Employment Contracts in Indonesia: PKWT, PKWTT and the New Law
Employment contracts in Indonesia come in two kinds, PKWT and PKWTT. Which one the law gives you, and how long a fixed term may run under UU 27/2026.
References (3)
- UU No. 27 Tahun 2026 on Manpower Protection (Pelindungan Ketenagakerjaan), signed, promulgated and in force 28 October 2026 (State Gazette 2026 No. 179). Article 62(5) and (8), foreign workers for a specific position and period; Article 77, what a written contract contains; Article 80(1), the two kinds of contract; Article 81(1), how a contract ends; Article 82, term, extensions and notice; Article 83, Indonesian and Latin script; Article 85, an unwritten fixed-term contract; Article 86, no probation; Article 87, permitted work, registration and conversion; Article 88, compensation; Article 90, ending early; Articles 92 and 93, probation and the letter of appointment; Article 115(4), working hours; Article 232(1), termination; Articles 310, 312 and 313, earlier regulations, new ones and entry into force
- Permenaker No. 6 Tahun 2016 on the religious holiday allowance — Article 2(2), employees on permanent and fixed-term contracts.
- Perpres No. 63 Tahun 2019 — Article 26(2) and (4), the language of an agreement
Employment contracts in Indonesia come in two kinds, and a fixed-term one may only be used for work that will end. Both kinds fall under the Manpower Protection Law, Undang-Undang (UU) 27/2026, in force since 28 October 2026. Our guide to the new manpower law covers the rest.
Employment contracts in Indonesia: the two types
A PKWT (perjanjian kerja waktu tertentu) is a fixed-term contract. A PKWTT (perjanjian kerja waktu tidak tertentu) is a permanent one. Every employment contract is one or the other (Article 80(1)).
A PKWT may only be used for work that will end: one-off or temporary work, work expected to finish before long, seasonal work, a new product or activity still being trialled, or work that is not permanent by nature (Article 87(1)).
The rule worth knowing before anything else
A fixed-term contract cannot be used for permanent work. One that is becomes a permanent contract by law (Article 87(2) and (5)).
| PKWT — fixed term | PKWTT — permanent | |
|---|---|---|
| Used for | Only work that will end | Permanent employment |
| Must be written | Yes, in Indonesian and Latin script | No — but an oral one needs a written letter of appointment |
| Probation | Not allowed. A clause is void and the time still counts | Up to 3 months, only if written in |
| At the end | Compensation, by length of service | Whichever of severance, long-service pay and compensation for rights applies |
How long a fixed-term contract can run
A fixed-term contract rests either on a period or on finishing a specific piece of work (Article 82(1)). Either way, it is set for at most 2 years and can be extended at most twice, each extension for up to 1 year (Article 82(2)). An employer that plans to extend tells the employee in writing at least 7 days before the contract ends (Article 82(3)).
A contract tied to a piece of work ends when the work is done (Article 81(1)(c)). The law leaves the detail of the kinds of work, the periods and the limits on extension to a Government Regulation (Article 87(7)), due within a year of 28 October 2026 (Article 312).
What a fixed-term contract has to contain
It must be in writing, in Indonesian and Latin script, and where a version in another language differs, the Indonesian one governs (Article 83). A fixed-term contract not made in writing is a permanent contract by law (Article 85).
Like any written employment contract, it sets out at least the parties, the job, the place, the wage and the term, in at least two copies, one for the employee (Article 77).
The employer registers the contract with the central or regional government within 3 working days of signing, and the employee and the labour inspector can then see it (Article 87(3) and (4)).
Compensation at the end of a fixed term
The law calls it uang kompensasi (often kompensasi PKWT) and sets it out in its own article (Article 88), apart from the severance scales (Article 232).
When a fixed-term contract ends in one of the ways Article 81(1) lists, including when its term runs out or the work is finished, the employer pays compensation (Article 88(1)). The amount follows the employee’s length of service with the company (Article 88(2)), and the detail is set by Government Regulation (Article 88(3)). Regulations made under the earlier manpower laws stay in force where they do not conflict with the new one (Article 310).
If either side ends a fixed-term contract early, the one who ends it pays the other the wages that would have run to the end of the term (Article 90).
Permanent contracts
A permanent contract may be written or oral. If it is oral, the employer issues a written letter of appointment with at least the employee’s name and address, the start date, the type of work, the wage, and the employer’s name and signature (Article 93(2) and (3)).
Probation (masa percobaan kerja) of up to 3 months is allowed only if it is written into the contract or the letter; otherwise there is none (Article 92(1), (4) and (5)). During it the employer pays at least 75% of the wage for the position, never below the minimum wage, and provides social security (Article 92(2)). The time counts as service, and an employee who meets the requirements and completes probation is confirmed as permanent (Article 92(3) and (6)).
On termination the employer pays whichever of severance, long-service pay and compensation for rights the reason calls for (Article 232(1)).
Whatever the hours, a contract is fixed-term or permanent (Article 80(1)). Working hours are set in the contract, company regulations or collective agreement (Article 115(4)).
Foreign employees
A foreign worker may be employed only for a specific position and a specific period, with the competence the position needs (Article 62(5)). What counts as a specific position and period is left to a Government Regulation (Article 62(8)). Our work permit page covers the permit itself.
Getting each role on the right contract
Our HR consulting team advises on the right type of agreement for each role and drafts it to Indonesian law. Where contracts are already in place, we read them first and redraft only what needs it.
Frequently asked questions
Can I put a probation period in a fixed-term contract?
How long can a fixed-term contract run?
Does the religious holiday allowance apply to fixed-term staff?
Must the contract be in Indonesian?
UU 27/2026 is published in the Audit Board’s database.
Note
This article is general guidance and is not a substitute for advice on your own situation.