The Omnibus Law on Job Creation, passed in 2020 and revised in 2023, substantially reformed Indonesia's labor regulations. It aimed to attract investment and create jobs by streamlining regulations and increasing labor market flexibility.
Key Labor Changes
Major labor provisions include modified severance calculations, expanded use of fixed-term contracts, changed overtime rules, modified minimum wage setting, adjusted leave entitlements, and reformed outsourcing regulations. Some changes increased employer flexibility while reducing certain worker protections.
Implementation
The law required implementing regulations to operationalize its provisions. Government Regulation 35 of 2021 provided detailed rules for labor provisions. Subsequent amendments and court challenges have modified some aspects. Ongoing regulatory development continues.
Business Impact
Companies operating in Indonesia should understand both the current law and its implementing regulations. Some provisions reduce costs while others create new requirements. Working with local experts helps navigate the evolving regulatory landscape and ensure compliance.