No Unilateral Dismissal: The Steps Indonesia's Law 27/2026 Requires Before Letting Staff Go

Indonesia's Law Number 27 of 2026 on Employment Protection, in force since 28 October 2026, requires an employer to try to prevent a termination first, then to hold bipartite talks for at most 30 working days. Termination of employment is known in Indonesia as PHK (pemutusan hubungan kerja). According to Fortune Indonesia's summary (9 November 2026), a PHK without those steps is void by operation of law and the worker must be reinstated.

For a small business owner this changes the mindset. Letting someone go is no longer a decision you announce but a process you go through and can prove. This article arranges the Indonesia termination procedure, as reported, into a sequence you can follow.

What has been reported

Fortune Indonesia summarises the flow as follows:

1. Prevention. Before a termination, the employer must try to prevent it, for example by reducing overtime, working hours or shifts, or by temporarily standing workers down.
2. Bipartite talks. If termination cannot be avoided, bipartite talks, meaning direct negotiation between employer and worker, are held for at most 30 working days.
3. A ruling if there is no agreement. Without agreement, the termination is only valid after a binding ruling from the industrial relations dispute settlement body.

A termination without these steps is void, and the worker must be reinstated.

Fortune Indonesia also lists prohibited reasons for termination, among them:

• illness of less than 12 months,
• marriage,
• pregnancy or childbirth,
• union activity,
• illness or disability caused by a work accident.

"Among them" means the list is longer in the text of the law.

The policy direction shows in a remark by Minister of Manpower Yassierli when the bill was passed on 6 October 2026. According to Katadata, he said there is no reason for companies to be able to dismiss workers easily on efficiency grounds.

Bear in mind that these are media summaries. Technical details, including the formulas for workers' entitlements, still wait for implementing regulations.

Step 1: try other routes first, and record them

From here on, this is our advice.

Prevention is not a formality. In a small business there often is a route short of termination. From the reported examples:

• Cut overtime. It is the first and easiest line to trim.
• Reduce working hours or shifts. For example, a shop running two shifts moves to one on quiet days.
• Stand people down temporarily. For a dip you believe is seasonal.

Beyond those examples, owners commonly consider freezing new hiring and moving people to a section that is still short of hands.

Whatever you choose, write it down: the date, what was done, who was affected and the result. If a change touches working hours or pay, discuss it and agree it with the employee in writing. This record is your evidence that prevention was truly attempted.

Step 2: test the reason

Before inviting anyone to talks, test your reason honestly:

• Is the real reason one of the prohibited ones? If the person you intend to let go is pregnant, newly married, ill, or active in a union, stop and take advice first.
• Can the reason be explained with data? A fall in orders, a branch closure or the loss of one large customer is easier to show than "poor performance".
• Can the choice of person be justified? Prepare the same basis for everyone, not likes and dislikes.

Step 3: bipartite talks

The talks run for at most 30 working days. Treat them as a documented series of meetings:

1. A written invitation stating the date, place and subject.
2. A signed attendance list.
3. Minutes of each meeting: what the employer said, how the worker responded, what is agreed and what is not.
4. Both parties' signatures on the minutes.
5. A count of working days from the first meeting, so you know when the 30-day limit is reached.

Come with data and with an offer, not just a notification. Talks that run in one direction are hard to call negotiation.

If agreement is reached, put it in a written agreement signed by both parties. Ask a consultant or the manpower office what must then be done with that agreement, because the sources we read do not explain it.

Step 4: if there is no agreement

As reported, without agreement the termination is only valid after a binding ruling from the industrial relations dispute settlement body. In practice that means:

• The employment relationship has not ended while the process runs. Do not withdraw access, stop pay or tell the employee to stay away on your own decision before confirming your obligations during that period.
• The process takes time. Build that into your cash planning.
• At this stage, support from a consultant or legal adviser is almost certainly needed.

Cost components to prepare

Fortune Indonesia reports that a worker's entitlements on termination include severance pay and a long-service award that depend on length of service, plus compensation for rights such as untaken leave and the cost of returning home. We deliberately give no worked example with exact figures, because the detailed formulas wait for implementing regulations.

For planning, set up these lines per employee:

• severance pay,
• long-service award,
• compensation for rights, especially remaining leave,
• wages during the talks and the settlement process,
• consultant fees.

To calculate those quickly you need three tidy data points for each person: start date, latest wage and remaining leave. If they are scattered across notebooks and memory, tidy them now, long before they are needed.

Common mistakes

• Dismissing by text message and treating the matter as closed.
• Asking the employee to sign a resignation letter to avoid the process. This invites a dispute.
• Having no record at all of warnings, talks or prevention efforts.
• Counting calendar days when the limit is 30 working days.

Note: this article summarises news reports and is not legal advice. Before starting any termination process, confirm the steps and the worker's entitlements for your case with an employment consultant or your local manpower office.

Sources

• Fortune Indonesia, 9 November 2026
• Katadata, 6 October 2026

FAQ

Can an employer in Indonesia dismiss someone unilaterally?

According to Fortune Indonesia's summary, no. A termination without prevention efforts, bipartite talks and, where needed, a ruling from the dispute settlement body is void, and the worker must be reinstated.

How long do bipartite talks last before a termination?

At most 30 working days, according to Fortune Indonesia.

Which reasons for termination are prohibited?

Among others, illness of less than 12 months, marriage, pregnancy or childbirth, union activity, and illness or disability caused by a work accident.