Quick Guide to Employment Contracts in Indonesia

Generally, an employment contract in Indonesia can either be a fixed-term (definite) or an indefinite-term (permanent) contract. Fixed-term employment agreements are subject to stricter requirements compared to indefinite-term employment agreements.

A fixed-term employment agreement must be in writing in the Indonesian language or in a bilingual format. Additionally, a fixed-term employment agreement cannot include a probationary period. Indefinite-term employees are employees who do not fall into the category of fixed-term employees. This type of worker is also known as a permanent worker. If a permanent worker is hired without a written employment contract, the employer must issue an appointment letter.

Fixed-term contracts

A fixed-term employee is also known as a contract worker. Based on the Labor Law, the types of work that can be performed by a fixed-term employee under a fixed-term employment agreement are either time-based or project-based.

For time-based work, the work must fulfil the following criteria:

• work that can be completed within a short period;
• seasonal work; or
• work that is related to a new product, new activity or a product that is still in the experimental stage.

For project-based work, the work must fulfil the following criteria:

• work that can be completed at one time; or
• temporary work.

Government Regulation No. 35/2021, dated 2 February 2021, regarding Fixed-Term Employment Agreement, Outsourcing, Working Hours and Rest Hours, and Termination of Employment (GR 35/2021) provides that fixed-term employees employed for a certain period (time-based) can only be employed for a maximum of five years (including any possible extensions thereof) unless the contract is project-based, in which case the employee can be employed until the work or project is completed.

Excerpted from Lexology Panoramic: Labor & Employment 2024, published by Law Business Research.

Find the Indonesia chapter of Lexology Panoramic: Labor & Employment 2024 here.

Further reading:

Employer Obligations Under Indonesia’s New Law on Maternal and Child Welfare

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