Measures before job cuts
The requirements appear in Article 228 of the Employment Protection Law, according to the text Kompas.com obtained from the Ministry of State Secretariat's Legal Documentation and Information Network (JDIH) on November 6, 2026.
The 10 measures include cutting holiday overtime and daily overtime, reducing shifts, and shortening working hours or the workweek. Employers can also leave expired fixed-term contracts unrenewed and refrain from replacing employees who reach retirement age.
The remaining measures are adjustments to managers' wages and/or benefits, temporary rotating furloughs for workers on indefinite contracts, voluntary early retirement programs, and retirement programs for eligible workers.
When layoffs remain unavoidable, employers must seek agreement with workers or their unions through bipartite negotiations. If those talks fail, Article 228(5) requires the parties to follow the legally prescribed industrial relations dispute resolution procedures.
Under Article 228(7), a dismissal is void if it has neither an agreement nor a legally final decision from the industrial relations dispute resolution body. In that situation, the employer must reinstate the affected worker.
Severance entitlements
Article 232 requires employers carrying out layoffs to pay severance and/or a long-service award, together with compensation for rights owed to the worker. The applicable payment factors depend on the reason for the layoff.
The minimum severance schedule in Article 232(2) starts at one month's wages for employees with less than one year of service. It rises to two months for service of one year to less than two, three months for two years to less than three, and four months for three years to less than four.
Workers with four years to less than five years of service are entitled to at least five months' wages; those with five years to less than six receive six months; those with six years to less than seven receive seven months; and those with seven years to less than eight receive eight months. The minimum for service of eight years or more is nine months' wages.
Merdeka.com reported that the law restores the minimum severance multiplier to one times the statutory entitlement, compared with 0.5 times under the Job Creation Law framework. It also allows agreements for payments of two to four times the entitlement. KSPI President Said Iqbal said the 0.5-times formula is no longer used.
Contracts, wages and outsourcing
Iqbal, who also serves as Labour Party president, outlined other changes in comments reported by Merdeka.com. He said fixed-term employment contracts, known as PKWT, are limited to a combined four years across three periods, down from the five-year limit in Government Regulation No. 35 of 2021.
For minimum-wage increases, Iqbal said the formula adds inflation to economic growth multiplied by an index ranging from 0.5 to 1.0. The previous index range, under Government Regulation No. 49 of 2026, was 0.5 to 0.9.
According to Iqbal, outsourcing is restricted to four supporting activities: catering, security, cleaning and driving. Mining and oil and gas businesses, as well as state-owned enterprises, must establish subsidiary limited companies, or PTs, to use outsourcing.
Iqbal said the law incorporates 80-85 percent of labor's proposed concepts, with the rest reflecting compromises with proposals from employers' group Apindo. He characterized it as substantially better than the Job Creation omnibus law.
Passage and transition rules
The House of Representatives (DPR) passed the law on October 6, 2026, during its ninth plenary session of the 2026-2027 session year, according to E-Media DPR RI (Parlementaria). Its 23 chapters and 313 articles regulate labor matters separately from the omnibus framework of the Job Creation Law, Law No. 6 of 2023, in response to a Constitutional Court ruling.
Implementing regulations must be adjusted within one year of the law's enactment. Until replacement rules are issued, earlier regulations continue to apply wherever they do not conflict with the new law.
Those transitional rules include Government Regulation (PP) No. 35 of 2021, covering fixed-term contracts, outsourcing, working time, rest periods and layoffs. They also include the wage rules in PP No. 36 of 2021, as amended by PP No. 51 of 2023.
