Labour Protection Law: A New Direction for Fixed-Term Employment, Outsourcing, Wages, and Termination
Introduction
On 28 October 2026, the President enacted Law No. 27 of 2026 on Labour Protection (“Law”), which was promulgated the same day in State Gazette 2026 No. 179 and took effect upon promulgation (Art. 313). The Law follows up on Constitutional Court Decision No. 168/PUU-XXI/2023, which called for labour matters to be reorganised into a standalone law. This newsletter updates our previous edition, which was based on Baleg’s clean draft Revision 2 dated 26 August 2026.
The Law revokes Law 13/2003 and the manpower provisions of the Job Creation Law Law Number 6 of 2023 concerning the Enactment of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation into Law. (Art. 311), while their implementing regulations, including GR 35/2021, remain in force insofar as they do not conflict (Art. 310). Implementing regulations of the Law must be issued within 1 year of promulgation (Art. 312). Several provisions changed from the draft, including outsourcing, minimum wages, compensation of entitlements, severance funding, Company Regulations, and criminal sanctions, but the direction is clear: stronger worker protection and higher compliance costs for companies.
Key Changes in Detail
- Restrictions on PKWT and Their Legal Consequences;
- Limited Outsourcing and the Risk of Transferred Employment;
- Higher Termination Costs and Stricter Procedure;
- New Workplace Protection Obligations;and
- Criminal Sanctions: Some Unchanged, Some Lighter.
Recommended Actions
| Priority | Actions |
| High | Inventory all ongoing PKWTs, map contracts that will exceed 2 years (or 4 years including extensions), and prepare scenarios for conversion to PKWTT. |
| High | Audit outsourcing agreements and identify work outside the 4 support services (and mining/oil support services not yet run through a subsidiary) to assess the risk of employment transferring by operation of law, bearing in mind the 28 October 2027 compliance deadline. |
| High | Recalculate projected post-employment benefit liabilities (actuarial) using the new severance multipliers, and prepare for the severance reserve fund obligation. |
| Medium | Update Company Regulations/CLA and SOPs: internal complaint mechanism, anti-bullying and anti-sexual harassment policies, lactation rooms, maternity leave, collective leave, long leave, and ending any diploma-withholding practices. |
| Medium | Strengthen the OHS management system, prepare to set up an OHS committee and annual health checks, and (for medium and large companies) develop supply-chain audit procedures on child labour. |
| Routine | Monitor the issuance of the Law’s implementing regulations (due by 28 October 2027), and submit input through employer associations during their preparation. |