sari identified the strengthening of employment supervision as one of the aspects requiring reinforcement under the RUU. The DPR has received numerous concerns regarding inadequate supervision in the regions and seeks a supervisory system capable of reaching companies more broadly.

The draft also contains criminal provisions applicable to employers that fail to provide labor protection, as well as criminal provisions applicable to employers that pay wages below the minimum wage.

(Source: Center for the Drafting of Laws of the DPR RI, EMedia DPR RI)

Competing Interests: Worker Protection vs. Business Sustainability

The discussion of the Employment RUU places the Government and the DPR in a position where they must balance strengthening worker protection with the need for business sustainability. The target of completing the legislation by October 2026 means that the regulatory drafting process is taking place within a relatively limited timeframe, making the substance of the regulations and the dialogue mechanism important factors in determining the quality of the resulting regulations.

• Interests of workers/laborers: Trade unions are advocating for stronger certainty regarding employment status, social protection, adequate wages, and protection against termination of employment and new forms of employment relationships. These demands are directly related to income security, purchasing power, and workers’ welfare.

• Interests of the business community: Employers require regulations that provide legal certainty while allowing flexibility in workforce management. Labor costs, wage-setting mechanisms, outsourcing provisions, termination of employment, and the use of labor are among the factors that may affect corporate efficiency and competitiveness.

The issue is not merely a matter of choosing between the interests of workers and those of employers. This RUU must be capable of establishing enforceable protection standards without creating legal uncertainty or burdens that hinder business continuity. Conversely, flexibility for the business community should also be subject to minimum protection standards so that it does not ultimately result in the erosion of workers’ rights.

The effectiveness of tripartite dialogue among the Government, the DPR, trade unions/labor unions, and employers’ associations will be important in the next stage of deliberations. The quality of the regulations will not be determined solely by how quickly the RUU is enacted, but by the extent to which these divergent interests are translated into clear and enforceable provisions that provide certainty for both workers and employers. Accordingly, the target for enactment in October 2026 should be accompanied by a deliberative process that remains open to input from the relevant parties and is based on actual labor market conditions and the capacity of the business community.