Indonesia Employment Law 2026: A Guide for Foreign Companies

Last updated: October 27, 2026

Hiring and managing employees in Indonesia requires employers to coordinate employment contracts, wages, working time, social security, payroll, and employee records. Companies may also need to review outsourcing arrangements or requirements for employing foreign workers.

This guide provides an overview of Indonesia’s employment framework in 2026. The rules that apply depend on the employment relationship, the work being performed, the employee’s location and status, and the company’s arrangements.

Companies managing employees across Southeast Asia should also review the separate requirements in our Malaysia Employment Law 2026 guide for foreign companies.

Indonesia Employment Law 2026: The main employment regulations

Indonesia’s employment framework is based on Law No. 13 of 2003 on Manpower, as amended, including by Law No. 6 of 2023. Implementing regulations address specific topics such as fixed-term contracts, working hours, outsourcing, termination, wages, and foreign workers.

Several regulations are particularly relevant to employers in 2026:

• Government Regulation No. 35 of 2021 addresses fixed-term employment agreements (PKWT), outsourcing, working time and rest periods, and termination.
• Government Regulation No. 49 of 2025 amended the wage framework under Government Regulation No. 36 of 2021.
• Minister of Manpower Regulation No. 7 of 2026 sets out rules for outsourced work.
• Government Regulation No. 6 of 2025 amended the rules for the Job Loss Security programme (Jaminan Kehilangan Pekerjaan, or JKP).
• Government Regulation No. 34 of 2021 and Minister of Manpower Regulation No. 8 of 2021 address the use of foreign workers.

These regulations cover different parts of employment compliance. Employers should check the regulation that applies to the specific decision they are making.

Official references:

• Law No. 6 of 2023
• Government Regulation No. 35 of 2021
• Government Regulation No. 49 of 2025
• Minister of Manpower Regulation No. 7 of 2026
• Government Regulation No. 6 of 2025
• Government Regulation No. 34 of 2021
• Minister of Manpower Regulation No. 8 of 2021

For a broader overview of HR administration and employer obligations, see our Indonesia HR Compliance guide for foreign companies.

Start with the employment relationship

Before preparing a contract or configuring payroll, identify the employment arrangement and the parties’ responsibilities.

Workforce arrangement	Main areas to review
Permanent employee	PKWTT terms, wages, benefits, working time, social security, and termination
Fixed-term employee	Whether PKWT is appropriate, contract terms, duration, and compensation at the end of the contract
Foreign worker	Foreign-worker approvals, work authorization, employment terms, and reporting
Outsourced worker	The provider, outsourced work, agreements, registration, and worker protections
Employee leaving the company	Contract status, termination process, outstanding payments, and applicable JKP requirements

The arrangement should reflect how the work is actually performed. A contract label by itself does not establish the legal nature of the relationship.

Employment contracts: PKWT and PKWTT

Indonesia recognises fixed-term employment agreements (PKWT) and indefinite-term employment agreements (PKWTT).

A PKWT is for work that meets the applicable requirements for fixed-term employment. Employers should check the nature of the work, contract terms, duration, and registration or reporting requirements before using one. A probationary period should not be included in a PKWT.

A PKWTT is generally used for an ongoing employment relationship. Employers should ensure that the contract and supporting employment records accurately describe the employee’s role and working conditions.

At the end of an eligible PKWT, compensation may be payable under the applicable rules. Employers should confirm the calculation and any exceptions for the particular contract.

For more detail, see our guides to fixed-term employment in Indonesia and permanent employment in Indonesia.

Wages and payroll

Employers should determine wages using the current rules for the employee’s location and circumstances. Minimum wages are set at regional levels, so a single nationwide figure should not be assumed to apply to every employee.

Government Regulation No. 49 of 2025 amended parts of the national wage framework under Government Regulation No. 36 of 2021. Employers should review the current regional minimum wage and relevant wage provisions when setting or changing salaries.

Payroll may need to reflect:

• Basic salary
• Allowances and other agreed compensation
• Overtime pay, where applicable
• Tax withholding and reporting
• BPJS contributions
• THR and other applicable benefits
• Contractual deductions and adjustments

The employment agreement, payroll calculations, attendance records, and employee records should use consistent information. For an expatriate’s compensation, tax, and social-security considerations, see our payroll guide for foreign employees in Indonesia.

Working hours, rest, and overtime

Government Regulation No. 35 of 2021 sets out rules on working time, rest periods, and overtime. Standard working time generally follows one of these schedules:

• 7 hours per day and 40 hours per week over 6 working days; or
• 8 hours per day and 40 hours per week over 5 working days.

Different arrangements may apply in specific circumstances. Employers should confirm the schedule, rest periods, overtime process, and applicable limits for the work being performed.

Overtime should be authorised and recorded in accordance with the applicable requirements. Payroll should reflect eligible overtime and the relevant calculation rules.

Social security and employee benefits

Employers should review applicable registration and contribution obligations for Indonesia’s social-security programmes, including:

• BPJS Kesehatan, for health coverage
• BPJS Ketenagakerjaan, which administers employment-related social-security programmes

Coverage and contributions may depend on the worker’s status and applicable programme rules. Employers should verify each employee’s eligibility and contribution treatment rather than assuming that one payroll setup fits every workforce.

Employment administration may also need to account for THR, leave, and other statutory or contractual benefits. Keep records of eligibility, calculations, payments, and changes to employment terms.

Outsourcing and service-provider arrangements

Minister of Manpower Regulation No. 7 of 2026, effective April 30, 2026, sets out requirements for outsourced work. It addresses matters including outsourced work, providers, agreements, registration, and supervision. Existing arrangements may also be subject to transition requirements.

Before entering or renewing an outsourcing arrangement, employers should review:

• The work being outsourced and whether the arrangement fits the applicable framework
• The provider’s required business licensing and compliance
• The written service and outsourcing agreements
• Registration or recording requirements
• Worker protections and the division of responsibilities
• Any transition requirements that apply to existing agreements

Outsourcing, recruitment, payroll services, and an Employer of Record (EOR) arrangement are not interchangeable labels. The actual contract and working arrangement determine which responsibilities apply.

Employing foreign workers

Employing a foreign national involves employment and immigration requirements. Government Regulation No. 34 of 2021 and Minister of Manpower Regulation No. 8 of 2021 address the use of foreign workers, including the RPTKA process and related employer obligations.

Before a foreign employee begins work, employers should verify:

• Whether the position and proposed arrangement are permitted
• The required RPTKA approval or any applicable exception
• The employer and employee documentation required for the case
• The relevant immigration and work authorisations
• Any applicable compensation, reporting, or payment obligations
• Whether counterpart-worker or knowledge-transfer requirements apply

Requirements depend on the circumstances and any applicable exceptions. Verify the current process before confirming a start date.

Our RPTKA guide for companies hiring foreign workers provides more detail on foreign-worker planning and approvals.

Outsourcing, EOR, and direct employment are different arrangements

These terms describe different workforce or service arrangements.

Direct employment

An Indonesian employing entity hires the employee and manages the employment relationship.

Outsourcing

A company engages an outsourcing provider for work under the applicable outsourcing framework. The arrangement should be assessed against the current rules, the work performed, the provider’s role, and the agreements between the parties.

Employer of Record

EOR is a commercial term for an arrangement in which a local entity handles specified employment administration for a client company. The term itself does not determine the legal responsibilities of each party. Those depend on the actual structure, contracts, and applicable requirements.

Before selecting an arrangement, confirm:

• Which entity signs the employment agreement
• Who pays the employee and manages payroll
• Who directs the employee’s day-to-day work
• Who handles statutory administration and reporting
• Which responsibilities remain with the client company

For a fuller explanation of this model, see our guide to EOR in Indonesia.

Termination and JKP

Termination should be reviewed against the employment agreement and applicable law. Government Regulation No. 35 of 2021 addresses termination and related employee entitlements. Depending on the circumstances, an employer may need to consider the reason for termination, required process, notice, severance or other payments, and supporting records.

The Job Loss Security programme (JKP) is governed by Government Regulation No. 37 of 2021, as amended by Government Regulation No. 6 of 2025. The amendments address matters including participation requirements, contributions, claim periods, and evidence of termination.

Before ending employment, employers should:

• Confirm the employment status and applicable contract
• Review the reason and process for termination
• Calculate amounts that may be payable
• Check documentation and employee records
• Confirm applicable BPJS and JKP administration
• Obtain appropriate advice when the legal or financial risk is material

Practical compliance checklist

Before hiring

• Identify the employment arrangement and employing entity.
• Confirm the employee’s work location and applicable wage requirements.
• Prepare the appropriate written employment agreement.
• Check payroll, tax, BPJS, and benefit requirements.
• Verify foreign-worker approvals and immigration documents, if applicable.
• Review any outsourcing or third-party service arrangement.

During employment

• Keep contracts, payroll, attendance, and employee records consistent.
• Review changes to wages and regional requirements.
• Record working hours, leave, overtime, and payments.
• Maintain required social-security registrations and contributions.
• Track relevant permit and reporting deadlines for foreign workers.
• Review outsourcing agreements against current requirements.

Before employment ends

• Confirm the applicable contract and termination rules.
• Review the process and documentation.
• Calculate outstanding wages and any applicable entitlements.
• Check BPJS, JKP, and reporting requirements.
• Retain records of the decision and payments.

Frequently asked questions

Conclusion

Indonesia Employment Law 2026 is best approached as a set of rules tied to specific employment arrangements. Foreign companies should identify the workforce structure, check the employee’s location and status, and keep contracts, payroll, social-security administration, and employee records aligned.

A regular review can help employers respond to changes in wage rules, outsourcing requirements, foreign-worker procedures, and employment arrangements.

Need support reviewing your workforce setup in Indonesia?
Contact Big Fish Global Consulting to discuss your requirements.