Employment Agreements in Indonesia

In recent years, Employment issues have become increasingly important and sensitive in Indonesia. Therefore, it is important for us to provide our Client (both local and multinational companies) with legal insight related to the employment arrangement.

Under Law No. 13 of 2003 concerning Manpower (“Labor Law”), the prevailing employment regulation in Indonesia, there are 2 (two) types of Employee Agreement, which are (i) Employee Agreement for a Specific Period or Permanent Contract (Perjanjian Kerja Waktu Tertentu, known as PKWT); and (ii) Employee Agreement for an Indefinite Period (Perjanjian Kerja Waktu Tidak Tertentu, known as PKWTT).

A. Employee Agreement for a Specific Period

 As the name suggests, a PKWT or an Employee Agreement for a Specific Period is a fixed-term employment contract meant for temporary jobs, seasonal jobs, work related to new activities at the trial process, and daily freelance jobs. Unlike PKWTT, probation periods do not apply in PKWT.

Based on the type of work as stipulated in Minister of Manpower Decree No. 100 of 2004 concerning PKWT (“Manpower Decree No. 100/2004”), PKWT can be classified in 4 (four) PKWTs, which are:

a. KWT-01 for One-Time/Temporary Work

PKWT for One-Time/Temporary Work valid for work that is completed within 3 (three) years period. This PKWT is based on the accomplishment of a certain job, and can be automatically terminated if the job is completed faster than the period of works as stipulated in the PKWT. However, PKWT for One-Time/Temporary Work cannot be extended, but can be renewed for a period of no longer than 2 (two) years. The renewal of PKWT for One-Time/Temporary Work can only be made after the lapse of 30 (thirty) days grace period, unless stated otherwise in the first PKWT.

b. PKWT-02 for Seasonal Job

Please be informed this PKWT depends on the season/weather, and usually is purposed to fulfill a specific order/target. Therefore, PKWT Seasonal Job only applies for 2 (two) years maximum which can be extended once for 1 (one) year with considering the season. However, PKWT Seasonal Job cannot be renewed

c. PKWT-03 for Job Related to New Product

This PKWT valid for 2 (two) years maximum which can be extended once for 1 (one) year, and cannot be renewed. We understand that the PKWTs apply for work related to (i) new products, (ii) new activities, or (iii) additional products under a trial period, which are accomplished outside of the usual scope of work.

d. PKWT-04 for Daily Freelance Job/Daily Worker

PKWT Freelance Job is for work with irregular time and volume, and the wage is based on the attendance on daily or the PKWT. PKWT Freelance Job can be performed on the condition that the employee works less than 21 (twenty one) days in one month. After the lapse of 21 (twenty one) day, then the PKWT Freelance Job is automatically converted to PKWTT.

Pursuant to Labor Law, the PKWT must be registered at the Manpower Office in the Regency/City at the latest 7 (seven) days after signing of PKWT. For PKWT-04 for Daily Freelance Job / Daily Worker, the list of employees consisting of the employer’s identity, the employee’s identity, type of work, and amount of wage must be registered in the above Manpower Office at the latest 7 (seven) days after the employment.

Article 15 of Manpower Decree No. 100/2004 regulates that PKWT must fulfill the following requirements:

  1. PKWT must be made in Bahasa Indonesia (bilingual agreement is acceptable);
  2. PKWT must be made for the type of work as stipulated in Manpower Decree No. 100/2004 and no other;
  3. PKWT must not deviate from the conditions of the extension term (for product-related job);
  4. Renewal of PKWT must pass the grace period of 30 (thirty) days after the expiry of extension of PKWT unless agreed otherwise;
  5. Termination of PKWT caused by failure to fulfill one of the 4 (four) above requirements will follow the settlement procedure and rights as stipulated in the prevailing regulations for PKWTT.


B. Employee Agreement for an Indefinite Period

A PKWTT or an Employee Agreement for an Indefinite Period is an employment agreement or contract for a permanent job. Unlike PKWT, PKWTT may require a probation period for no longer than 3 (three) months, during which the Employer is obliged to pay wages to the Employees.

PKWTT may be made in writing or just in verbal. In the event that the PKWTT is made verbally, the clauses between Employer and Employee are the clauses as stipulated in the prevailing Labor Law. It is not compulsory for Employers to register PKWTT to the Manpower Office or any other related labor institution/agencies in Indonesia.



SMART Legal Consulting has extensive experience in helping employers/companies to ensure that their Employment Arrangement has rights and proper.

If you need immediate assistance, please contact the SMART Help Desk at:

E:  info@smartcolaw.com

H: +62821-1234-1235

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