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Indonesia
One of the first decisions employers face when hiring in Indonesia is whether a role should be filled under a fixed-term (definite) employment contract (PKWT) or an indefinite-term (permanent) contract (PKWTT). The distinction is important, as Indonesian law imposes specific requirements on the use of fixed-term contracts.
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.
Time-based 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 or trial stage.
Project-based work must fulfil the following criteria:
- work that can be completed at one time; or
- temporary work.
Government Regulation No. 35/2021 regarding fixed-term employment agreements, outsourcing, working hours and rest hours, and termination of employment 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.
Probationary period
Only a permanent employment contract can provide for a probationary period. The Labor Law allows a maximum probationary period of three months, during which time the employer can terminate the employment without having to follow the termination procedures as prescribed by law.
A probationary period of employment applies only if it is specified in writing to the employee when they are hired. The duration of the probation for any employee must be communicated in advance to the employee concerned. A probationary period cannot be extended or repeated. Violation of this restriction will mean that the employee automatically acquires permanent status.
Selecting the appropriate type of employment contract is an important compliance issue for businesses operating in Indonesia. Employers should carefully assess the nature of the role before deciding whether a fixed-term or permanent arrangement is appropriate to help ensure compliance with Indonesian employment law.
Read the full Indonesia chapter of the Lexology Panoramic Labor & Employment guide online.
Download the PDF version of the chapter here.
Further Reading
SSEK Partner Shares Indonesia Employment Law Insights at Regional Roundtable
Indonesia Reintroduces Limits on Outsourcing Under New Manpower Regulation
This article is adapted from the Indonesia chapter of the Lexology Panoramic Labor & Employment 2026 comparative guide, authored by SSEK Law Firm partner Syahdan Z. Aziz. This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user’s own risk. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.
