Job Employment Contract Template for Indonesia
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What is a Job Employment Contract?
The Job Employment Contract serves as the primary document establishing an employment relationship in Indonesia, governed by Law No. 13 of 2003 on Manpower and the Omnibus Law of 2020. This document is essential when hiring new employees, whether on a fixed-term (PKWT) or permanent (PKWTT) basis, and must be executed before or at the commencement of employment. It contains all mandatory provisions required by Indonesian law, including working conditions, compensation, benefits, and termination procedures, while also addressing specific Indonesian requirements such as religious holiday allowances (THR) and social security participation. The contract can be customized for various employment levels and sectors while maintaining compliance with local labor regulations, making it suitable for both domestic and multinational companies operating in Indonesia.
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Frequently Asked Questions
Is a job employment contract legally binding in Indonesia?
Yes, employment contracts are legally binding in Indonesia under Law No. 13 of 2003 on Manpower and the Omnibus Law of 2020. Once signed by both employer and employee, the contract creates enforceable legal obligations including compensation, working conditions, and termination procedures. Both parties must comply with all terms or face potential legal consequences.
Can I be fired without an employment contract in Indonesia?
Working without a proper employment contract violates Indonesian labor law and creates significant risks for both parties. Under Law No. 13 of 2003, employers must provide written contracts before or at employment commencement. Missing contracts can lead to disputes over terms, difficulty proving employment relationship, and potential penalties for employers.
How long should an employment contract be in Indonesia?
Indonesian employment contracts can be indefinite (permanent) or fixed-term with specific duration limits. Fixed-term contracts (PKWT) cannot exceed 5 years total including renewals, while indefinite contracts (PKWTT) have no time limit. The Omnibus Law simplified these categories and reduced bureaucratic requirements for contract types.
Difference between PKWT and PKWTT employment contracts in Indonesia?
PKWT (fixed-term contracts) are for temporary work with specific end dates and limited renewal options, while PKWTT (indefinite contracts) are permanent positions with no predetermined end date. PKWT workers have fewer severance benefits, while PKWTT employees enjoy stronger job security and termination protections under Indonesian labor law.
How long does it take to draft an employment contract in Indonesia?
A standard employment contract in Indonesia typically takes 1-3 business days to draft properly. This includes ensuring compliance with mandatory provisions under Law No. 13 of 2003, incorporating company-specific terms, and reviewing current Omnibus Law requirements. Complex contracts with detailed terms may require additional time.
Common mistakes employers make with Indonesian employment contracts?
Common mistakes include omitting mandatory provisions like minimum wage compliance, incorrect probationary period terms (maximum 3 months), failing to specify contract type clearly, and not including required social security (BPJS) provisions. Many also forget to update contracts for recent Omnibus Law changes affecting overtime and termination procedures.
Must employment contracts be in Bahasa Indonesia?
Yes, Indonesian labor law requires employment contracts to be written in Bahasa Indonesia. While bilingual contracts are permitted, the Indonesian version takes legal precedence in disputes. Foreign companies often use bilingual contracts but must ensure the Indonesian version accurately reflects all terms and complies with local labor regulations.
About the Job Employment Contract
A Job Employment Contract is a legally binding agreement that formalizes the employment relationship between an employer and employee in Indonesia. Under Indonesian labor law, specifically Law No. 13 of 2003 on Manpower and the recent Omnibus Law (Law No. 11 of 2020), this document serves as the foundation for all employment relationships and must comply with specific regulatory requirements to ensure legal validity and worker protection.
When do you need this document?
You need a Job Employment Contract whenever you hire a new employee in Indonesia, whether for a fixed-term position (PKWT) or permanent employment (PKWTT). The contract must be executed before or on the first day of employment and is required for all employment arrangements, from entry-level positions to executive roles. This document is essential when establishing employment relationships with Indonesian citizens, foreign workers with valid work permits, or when multinational companies hire local staff. You also need this contract when converting temporary workers to permanent status or when modifying existing employment terms that require formal documentation.
Key legal considerations
Your employment contract must include several mandatory provisions under Indonesian law. The probation period cannot exceed three months and must be clearly specified in the agreement. Compensation sections must detail base salary, allowances, and the mandatory religious holiday allowance (THR) equivalent to one month's salary. The contract must specify working hours, which cannot exceed 40 hours per week or 8 hours per day for standard work arrangements. Termination clauses must comply with Indonesian severance pay requirements, which were modified under the Omnibus Law, and must outline proper notice periods and procedures. Social security participation (BPJS) is mandatory and must be explicitly addressed in the contract.
Legal requirements in Indonesia
Indonesian employment contracts must be written in Indonesian language (Bahasa Indonesia) and can include a foreign language version as a supplement. The contract must specify whether the employment is fixed-term (PKWT) with a maximum duration of two years, extendable once for one year, or permanent (PKWTT) with no specified end date. Government Regulation No. 35 of 2021 provides detailed implementing rules for contract terms, working hours, and termination procedures. Foreign employees require additional documentation including work permits (ITAS) and must have their contracts registered with local manpower authorities. The contract must comply with minimum wage regulations set by regional governments and include provisions for annual leave, sick leave, and maternity/paternity benefits as mandated by law. All contracts involving companies must be signed by authorized representatives and witnessed according to Indonesian corporate requirements.
GOVERNING LAW
Applicable law
This Job Employment Contract is drafted to comply with Indonesia law. Key legislation includes:
Law No. 11 of 2020 on Job Creation (Omnibus Law): Recent law that amended various provisions of the Labor Law, including changes to severance pay calculations, fixed-term employment contracts, and outsourcing regulations
Government Regulation No. 35 of 2021: Implementing regulation for fixed-term employment contracts, outsourcing, working and rest hours, and termination of employment relationships under the Omnibus Law
Law No. 40 of 2004 on National Social Security System: Regulates mandatory social security and health insurance coverage for employees
Law No. 1 of 1970 on Work Safety: Establishes basic requirements for workplace safety and health protection
Government Regulation No. 36 of 2021: Regulates wages, including minimum wage determination and wage structure
Minister of Manpower Regulation No. 2 of 2019: Specifies requirements for religious holiday allowances (THR) that must be paid to employees
Government Regulation No. 34 of 2021: Regulates the use of foreign workers in Indonesia, including permit requirements and positions that can be held by foreign workers
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