The company’s employment agreements are the most important thing when accepting a new employee. Employment contracts between employers and employees outline what rights each party has, as well as any obligations they have to uphold.

It’s important to have an employment agreement in place. There are two different types of agreements: time-limited and indefinite. The difference is that with an indefinite employment contract, employees may be subject to probationary periods or notice requirements even if they’re not expressly stated by the employer; but this does depend on the company‚Äôs industry as some industries require employees go through predetermined probation before full hiring procedures can take place (such as law enforcement).

On the other hand, a definite employment contract can only be made for certain jobs that according to the type and nature or activities of the work will be completed within a certain time.


Fixed Term or Definite Employment Agreement

The characterization of fixed term or definite employment agreement in accordance to Article 59 of Law no 13 of 2013 on Manpower (Manpower Law) that has been amended by Law No. 11 of 2020 (Job Creation Law) namely:

  1. Work that is once completed or temporary in nature;
  2. Work that is expected to be completed in a relatively short time;
  3. Seasonal work;
  4. Work related to new products, new activities, or additional products that are still under trial or review; or
  5. Work whose type and nature or activity are non-permanent.


Changes to Fixed Term Employment Period

The issuance of the Job Creation Law, revises the employment period in the fixed term employment agreement stipulated in Article 59 of Manpower Law. Previously, the employment period is a maximum of 2 (two) years, extended 1 (one) year and can be renewed 1 (one) time and a maximum of 2 (two) years. Renewal of definite period employment agreement can only be held after exceeding 30 (thirty) days grace period since the expiration of said employment agreement.

In connection with the issuance of Job Creation Law and Government Regulation of the Republic of Indonesia Number 35 of 2021 on Fixed Term Time Employment Agreements, Outsourcing, Working Hours and Breaks, and Employment Termination (PP 35/2021) the working period in a fixed term / definite period employment agreement is amended. Article 8 PP 35/2021 states that the working period can be made for a maximum of 5 (five) years, provided that the extension does not exceed 5 (five) years. The working period of a fixed term employment agreement starts when the employment is effective.

In addition to the duration change above, at the end of the employment employers are obliged to compensate workers with the calculations listed in PP 35/2021.

Author: Ine Nurhayati, S.H., M.H.

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