Wage formulas, outsourcing, contracts, and severance remain key disputes before planned passage.
Indonesia’s proposed new employment law is approaching a crucial legislative deadline, but employers and labor groups remain divided over how far the rules should prioritize worker protection versus business flexibility.
Workers and Employers Remain Divided
Labor groups and the Indonesian Employers Association, or Apindo, have yet to reach common ground on several major provisions in the Manpower Protection Bill. KSPI president Said Iqbal, who also serves as President Prabowo Subianto’s special adviser on labor affairs, said the House of Representatives had facilitated talks between the two sides, but disagreements remained over minimum wages, outsourcing, fixed-term employment contracts, or PKWT, and severance pay.
Unions Push for Stronger Worker Protections
Labor groups are seeking tighter restrictions on outsourcing and want fixed-term contracts prohibited for full-time positions. The Federation of Indonesian Metal Workers’ Union, or FSPMI, has also demanded minimum wage increases of 7.5% to 9.5% for provincial and city minimum wages, tax exemptions for Old-Age Savings, and opposition to severance payments being reduced to half of the amount required under previous rules. Said said the proposed wage increase of up to 9.5% was intended to account for differences in economic growth across regions while sustaining workers’ purchasing power and welfare.
Apindo Warns Against Rigid Regulation
Apindo chairwoman Shinta Kamdani warned that overly rigid employment regulations could raise business costs, reduce competitiveness, and affect job creation and investment. The employers’ group wants greater flexibility for outsourcing and fixed-term contracts while proposing that minimum wages be adjusted every two years instead of annually, using inflation, economic growth, an alpha coefficient starting at 0.1, and living-cost data from Statistics Indonesia as an upper limit.
Employers Propose New Severance System
Apindo has also proposed moving severance payments to a prefunded system integrated with the government’s Job Loss Insurance, or JKP, program, which it says would ensure workers receive income while preventing employers from paying twice. Other proposals include targeting 2 million new formal jobs annually by 2030, increasing government support for worker training, setting a maximum regular working limit of 45 hours per week with sector-based flexibility, and applying what Apindo describes as proportional sanctions for labor violations.
Lawmakers Face Constitutional Court Deadline
Despite the unresolved differences, lawmakers were targeting October 8, 2026, or earlier, to pass the bill before the House enters recess. The legislative push follows an October 31, 2024 Constitutional Court ruling ordering the government and House to create a separate employment law outside the Job Creation Law within two years. CORE Indonesia researcher Yusuf Rendy Manilet said the central challenge is ensuring regulations are clear, fair, and enforceable, warning that legislation lacking trust from either employers or workers could face further legal challenges.
For Indonesian workers and businesses, the bill could reshape rules governing wages, contracts, outsourcing, severance, and workplace protections, making the unresolved negotiations particularly significant. For Singaporean companies and readers with economic interests in Indonesia, the debate provides insight into changes being considered for Indonesia’s labor and business environment.
Sources: Asia News Network (2026) , The Jakarta Post (2026)
Keywords: Indonesia Employment Bill, Worker Protection Indonesia, Minimum Wage Indonesia, Outsourcing Rules, Severance Pay, Apindo
