JAKARTA, KOMPAS.com — Indonesia’s newly enacted Labor Protection Law takes direct aim at a long-standing corporate practice: holding employee diplomas hostage. Under Law Number 27 of 2026, any company that withholds personal documents from workers now violates national statute.
The prohibition lands in Article 78, a provision that reshapes how employment contracts get negotiated. Employers may no longer demand diplomas as a precondition, nor may they retain those documents as leverage throughout the working relationship.
One exception exists. Paragraph two of Article 78 carves out space for company-funded training programs, where a written agreement can justify temporary document retention. But outside that narrow window, the practice faces an outright ban.
Labor placement agencies face identical restrictions. Article 50 prevents these intermediaries from confiscating job seekers’ diplomas or personal papers as collateral during recruitment. The law’s sweep covers both direct employers and third-party hiring firms.
Beyond document protections, the statute mandates aggressive layoff prevention. Article 228 obliges employers, government bodies, and labor unions to exhaust every possible avenue before terminating workers. The law enumerates ten specific alternatives: cutting holiday overtime, trimming daily overtime, reducing shifts, shortening work hours, letting fixed-term contracts lapse without renewal, not backfilling retirees, adjusting managerial wages, rotating temporary layoffs for permanent staff, offering early retirement, and opening pension eligibility.
When layoffs prove unavoidable, companies must pursue bipartite negotiations toward consensus. Failure to reach agreement pushes disputes into formal industrial relations channels. Critically, any termination executed without a legally binding settlement gets declared void, forcing the employer to reinstate the affected worker.
The law establishes a new enforcement floor for labor rights across Indonesia, signaling that document confiscation and unilateral terminations will carry legal consequences.
