Training Indonesia – In March 2023, the Indonesian government enacted Law Number 6 of 2023, officially establishing the Job Creation Law (commonly known as Undang-Undang Cipta Kerja) as a permanent regulation. This law, derived from Government Regulation in Lieu of Law No. 2/2022, represents a sweeping reform that affects labor regulations, investment procedures, and workforce development strategies in Indonesia. For HR professionals, it marks a pivotal moment in how employment policies and practices must evolve to meet both legal and business demands. 

Why UU Cipta Kerja Matters for HR in Indonesia 

The Undang-Undang Cipta Kerja (Job Creation Law) aims to simplify regulations, boost investment, and broaden employment opportunities across the country. According to Article 3 of the law, its primary purpose is to improve worker protection and welfare while increasing Indonesia’s competitiveness through economic transformation and legal clarity (UU No. 6 Tahun 2023, Art. 3). 

HR leaders must now move beyond traditional compliance roles and take on strategic responsibilities to align talent policies with this updated legal framework. 

Key Provisions HR Must Understand 

1.  Flexible Employment Contracts (PKWT): The law provides more structured definitions of fixed-term employment, including compensation requirements at the end of contract periods. HR must ensure all contracts comply with these revised standards. 
2. Layoff Procedures (PHK):  The Job Creation Law offers clearer and more efficient procedures for employment termination while ensuring workers' rights are preserved. HR teams must revise offboarding policies to reflect these updates. 
3. Wage Adjustments and Productivity Links: Wage-setting under the law now takes into account not only inflation and economic growth but also company productivity and sustainability. HR professionals should develop more data-driven, performance-based compensation frameworks. 
4. Regulation of Outsourcing:  The law reaffirms the legality of outsourcing for non-core activities while reinforcing protections for outsourced workers. This requires careful vetting of third-party contracts and supplier management by HR. 
5. Foreign Workers (TKA):  Provisions for hiring foreign workers with specialized skills have been streamlined, provided knowledge transfer and proper documentation are ensured. This creates room for HR to address skills gaps responsibly. 

Strategic Challenges and HR's Role 

The transition to UU Cipta Kerja presents both opportunities and legal challenges. HR departments must be proactive by: 

• Auditing current employment contracts to ensure alignment with new rules 

• Training managers and HR teams on the implications of the law 

• Improving engagement with labor unions and facilitating open communication 

• Designing compensation policies based on productivity and organizational performance 

The enactment of Undang-Undang Cipta Kerja represents a major evolution in Indonesia's labor landscape. HR professionals are no longer just compliance gatekeepers—they are key drivers of organizational change. Understanding and implementing the law's provisions is critical for building a competitive, compliant, and future-ready workforce in Indonesia. 

Reference 

• Republic of Indonesia. (2023). Law Number 6 of 2023 on the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation into Law (Undang-Undang Cipta Kerja). Jakarta: State Secretariat. 
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