UU No. 27/2026 Explained: What Changes for Employers and Employees?

Indonesia has introduced a major employment reform affecting companies, workers, and foreign investors. Effective 28 October 2026, UU No. 27/2026 on Employment Protection responds to Constitutional Court Decision No. 168/PUU-XXI/2023 and consolidates employment provisions into a dedicated law. It repeals Law No. 13 of 2003 and specified employment provisions of Law No. 6 of 2023. For businesses operating in Bali, Lombok, and elsewhere in Indonesia, the priority is understanding what changed, what remains applicable, and which procedures require further clarification.

Foreign Workers, Mixed Marriages and KITAS

Employers hiring foreign nationals should review their existing authorization arrangements. Under Article 62, UU No. 27/2026 generally requires an approved foreign manpower utilization plan and ministerial approval for employing foreign workers, subject to specified exceptions. Employers must also consider eligible positions, competence, and restrictions on foreign nationals performing personnel or human resources management functions.

One notable provision concerns mixed marriages. Article 62 provides an exception from the approvals specified in its first paragraph for foreign workers legally married to Indonesian citizens for at least five years. However, UU No. 27/2026 does not automatically exempt those individuals from every employment or immigration requirement. Employers should distinguish manpower approvals from immigration status, including KITAS sponsorship and permitted activities, and obtain guidance before changing existing arrangements.

UU No. 27/2026 also provides a special approval framework for qualifying foreign-national children of marriages between Indonesian and foreign citizens. Implementation details require attention to subsequent regulations.

Employment Contracts and PKWT Changes

Fixed-term employment contracts, known as PKWT, deserve immediate review. The official government abstract highlights a revised maximum initial duration of two years, with no more than two extensions, each lasting no longer than one year. UU No. 27/2026 therefore makes contract timelines particularly important for businesses relying on seasonal, project-based, or temporary staff.

Employers should audit existing contracts, renewal dates, job classifications, and compensation arrangements. The new framework should not be interpreted as permission to classify every position as temporary. The nature of the work and other statutory conditions still matter. Businesses should also distinguish PKWT from indefinite employment agreements, known as PKWTT.

Because UU No. 27/2026 took effect recently, employers should examine transitional provisions and the continuing application of implementing rules before amending signed agreements. A documented review is safer than automatically replacing every contract. Employers should record when each contract began, whether extensions were signed, and which duties the worker actually performs. These details can determine whether an agreement meets the statutory framework and whether additional obligations arise at its conclusion.

Employee Rights and Employer Obligations

Employee protection extends beyond contract duration. UU No. 27/2026 expressly prohibits employers from requiring or retaining employees’ diplomas or personal documents as security in an employment relationship. Businesses that currently hold original certificates should promptly review their practices and establish appropriate document-return procedures.

The law also addresses skills training and protections for informal workers and certain work relationships, including access to social security. Employers should revisit payroll practices, working hours, leave policies, workplace protections, and BPJS administration against the provisions applicable to their workforce.

UU No. 27/2026 is not a reason to assume every existing workplace policy has become invalid. Instead, compare current agreements, company regulations, and collective agreements with the new statutory framework. Identify specific gaps, document corrective actions, and communicate changes clearly to employees.

Termination, Resignation and Employment Disputes

Terminating employment remains a sensitive legal and operational decision. Before proceeding, employers should establish the actual grounds for termination, review relevant contractual provisions, calculate potential entitlements, and follow applicable notification and dispute-resolution procedures. UU No. 27/2026 should be read alongside surviving implementing regulations and Indonesia’s industrial relations dispute framework.

Resignations also require careful administration. Employers should document notices, final payments, outstanding benefits, and handovers instead of assuming that an employee’s departure eliminates every obligation. Where a termination is disputed, bipartite discussions may be required before further formal resolution mechanisms.

For foreign-owned companies, incomplete records can complicate negotiations and increase exposure. Maintain employment contracts, attendance records, payroll information, warning letters, and correspondence. UU No. 27/2026 makes a timely HR compliance review especially valuable before restructuring, downsizing, or closing operations.

Outsourcing, Recruitment and HR Management

Companies using outsourcing providers should not assume that transferring staffing functions removes every compliance concern. Review who employs the workers, which party supervises daily activities, how wages and benefits are administered, and what protections the service agreement provides. UU No. 27/2026 should inform this review alongside applicable outsourcing regulations.

Recruitment processes also deserve scrutiny. Check employment advertisements, candidate documentation, contractual classifications, and onboarding procedures. Avoid retaining original personal documents as employment guarantees. Ensure that managers understand the difference between independent service arrangements and employment relationships, because labels alone do not determine legal status.

For hotels, restaurants, villas, and other growing businesses, practical compliance means coordinated work between HR, legal advisers, payroll teams, and operational managers. UU No. 27/2026 creates an opportunity to correct inconsistencies before they become disputes. Regular internal audits also help employers prepare for inspections and employee questions.

Prepare Your Business for the New Framework

How well do your current employment contracts, foreign-worker arrangements, and HR procedures align with Indonesia’s latest rules? UU No. 27/2026 calls for informed, coordinated compliance rather than assumptions. Contact Synergy Pro Corporate Business & Legal Advisory for assistance with employment legal reviews, HR management, immigration coordination, and business compliance in Bali, Lombok, and across Indonesia.