Indonesia advances new manpower law ahead of 2026 deadline.
Indonesia’s House of Representatives confirmed on 14 July 2026 that Commission IX is fast-tracking deliberation of a new Manpower Law, the most significant overhaul of the country’s employment framework since the 2023 Job Creation Law. Foreign employers with fixed term contracts or outsourced staff should prepare for tighter employment rules ahead of the law’s finalisation.
Why a standalone law is being drafted
The bill was prompted by a Constitutional Court ruling. In Decision 168/PUU-XXI/2023, read out on 31 October 2024, the court found that the employment provisions under the 2023 Job Creation Law overlap and conflict with the original 2003 Manpower Law. It gave lawmakers two years to separate the employment cluster into a standalone law, setting a deadline of 31 October 2026.
With just over three months remaining, it was confirmed that Commission IX will use the current legislative recess to consult employer associations, unions and academics, before formal deliberations begin once the House reconvenes. The President has also instructed the Manpower Ministry to ensure the law is signed within this year.
What the draft currently addresses
In June 2026, the House’s legislative drafting body presented a draft spanning 19 chapters and 224 articles to Commission IX. The scope goes beyond a technical transfer of existing rules. Key areas under discussion include the maximum duration and compensation structure for fixed term contracts (PKWT), permissible outsourcing arrangements, foreign worker employment requirements, wage structures based on length of service, termination procedures built around bipartite negotiation, as well as severance, service pay and termination compensation.
Two areas carry particular weight for foreign employers. Outsourcing is expected to be narrowed further, building on Manpower Ministry Regulation 7 of 2026, which already limits the practice to supporting functions. Fixed term contract duration is also under discussion for reduction from the current five-year maximum limit under the Job Creation framework, partly in line with Indonesia’s labour commitments under its trade agreement with the United States.
What to review ahead of the new law
The bill has not yet passed, but the 31 October 2026 deadline and the direction toward tighter contract terms and narrower outsourcing scope are already fixed.
Employers should review three key areas now. Fixed term contracts should be checked against the current five-year limit, particularly where renewal is likely. Outsourcing agreements should be assessed against the supporting functions requirement under Ministry Regulation 7 of 2026, since further narrowing is expected. Termination procedures and severance calculations should also be reviewed for consistency with current bipartite negotiation requirements.
Businesses with large fixed term or outsourced workforces have the most at stake, and may benefit from tracking the consultation process rather than waiting for the final law.
