Indefinite Term Employment Agreement

Jakarta Lawyer - LekslawyerUnder Article 56 of Law Number 13 of 2003 on Employment (“Law No.13/2003”), there are two types of employment agreements, namely the employment agreement for definite term employment agreement and indefinite term employment agreement (“PKWTT”).

Employment Relation

Article 51 of Law No.13/2003 regulates that employment agreement can be made orally or in writing. If it is made orally, the employer is obliged to issue a letter of appointment for the worker. The mentioned letter of appointment letter shall at least contain information on (i) the name and address of the worker, (ii) the date the worker starts to work, (iii) the type of job that the worker is supposed to do and (iv) the amount of wages that the worker is entitled to.

Under Article 54 paragraph (1) of Law No.13/2003, a written employment agreement shall at least contain:

  1. the name, company address and type of business;
  2. the name, sex, age and address of the worker;
  3. the position or the type of job;
  4. the place where the job is carried out;
  5. the amount of wages and the mechanism of payment;
  6. job requirements which contains the right and obligation of enterpreneur and worker;
  7. the effective date and the period of employment agreement;
  8. the place and date where the employment agreement is made; and
  9. the signatures of the parties under the employment agreement.

Article 60 of Law No. 13/2013 regulates that the employment agreement for an indefinite term may require a probation period. This period can be no longer than 3 (three) months and during this probation period it is prohibited to pay wages less than the applicable minimum wage.


Termination of Employment (“Termination”)

Under Article 151of Law No.13/2003, the employer and the employee must make all efforts to prevent Termination of the employment agreement. If, despite all efforts, negotiation fails to result in any agreement, the employer may only terminate the agreement after receiving a decision from the institute for the settlement of industrial relation disputes (“ISRID”).

Under Article 154 of Law No.13/2003, the decision of ISRID is not required if:

  1. the employee is still on probation period and the Termination has been stipulated in writing;
  2. the mentioned employee makes an application for resignation in writing on his/her own will with no indication of being pressured or intimidated by the employer to do so or the employment relationship is expired;
  3. employee who has reached the retirement age as stipulated under employment agreement, company’s regulation, collective work agreements and laws and regulations;
  4. employee dies.

Under Article 155 of Law No.13/2003, any Termination mentioned above conducted without the decision of ISRID is considered null and void. Then, both employer and the employee shall conduct their obligations until issuance of ISRID’s decision.

If all efforts have been made and the Termination is inevitable, the employer is obliged to pay the severance pay and/or employment reward pay and unusable compensation pay.

In the event that the employee that cannot accept the Termination as set forth in Article 158 paragraph (1), Article 160 paragraph (3) and  Article 162  of Law No.13/2003, then under Article 171 Law No.13/2003, that employee may file a claim to the Industrial Relation Court at the latest 1 (one) year from the Termination date.

The above mentioned provision is also stipulated in Article 82 Law Number 2 of 2004 on Industrial Relation Dispute Settlement, which states that the claim from the employee as set out in Article 159 and Article 171 Law No.13/2003 may only be filed in the period of 1 (one) year from the receipt or notification of Termination decision by the entrepreneur.

Under the Constitutional Court Decision No. 012/PUU-I/2003, Article 158 and Article 159 Law No.13/2003 have been declared to not have a binding legal force.

Dianyndra Hardy

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