Employment Contract Template for Indonesia

An Employment Contract is your essential legal document for establishing formal employment relationships in Indonesia. This agreement serves as the cornerstone of workplace relations, defining rights, responsibilities, and obligations for both employers and employees while ensuring full compliance with Indonesian labor law requirements.

When do you need this document?

You need an Employment Contract whenever you hire an employee in Indonesia, regardless of whether it's a permanent position (PKWTT) or fixed-term arrangement (PKWT). Indonesian law mandates written employment contracts for all formal employment relationships, making this document legally required rather than optional. You'll use this contract when hiring Indonesian nationals, foreign workers with proper permits, or when converting informal work arrangements into compliant employment relationships. The contract is also essential when changing employment terms, promoting employees to new positions, or renewing fixed-term contracts.

Key legal considerations

Your Employment Contract must address several critical legal requirements under Indonesian law. The contract must specify the employment type—permanent contracts offer greater job security but require higher severance payments, while fixed-term contracts provide flexibility but have strict renewal limitations under the Omnibus Law. You must include mandatory social security (BPJS) enrollment, minimum wage compliance, and proper working hour restrictions. The probation period cannot exceed three months for permanent employees, and termination procedures must follow strict legal protocols to avoid industrial relations disputes. Religious leave, annual leave entitlements, and overtime compensation must align with Indonesian labor standards.

Legal requirements in Indonesia

Indonesian employment contracts must comply with Law No. 13 of 2003 on Manpower as amended by the Omnibus Law, which introduced significant changes to severance calculations and contract flexibility. The contract must be written in Indonesian language, though English translations are permitted for clarity. You must register employees with BPJS for healthcare and work accident coverage within 30 days of employment start. Fixed-term contracts cannot exceed two years initially with one possible extension, while certain positions like permanent managerial roles require indefinite contracts. The contract must specify working hours (maximum 40 hours per week), overtime rates (minimum 1.5x regular pay), and annual leave entitlements (12 working days minimum). All termination procedures must follow the Industrial Relations Dispute Settlement Law to ensure proper severance calculations and avoid legal complications.