Indonesia’s House of Representatives has passed a new Employment Protection Law aimed at strengthening workers’ rights while providing a clearer framework for employment relations, including contracts, wages, layoffs and severance payments. 

The bill was approved during a plenary session on Tuesday, 6 October, less than two months after lawmakers initiated the legislation. The law follows a 2024 Constitutional Court ruling that required the government and the House to establish a separate employment law outside the Job Creation Law framework. 

The legislation consists of 23 chapters and 313 articles covering a broad range of employment issues, including workers’ rights, social security, employment status, occupational health and safety, wages, industrial relations, termination of employment and severance benefits. 

Manpower Minister Yassierli said the legislation would provide greater legal certainty by harmonizing employment standards that had previously been spread across different regulations. He also said the law strengthens worker protection while providing clearer rules governing employment relations. 

“This bill reflects a balance between the protection of workers’ fundamental rights and the sustainability of the business sector,” Reuters quoted lawmakers as saying during the legislative process. 

Among the changes reported during the legislative process are higher severance benefits for eligible workers, tighter rules on fixed-term employment contracts and measures aimed at strengthening labor inspection and severance protection. The legislation also contains provisions addressing workers outside conventional formal employment, although the precise scope of several protections will depend on the final text and subsequent implementing regulations. 

Business groups, meanwhile, have called for careful implementation of the new rules. The Indonesian Chamber of Commerce and Industry (KADIN) has highlighted the need for clear implementing regulations and sufficient preparation so that the new provisions do not create additional uncertainty for employers. 

KADIN has also pointed to the importance of considering companies’ capacity and competitiveness when implementing provisions related to employment costs, wages, severance and other obligations. Similar concerns were raised during the legislative process by employer representatives, who warned that additional obligations or restrictions without clear implementation mechanisms could affect investment and job creation. 

Labor groups and academics have also pointed to a mixed picture. As reported by Kompas, several provisions were regarded as progress, including stronger labor inspection, a severance reserve fund and shorter maximum fixed-term employment periods compared with the Job Creation Law framework. 

At the same time, concerns remain over protections for informal workers, wage provisions and the number of important issues that are still expected to be regulated through implementing rules. Labor organizations have also differed in their assessments of the legislative process, with some describing it as more participatory than previous labor reforms while others questioned whether the final stages allowed sufficient public scrutiny.