Minimum requirements
Based on Article 54 paragraph (1) of Manpower Law, an employment contract must, at least, contain the following elements:
- Company’s name, address, and type of business;
- Employee’s name, gender, age, and address;
- Job title or type of work;
- Work location;
- Wages and method of payment;
- Rights and obligations of both company and employee;
- Start and duration of the Employment Contract;
- Place and date the Employment Contract is made; and
- Signatures of the company’s authorized representative and the employee.
Furthermore, the provisions under points (v) and (vi) shall not contradict the company regulation, collective labour agreement, or other regulations. The employment contract must also be executed in at least 2 copies, each bearing equal legal force, with one copy retained by the employee and the other one by the employer (Article 54 paragraphs (2) – (3) of the Manpower Law).
Fixed-term/Open-ended Contracts
Indonesian Employment Law recognizes fixed-term (PKWT) and open-ended employment contracts (PKWTT) as definite or indefinite employment contracts, respectively, with the criteria for each type defined as follows:
PKWT: An employment contract on a temporary or definite period basis to perform certain tasks or projects with a limited scope, including:
- one-time nature work (i.e., construction workers, set designers, etc.);
- expected to be completed in a short period (i.e., warehouse packer, customer support, etc.);
- seasonal (i.e., retail, barista, etc.);
- related to new products or activities that are still in trial or exploratory (i.e., product testers, market researchers, etc.); or
- non-permanent (i.e., freelance writers, couriers, maintenance crew, etc.).
(Article 59 of Manpower Law and Article 5 GR 35/2021) (“Minimum Requirements”)
Accordingly, since a PKWT must be made in writing, it must comply with the Minimum Requirements.
The maximum limit of PKWT period is 5 years, including any extensions (Article 8 of GR 35/2021). PKWT must also be registered with the Manpower Office within 3 days after its execution if registered online, or within 7 days if registered offline.
PKWTT: An employment contract on a permanent or indefinite time basis. A PKWTT is only applicable for Indonesian citizens, and foreign citizens cannot be employed under a PKWTT.
A PKWTT may be made in either written of verbal format. If a PKWTT is made verbally, the employer is required, pursuant to Article 63 of the Manpower Law, to issue an appointment letter to the employee, which must include:
- Name and address of the employee;
- Start date;
- Job title or type of work; and
- Wages
(“Appointment Letter Requirements”)
If a PKWTT is made in writing, it must fulfil the Minimum Requirements as described above.
Trial Period
Pursuant to Article 60 of the Manpower Law and Article 12 of GR 35/2021, the probationary/trial period is applicable only to PKWTT employees and must be expressly stipulated in the employment contract. The duration of the probation period may not exceed 3 months. During this period, employers are strictly prohibited from paying employees less than the applicable minimum wage, as employees on probation are legally recognized as regular employees, and therefore, entitled to the same minimum wage protection.
Notice Period
Prior to the resignation date, an employee must submit a written resignation letter, at least, 30 days in advance, not be bound by a service commitment, and continue performing their duties until the effective resignation date (Article 36 point i of GR 35/2021). An employee who fulfils the foregoing requirements is entitled to compensation of rights (uang penggantian hak), which includes payment for unused annual leave, reimbursement of travel expenses, and any separation pay as stipulated in their employment agreement, if applicable (Articles 40 paragraph (4) and 50 of GR 35/2021). Conversely, employees who do not submit 30-day notices will not be eligible to receive such compensation.
