Under Article 59 Law Number 13 of 2003 on Employment (“Employment Law”), fixed-term employment contract is an employment agreement for definite period of time, or the completion of work is for certain period (“PKWT”). PKWT is for a temporary job, seasonal job and work related to new activities at the probation stage.
PKWT may be undertaken for a period of maximum 2 (two) years and may only be extended once for 1 (one) year. PKWT may also be renewed for a period of no longer than 2 (two) years. In that case, the renewal of PKWT can only be made after the lapse of 30 (thirty) days grace period.
Under Article 62 of Employment Law, if (a) either party in PKWT terminates the employment relation before PKWT’s expiry date, or (b) if the PKWT ends for reasons other than (i) decease of worker, (ii) PKWT’s expiry, (iii) a court decision or resolution or order of the industrial relation dispute settlement institution which has permanent legal force, such as natural disaster, riot and disturbance to the security, and/or (iv) certain situation prescribed in the PKWT or the company regulation, the terminating party is obligated to give compensation for the remaining contract’s amount to the other party.
Minister of Manpower and Transmigration Decree No. Kep100/Men/VI/2004 on the Implementation of Employment Agreement For Definite Period (“MOMTD No.100/2004”), the PKWT can only be used for the definite term work as follows:
a. one-time work or temporary work, the work which is completed within 3 (three) years. This PKWT is based on the accomplishment of a certain job. If the job can be completed faster, the PKWT is automatically terminated;
b. seasonal job, a job for 1 (one) type of work and particular season, according to Article 7 of the MOMTD No.100/2004. The PKWT for this type of job cannot be renewed.
c. job related to a new product, a job that can be conducted with the worker to carry out the job related to (i) new products, (ii) new activities, or (iii) additional products that are still tested or tried. The PKWT for this work can only be conducted for the maximum period of 2 (two) years and can be extended once for 1 (one) year. The PKWT for this type of work cannot be renewed.
d. daily freelance job, in which the type of work with the time and volume are irregular and the wage is based on the attendance or daily or freelance agreement. This work can be performed on the condition that the employee/worker works less than 21 (twenty one) days in one month. After the lapse of 21 (twenty one) days, then the PKWT is automatically converted to indefinite employment agreement.