Indonesia Labor Law: 2026 Wages, Contracts, Hours & Leave

Indonesian labor law has undergone a number of changes in recent years, making it important for HR teams operating locally to properly understand and comply with the country's labor law framework.

In this article, we reflect the 2023 amendments and review key areas frequently addressed in HR management in Indonesia, including employment contracts, Provincial Minimum Wages (UMP), working hours and overtime, and rest periods and paid leave.

Employment-related regulations in Indonesia are primarily based on the 2003 Manpower Law, with subsequent amendments related to the Job Creation Law (Cipta Kerja) incorporated into the current framework.

• Manpower Law of 2003 (Law No. 13 of 2003): The fundamental law defining the general principles of employment conditions. It remains in effect, although some provisions have since been amended or revised by subsequent legislation.

• Law No. 6 of 2023 (Job Creation Law / UU No. 6 of 2023): Legislation enacted to amend the previous Job Creation Law (Law No. 11 of 2020), which was introduced in 2020.

💡 Source: UNDANG-UNDANG REPUBLIK INDONESIA NOMOR 6 TAHUN 2023 TENTANG (Law No. 6 of 2023 on the Enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation)

In Indonesia, the governor of each province determines the minimum wage applicable within that province. As a result, the minimum wage employers must pay varies depending on where the workplace is located. The 2026 UMP differs by province in both amount and increase rate and is announced based on the decision of each provincial governor. Minimum wages in several major regions are as follows.

💡 References
- Reference: Overview of Provincial Minimum Wages (UMP) Across Indonesia's 38 Provinces
- Websites: Indonesia Ministry of Manpower, Legal Information Network of the Indonesia Ministry of Manpower

Employment contracts in Indonesia are broadly divided into permanent employment agreements (PKWTT, Perjanjian Kerja Waktu Tidak Tertentu) and fixed-term employment agreements (PKWT, Perjanjian Kerja Waktu Tertentu), with different rights and obligations applying to each. Let's look at the key differences.

• Entitlement to termination-related payments: For permanent employees under a PKWTT, statutory compensation related to termination may be payable depending on the reason for termination, length of service, and other factors.

• Probationary period: A probationary period of up to 3 months may be applied if specified in the employment agreement.

• Restrictions on use: Fixed-term employment may be used only for work that is temporary in nature, work expected to be completed within a short period, seasonal work, and other applicable categories.

• No probationary period: A probationary period cannot be applied to fixed-term employees.

Under Indonesian labor law, employment agreements may be made orally, although certain information must be provided in writing. Written requirements may also vary depending on the type of employment agreement, so for a PKWT, companies should first confirm the applicable written-form and language requirements. When a written agreement is prepared in both a foreign language and Indonesian, the Indonesian-language version may prevail in the event of a conflict in interpretation.

An agreement may be prepared in both a foreign language and Indonesian, but if the two versions conflict, the Indonesian version takes precedence. The agreement should clearly state the employer's name, employee information, wages and payment method, working conditions, and other required details, and these terms must not conflict with the company's work rules or collective labor agreement.

💡 Sources
- Peraturan Pemerintah Nomor 35 Tahun 2021 (Government Regulation No. 35 of 2021 on Fixed-Term Employment Agreements, Outsourcing, Working Hours and Rest Periods, and Termination of Employment)
- Undang-Undang Nomor 13 Tahun 2003 tentang Ketenagakerjaan (Indonesia Manpower Law No. 13 of 2003)
- Undang-Undang Nomor 6 Tahun 2023 (Law No. 6 of 2023 on the Enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation)

Indonesia also limits working hours to support employee work-life balance. When employees work beyond the statutory limits, overtime premiums apply depending on the work arrangement and number of overtime hours. The statutory working hour limits and overtime premium structure are as follows.

• For a 6-day workweek: Working hours are limited to 7 hours per day and a maximum of 40 hours per week.
• For a 5-day workweek: Working hours are limited to 8 hours per day and a maximum of 40 hours per week.

• Overtime limits: Overtime is limited to a maximum of 4 hours per day and 18 hours per week. Employees who work at least 3 hours of overtime must also be provided with food or beverages containing at least 1,400 calories, which cannot be replaced with cash.
• Overtime hours and overtime pay calculation

💡 Sources
- Peraturan Pemerintah Nomor 35 Tahun 2021 (Government Regulation No. 35 of 2021 on Fixed-Term Employment Agreements, Outsourcing, Working Hours and Rest Periods, and Termination of Employment)
- Undang-Undang Nomor 13 Tahun 2003 tentang Ketenagakerjaan (Indonesia Manpower Law No. 13 of 2003)
- Undang-Undang Nomor 6 Tahun 2023 (Law No. 6 of 2023 on the Enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation)

Rest and leave requirements designed to support employees' recovery and health are also an important part of Indonesian labor law. In particular, statutory annual paid leave has legally defined eligibility requirements and entitlements, requiring careful administration by HR teams.

• Minimum requirement: Employees must be provided with a 30-minute rest period after every 4 consecutive hours of work.

• Eligibility: Employees become entitled to paid leave after 12 consecutive months of service with the same employer.
• Leave entitlement: The statutory paid leave entitlement is at least 12 days per year after completing one year of service.

HR teams should therefore accurately determine when each employee becomes entitled to leave based on their employment start date and provide appropriate guidance so employees can use carried-over leave before it expires.

💡 Source: Undang-Undang Nomor 6 Tahun 2023 (Law No. 6 of 2023 on the Enactment of Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation)

When operating overseas workplaces, it is important to document employment contracts, wages and minimum wage requirements, working hours and overtime, and leave policies based on key local legal requirements, while maintaining consistent records. Understanding Indonesian labor law is the first step toward protecting the mutual rights of employees and employers and building stable labor relations.