Employment Contracts in Indonesia: PKWT, PKWTT and What Changed
Employment contracts in Indonesia come in two kinds, PKWT and PKWTT. Which one the law gives you, the five-year limit, and what changed in 2020.
References (7)
- UU No. 13 Tahun 2003 on Manpower, as amended by UU No. 6 Tahun 2023 — Article 42(4), foreign workers for certain positions and a certain time; Article 54(1), what a written contract contains; Articles 56–59, fixed-term contracts and the grounds for them; Article 57(1), written and in Indonesian; Article 58, no probation in a fixed-term contract; Article 60, probation in a permanent contract; Article 61A, compensation at the end; Article 62, ending early; Article 63, the letter of appointment
- PP No. 35 Tahun 2021 — in force 2 February 2021. Articles 4–7, the grounds; Article 8(1)–(3), five years including extensions; Article 9, completion-based contracts; Articles 10–11, daily contracts and the 21-day rule; Article 12, a void probation clause; Article 13, the nine items; Article 14, registration within three working days; Articles 15–17, compensation and early termination; Articles 23 and 25, part-time; Articles 36 and 40, grounds for dismissal and what is owed
- Constitutional Court decision No. 168/PUU-XXI/2023, 31 October 2024 — point 3, foreign workers; point 4, the five-year total; point 5, Indonesian and Latin script; point 20, a final industrial-relations ruling where talks fail; point 22, the compensation scale as a floor. Two years were given to enact a new manpower law
- PP No. 34 Tahun 2021 on the use of foreign workers — Article 4(1); Article 17, how long an RPTKA runs
- Perpres No. 63 Tahun 2019 — Article 26, the language of an agreement
- UU No. 11 Tahun 2020 on Job Creation, promulgated 2 November 2020, which replaced the original Article 59 structure; UU 11/2020 was itself revoked by UU No. 6 Tahun 2023
- Permenaker No. 6 Tahun 2016 on the religious holiday allowance — Article 2(2), employees on permanent and fixed-term contracts
Employment contracts in Indonesia come in two kinds, and a fixed-term one may only be used for work that will end. Use it for permanent work and the law makes it permanent.
Written on 17 September 2026
This page states the law in force on 17 September 2026. A new manpower law has been passed by parliament, according to press reports. On 20 October 2026 it had no number on BPK, and the current rules remained in force; our guide to employment law in Indonesia says where it stands. We will revise this page when it takes effect.
The two types, and how the law assigns them
A PKWT (perjanjian kerja waktu tertentu) is a fixed-term contract. A PKWTT (perjanjian kerja waktu tidak tertentu) is a permanent one.
A PKWT may only be used for work that will end: work expected to finish before long, seasonal work, a new product or activity still being trialled, one-off or temporary work, or work that is not permanent by nature (Article 59(1); PP 35/2021 Articles 4–7).
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 operation of law (Article 59(2)–(3)).
| 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 then a letter of appointment is required |
| Probation | Not allowed. A clause is void and the time still counts | Up to three months, only if written in |
| Registered with the Ministry | Yes, within three working days | Not under this rule |
| At the end | Compensation for time served (exceptions below) | Whichever of severance, long-service pay and compensation for rights applies |
| Foreign workers | The only option open to them | Not available |
Five years in total — the rule that changed
Some guidance online still describes a structure that has since been replaced.
The old structure — two years, one twelve-month extension, a thirty-day gap, then a two-year renewal — came from the original Article 59 of the 2003 Law. It was replaced by the Job Creation Law (UU 11/2020) in November 2020, and none of it survives.
The rule today is simpler: a term-based fixed contract runs for up to five years in total, including any extension (PP 35/2021 Article 8(1)–(2); confirmed by the Constitutional Court at point 4). How you split that is for you and the employee to agree. Service counts from the start of the relationship, not from the latest extension (Article 8(3)).
One consequence worth planning around: if the first contract already runs five years, there is nothing left to extend.
A contract tied to completing a piece of work rather than to a period states the scope and the expected time (Article 9(2)). If the work finishes early the contract ends with it (Article 9(3)).
What a fixed-term contract has to contain
Written, in Indonesian, in Latin script (Article 57(1), and the Constitutional Court at point 5). Where there is also a foreign-language version, the Indonesian one governs.
Nine items are listed in Article 54(1) — the parties, the job, the place, the wage, the term, and so on. The employer registers it with the Ministry of Manpower online within three working days of signature; if the online service is unavailable, in writing at the district or city manpower office within seven working days (PP 35/2021 Article 14).
Compensation at the end of a fixed term
It sounds like severance and is not.
Compensation is owed whenever a fixed-term contract ends — including when it simply runs out — to an employee with at least one month’s continuous service. It is one month’s wage for twelve months of service, pro rata for anything else, calculated on basic pay plus fixed allowances (PP 35/2021 Articles 15–16).
| Description | Amount |
|---|---|
| Basic pay plus fixed allowances | IDR 8,000,000 |
| Service completed | 18 months |
| Formula — months of service ÷ 12 × one month | 18 ÷ 12 = 1.5 |
| Compensation owed at the end | IDR 12,000,000 |
Where a contract is extended, compensation is paid at the end of each term, including before the extension begins (Article 15(4)). It is not owed to foreign workers (Article 15(5)), and in micro and small businesses the amount is by agreement (Article 16(6)).
If either side ends a fixed-term contract early, the one who ends it owes the other the wages that would have run to the end of the term (Article 62), and the employer still pays compensation for the time actually served (PP 35/2021 Article 17).
Daily contracts, and the point they stop being daily
A daily contract is a form of fixed-term contract, for work that varies in timing and volume, paid on attendance. It works while the employee is engaged fewer than 21 days in a month.
At 21 days or more for three consecutive months, the relationship becomes permanent by law (PP 35/2021 Article 10). A daily contract is still written, and social security still applies (Article 11).
Permanent contracts
A permanent contract may be oral, but then the employer must issue a letter of appointment (Article 63). Probation of up to three months is allowed only if it is written into the contract or the letter — otherwise there is no probation at all — and probation pay may not be below the minimum wage.
It ends on one of the grounds set out in PP 35/2021 Article 36, with whichever of severance, long-service pay and compensation for rights applies (Article 40). Since the Constitutional Court’s decision, the published scale is a floor rather than a fixed figure, and a disputed dismissal needs a final industrial-relations ruling before it takes effect.
Part-time is shorter working hours under a fixed-term or permanent contract, set in the contract, company regulation or collective agreement (PP 35/2021 Articles 23 and 25).
Foreign employees
A foreign worker may be employed only for a specified position and a specified period (Article 42(4); PP 34/2021 Article 4(1)). That means a fixed-term contract tied to the approved RPTKA (the foreign worker utilisation plan), whose length depends on the kind of work and runs up to five years in a special economic zone (PP 34/2021 Article 17).
A permanent contract is not available to them, and end-of-contract compensation does not apply. Our work permit page covers the permit itself.
Advice on which agreement a role needs — then the agreement drafted — is the first thing our HR consulting team does.
Frequently asked questions
Can I put a probation period in a fixed-term contract?
How long can a fixed-term contract run?
Do I owe anything when a fixed-term contract simply runs out?
Does the religious holiday allowance apply to fixed-term staff?
Must the contract be in Indonesian?
The instruments themselves are published by BPK’s legal documentation service.
Note
This article is general guidance and is not a substitute for advice on your own situation. A new manpower law is on its way; confirm the position before relying on it.