Labour and employment trends and developments in Indonesia

Marshall Situmorang

Nusantara Legal Partnership, Jakarta

marshall.situmorang@nusantaralegal.com

Audria Putri

Nusantara Legal Partnership, Jakarta

audria.putri@nusantaralegal.com

Overview of Indonesian employment law

Indonesian employment law is principally governed by Law No 13 of 2003 on Manpower, as amended from time to time, including by the manpower-related provisions under Government Regulation in Lieu of Law No 2 of 2022 on Job Creation, stipulated into law under Law No 6 of 2023 (Manpower Law). The Manpower Law is supported by implementing regulations, including government regulations and regulations issued by the Minister of Manpower.

Generally, the Indonesian manpower framework regulates employment agreements, wages, working hours, termination of employment, outsourcing, foreign workers, occupational safety and health, and social security. Employment disputes are generally handled under Law No 2 of 2004 on Industrial Relations Dispute Settlement through bipartite negotiation, mediation or settlement, and court proceedings before the Industrial Relations Court.

Recent developments suggest a clear policy emphasis on workers outside traditional employment arrangements or with limited formal protection. This is visible in the government’s approach to online transport workers, the renewed regulation of outsourcing, and the enactment of the domestic workers’ law.

Trends and developments of employment in Indonesia

New policy direction for online transport workers

One of the most closely watched developments is Presidential Regulation No 27 of 2026 on Protection of Online Transportation Workers (PR 27/2026). Such a worker is a person who gets travel and delivery jobs via a website or app. During the 2026 May Day commemoration, the President announced that PR 27/2026 had been signed to strengthen protection for online transport workers, including by addressing platform deductions, income distribution and social security protection.^[1]

This is commercially and legally important because online transport drivers in Indonesia have been treated as ‘partners’, rather than employees of the ride hailing operator. That model has allowed ride hailing platform operator to operate with flexibility, but it has also raised recurring questions on driver protection, particularly on income security, social security, accident risk, platform terms, and dispute handling.

Based on the public statement, PR 27/2026 appears to focus on reducing deductions imposed by platform companies and increasing the share of income drivers receive. The President publicly referred to a 92 per cent share for drivers and an eight per cent allocated share percentage for the ride-hailing platform operator, as well as health and work accident-related protection for the drivers.

From the perspective of the ride-hailing platform operators and their investors, it is important to know exactly how the implementing regulation would affect their relationship with the partner drivers. It remains to be seen how the PR 27/2026 would provide additional protection while maintaining the existing partnership model. Once the implementing regulation of PR 27/2026 has been issued the relevant ride-haling platform operator will need to adjust their platform terms, pricing, social security arrangements, and complaint-handling process. If the new regulation transforms the relationship between ride-hailing platform and its partners to become closer to an employment-style model, the cost and operational implications may be more significant.

Changes on outsourcing arrangement regulation

The Minister of Manpower recently issued Ministry of Manpower Regulation No 7 of 2026 on Outsourcing Work (MoM Reg 7/2026), which stipulates a concrete regulatory framework on the types and fields of work that may be outsourced.^[2]

Article 3(2) of MoM Reg 7/2026 provides that outsourced works must be supporting activities, and they are limited to:

1. cleaning services;
2. food and beverage provision;
3. security;
4. provision of drivers and workers’ transport;
5. operational support services; and
6. supporting work in the mining, oil, gas and electricity sectors.

MoM Reg 7/2026 also requires outsourcing arrangements to be set out in a written outsourcing agreement. Article 4(1) of MoM Reg 7/2026 provides that the agreement must, at least, cover the outsourced work, term, work location, number of outsourced workers, protection and rights of outsourced workers, and the rights and obligations of the outsourcing company and the company assigning the work. Moreover, the worker protection provisions must cover, among other matters:

1. wages;
2. overtime pay;
3. working hours and rest periods;
4. annual leave;
5. occupational safety and health;
6. social security;
7. religious holiday allowance; and
8. rights on expiry or termination.

One of the major changes introduced by MoM Reg 7/2026 is that the responsibility and protection towards the outsourced workers are no longer the responsibility of the outsourcing company alone. The protection and rights of outsourced workers must be upheld in accordance with applicable laws and regulations. While such protection is the responsibility of the outsourcing company, the company assigning the outsourced work must ensure that the outsourcing company provides those protections (Art 4(2) and (3) of MoM Reg 7/2026).

The regulation also introduces a recording requirement. The outsourcing company must have proof of the recording of the outsourcing agreement, and the application to meet the recording requirement must be submitted to the relevant local Manpower Office where the work is performed no later than three working days after the agreement is signed (Art 5 of MoM Reg 7/2026).

This issuing MoM Reg 7/2027 has direct impact on various companies which use outsourced workers, whereby, their existing outsourcing arrangements should be reviewed to ensure that the outsourced work: falls within permitted categories; is genuinely supporting work; its recording requirement has been satisfied; and worker protections have been properly allocated and implemented. A company assigning outsourced work which violates the permitted categories may be subject to administrative sanctions, including written warnings and restrictions on business activities (Art 8 of MoM Reg 7/2026). Existing outsourcing agreements remain valid until they expire, but the types and fields of outsourced work must be adjusted within two years after the promulgation of MoM Reg 7/2026 (Art 10 of MoM Reg 7/2026).

New regulation on the protection of domestic workers

Indonesia has also recently enacted Law No 2 of 2026 on Protection of Domestic Workers (Law 2/2026), which was stipulated and promulgated on 30 April 2026.^[3] The issuing of this Law is significant as domestic workers in Indonesia have traditionally operated in a largely informal setting, despite being frequently employed in Indonesian households.

Article 10 of Law 2/2026 defines ‘domestic work’ broadly. It includes any domestic works such as cooking, washing and ironing clothes, house cleaning, cleaning the yard or garden, childcare, caring for sick persons, elderly persons, persons with special needs or persons with disabilities, driving, guarding the house, caring for pets, and other domestic work agreed by the employer and the domestic worker.

The working relationship between a domestic worker and an employer is based on an agreement or employment agreement (Art 11(1) of Law 2/2026). The employment agreement must, at least, include the identities of the parties, workplace address, commencement date and term, scope of domestic work, rights and obligations, working conditions, wage amount and payment method, place and date of execution, and signatures or thumbprints of the parties (Art 11(2) of Law 2/2026). The employment agreement must be made in Indonesian language (Art 11(5) of Law 2/2026). For direct recruitment, the employer and the prospective domestic worker may record their agreement in the form of an employment agreement (Art 12 of Law 2/2026).

Law 2/2026 also regulates how the working relationship may be terminated. The relationship may be terminated due to: mutual agreement; non-performance of the agreement or employment agreement; a criminal act committed by either party against the other; the domestic worker’s absence for seven consecutive days without clear reason; death of either party; expiry of the agreement or employment agreement; or relocation of the employer where the domestic worker is unwilling to continue the working relationship (Art 14 of Law 2/2026).

Law 2/2026 also stipulates domestic workers’ rights to: worship based on their religious beliefs; reasonable working hours; rest periods and leave; receive wages; receive religious holiday allowance; receive healthcare and employment social security; eat healthy food; proper accommodation for full-time domestic workers; a safe and healthy working environment; and claim their employment termination rights if the employer fails to perform the employment agreement (Art 15(1) of Law 2/2026). Domestic workers also have obligations, including: providing accurate information; performing the agreement; requesting permission if they are unable to work; giving a month’s notice before resignation; and maintaining the good name of the employer and the employer’s family (Art 17 of Law 2/2026).

Although Law 2/2026 is primarily relevant to household employment, its wider policy message is clear: Indonesia is increasingly willing to bring informal or private work arrangements into a framework of formal protection.

Development of a new employment law

A broader legislative process is also underway following Constitutional Court Decision No 168/PUU-XXI/2023. The decision concerned, among other matters, the constitutional review of manpower-related provisions contained in Government Regulation in Lieu of Law No 2 of 2022 on Job Creation, which was later enacted into law as Law No 6 of 2023.

The Constitutional Court Decision noted that the Indonesian employment law had become fragmented, with the relevant norms found in Law No 13 of 2003 on Manpower, Law No 6 of 2023, and a number of Constitutional Court decisions. It was also observed that this structure created a risk of inconsistency, disharmony and legal uncertainty. Against that background, the Court stated that the legislature should promptly form a new employment law other than Law No 6 of 2023. The Court considered that two years would be sufficient to prepare the new law, provided that the process accommodates Law No 13 of 2003, Law No 6 of 2023, and the relevant Constitutional Court decisions, with active trade union participation.^[4]

This process is expected to cover core employment issues, including fixed-term employment, outsourcing, wages, termination of employment, and other worker protection matters. While the existing Manpower Law and its implementing regulations remain applicable, future reforms may require employers to update the employment agreements, company regulations, collective labour agreements, outsourcing contracts, employment termination planning, and industrial relations strategy.

For employers, digital platforms, investors and cross-border businesses, this should be monitored before enactment. The direction of reform may affect workforce structuring, vendor arrangements, outsourcing models, cost allocation and dispute risk management.

Concluding remarks

Having regard to the above recent developments, there is a substantial trend that the Indonesian labour and employment laws and regulations are headed for a more deliberate and protective approach towards employees. Notwithstanding such developments, Indonesia is not abandoning labour market flexibility but is placing clearer legal boundaries around work arrangements that have grown rapidly or long existed without the same level of formal protection as conventional formal employment relationships.

For cross-border employers and investors, the practical implication is straightforward. Workforce models in Indonesia should not only be assessed by contractual form, but also against the broader regulatory direction, particularly where the arrangement involves platform-based work, outsourced personnel, household or informal labour, or other non-standard working models. Businesses operating in Indonesia should, therefore, monitor the legal developments, review the existing workforce arrangements, and ensure that the employment practices remain aligned with the most current regulatory regime.