Learn about employment contracts in Indonesia thanks to Horizons’ up-to-date guide.
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Fixed-term contracts are common in Indonesia. They have a maximum initial term of two years but can often be renewed repeatedly. They are known as Perjanjian Kerja Waktu Tertentu (PKWT).
Fixed-term contracts are always recommended when hiring in Indonesia.
Open-ended contracts are legal in Indonesia, and can be suitable for employment with no specified end date. These contracts are known as Perjanjian Kerja Waktu Tidak Tertentu (PKWTT).
Generally, these employment contracts are not recommended when hiring employees in Indonesia.
There are no other notable types of employment contacts in Indonesia. The two primary types of employment contracts in Indonesia are fixed-term and open-ended contracts.
Fixed-term contracts (standard) have no probation period; however, termination is relatively straightforward (at the end of the contract period). Normally contracts are entered for a period of 1 year (although it’s possible to enter for a maximum period of 5 years per contract).
Open-ended or permanent contracts do have a probation period, but any termination is a complicated process with extremely high severance payment requirements.
We advise employers to hire employees on fixed-term contracts when possible in order to protect companies in cases of dispute.
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