Under Article 1 number 14 of Law Number 13 of 2003 on Labor (“Labor Law”), an (individual) employment agreement shall be defined as an agreement made between anemployee and an entrepreneur or an employer. The agreement specifies the work requirements, rights, and obligations of both sides.
Under Article 56 paragraph (1) of Labor Law, an employment agreement may be made for a definite period of time or for an indefinite period of time. This article will be discussed about employment agreement for a definite period of time. Under Article 56 paragraph (2) of Labor Law an employment agreement for a definite period of time is based on a definite period of time or the completion of certain job.
Based on Minister of Labor and Transmigration decision Number KEP 100/MEN/VI/2004 on the provision of the Employment Agreement for a Definite Period of Time, (“Kepmenakertrans 100/2004”), in Article 1 number 1, employment agreement for a definite period of time (“PKWT”) is an employment agreement made between an employee and an entrepreneur or an employer to hold on an employment relation for a definite period of time or the completion of certain job.
PKWT is based on definite period of time or the completion of certain job. PKWT shall be made in writing and must be written in the Indonesia language with Latin alphabets and the PKWT should be recorded at related labor institution. PKWT cannot stipulate a probation period. PKWT cannot be made for jobs that are permanent by nature.
PKWT can only be made for a certain job according to the type and nature of the job, a job that will finish in a specified period of time, that is:
- A work to be performed and completed at once or work which is temporary by nature;
- A work which its completion is estimated at a period of time which is not too long and no longer than three years;
- A seasonal work. Seasonal work is a work that depends on the season, weather or a certain condition, so that a job can onlybe done in a certain season; or
- A work that is related to a new product, a new type of activity, or an additional product that is still in the experimental stage or try-out phase.
PKWT may be made for a period of no longer than 2 (two) years and may only be extended 1 (one) time for another period that is not longer than1 (one) year, and the renewalof PKWT may only be made once and for a period of no longer than 2 (two) years.The entrepreneur who intends to extend the PKWT shall notify their employee of the intention in writing within a period of not later than 7 (seven) days before the expiration of the PKWT. The renewal of PKWT can only be held after passing the grace period of 30 (thirty days) after the expiryof PKWT.
Especially for PKWT that is related to a new product, a new type of activity, or an additional product that is still in the experimental stage or try-out phase, the work agreement cannot be renewed.