Employment Contracts

Information about what to expect in an Indonesian employment contract…

Employment contracts in Indonesia can either be fixed-term or for an unspecified period of time. Fixed-term contracts are given for defined time periods or until the completion of a certain job. Such contracts cannot exceed two years in length. Extending a contract for up to one year is allowed.

Job contracts with no specified termination date can sometimes include a probationary period of up to three months. Fixed-term contracts may not include a probationary period.

Only fixed-term employment contracts need to be made in writing. They should be written in Indonesian. Job contracts, where used, should contain the following information:

  • The name, age, address and gender of the employee
  • The name, address and business type of the employing company
  • The job title or type of work the employee is being hired to do
  • The place of work
  • The salary and how it will be paid
  • The conditions of the employment and the employee's obligations and rights
  • The start date of the employment and the place and date the agreement was made

A letter of appointment only is required for permanent employment.

All workers are entitled to 12 days of leave each year.

If either an employer or employee terminates employment before the specified date in a fixed-term contract the party that initiated the termination has to pay compensation to the other party. This compensation covers the employee's wages until the date that the contract was due to finish. The only exemptions to this rule are if the employment was terminated due to the employee's death, a court decision or if there is a special clause outlined for such circumstances in the job contract.

There are a number of circumstances under which an employee can apply to end their employment and receive severance pay:

  • If they are ordered to complete illegal acts
  • If the employer abuses the employee physically or verbally
  • If wages are not paid for three consecutive months
  • If the employer does not meet their obligations towards the employee
  • If the employee is made to perform duties outside of those defined in their job contract
  • If the employee is asked to perform tasks not in their contract which endanger their health, life, safety or morality

Indonesian employment law states that employers and trade unions must make all efforts to avoid dismissing an employee. If discussions between a union (if the employee is a member of one), the employee and the employer are not successful then the employer must apply for permission to terminate the employment from the Institution for the Settlement of Industrial Relation Disputes (ISIRD). In the event of gross misconduct (theft or fraud for example) permission is not needed.

Should an employee break the terms of their contract they can be dismissed once three warning letters have been issued.

Further Information

  • Information from the International Labour Organisation on employment law in Indonesia: Click here