Employment Agreement Template for Indonesia

An Employment Agreement puts the working relationship between an employer and employee in writing, following Indonesia's Manpower Law (UU No. 13/2003). It spells out key details like salary, work hours, job duties, and benefits that both sides agree to follow.

This legal contract protects both parties by clearly stating their rights and responsibilities. In Indonesian companies, it must include basic terms required by law, such as leave policies, workplace rules, and termination procedures. Most employers use either fixed-term (PKWT) or permanent (PKWTT) agreements, depending on the job's nature and duration.

Use an Employment Agreement before any new hire starts working at your Indonesian company. This protects both employer and employee by documenting the exact terms of employment from day one, as required by Indonesia's Manpower Law. It's especially important when hiring for specialized roles, management positions, or jobs involving confidential information.

The agreement becomes essential during major workplace changes like promotions, transfers between company divisions, or shifts in job responsibilities. Indonesian law requires updating employment terms in writing, so having a proper agreement helps avoid disputes and ensures compliance with local labor regulations.

• Fixed-Term Agreement (PKWT): Used for project-based work or seasonal jobs, with a clear end date and maximum duration of 5 years under Indonesian law
• Permanent Agreement (PKWTT): The standard type for regular, ongoing employment with no set end date
• Probationary Agreement: Covers initial trial periods up to 3 months, outlining performance expectations and evaluation criteria
• Part-Time Agreement: Designed for employees working less than 40 hours per week, with pro-rated benefits
• Executive Employment Agreement: Contains additional provisions for senior roles, including confidentiality clauses and performance bonuses

• Employers: Companies, organizations, and business owners who need to formalize employment relationships and protect their interests
• HR Managers: Responsible for drafting, maintaining, and updating Employment Agreements to align with company policies
• Legal Teams: Review and ensure agreements comply with Indonesian labor laws and regulations
• Employees: Workers who sign and must understand their rights, responsibilities, and benefits under the agreement
• Labor Unions: May negotiate terms of Employment Agreements on behalf of their members
• Government Officials: Monitor compliance with labor laws and resolve employment disputes

• Basic Details: Gather employee information, job title, department, and reporting structure
• Compensation Package: Document salary, bonuses, benefits, and any performance-based incentives
• Work Terms: Define working hours, location, leave policies, and overtime arrangements
• Job Description: List key responsibilities, performance metrics, and expected deliverables
• Company Policies: Include references to relevant internal policies and procedures
• Legal Requirements: Ensure compliance with Indonesian labor laws, including minimum wage and benefits
• Review Process: Use our platform to generate a compliant agreement and have both parties verify details

• Party Details: Full names, addresses, and legal identities of employer and employee
• Employment Terms: Job title, duties, work location, and employment status (PKWT or PKWTT)
• Compensation Structure: Base salary, allowances, benefits, and payment schedule
• Working Hours: Regular hours, overtime provisions, and rest periods per labor law
• Leave Entitlements: Annual, sick, religious, and maternity leave allocations
• Termination Clauses: Notice periods, severance terms, and grounds for termination
• Confidentiality: Protection of company information and trade secrets
• Dispute Resolution: Process for handling workplace conflicts under Indonesian law

An Employment Agreement differs significantly from an Agency Agreement in Indonesian business law. While both involve working relationships, they serve distinct purposes and carry different legal implications.

• Legal Status: Employment Agreements create employer-employee relationships with direct supervision, while Agency Agreements establish independent business relationships where the agent acts on behalf of the principal
• Benefits and Protection: Employees under Employment Agreements receive mandatory benefits like health insurance and severance pay, while agents under Agency Agreements typically don't qualify for these benefits
• Control Level: Employment Agreements grant employers direct control over work methods and schedules, whereas Agency Agreements allow agents more autonomy in how they achieve objectives
• Tax Treatment: Employment income is subject to employee tax withholding, while agency income is treated as business income with different tax obligations

Understanding these differences helps organizations choose the right agreement type based on their actual working relationship and legal obligations under Indonesian law.