Employment contracts Indonesia

What should an employment contract in Indonesia include?

In Indonesia, typical employment contracts include:

• Identification and contact details of the employer and employee.
• Duties and responsibilities assigned to the employee.
• Scheduled workdays and hours of work.
• Agreed salary or wage, including any additional perks or bonuses.
• Conditions for contract termination, including notice periods.
• Commitment to confidentiality and non-disclosure.

Both parties should carefully review the terms of the employment agreement before signing.

What types of employment contracts exist in Indonesia?

1. Permanent employment contract

A permanent employment contract (PKWTT) is Indonesia’s most common type of contract for long-term employment. This contract type offers employees security and benefits, and it is also renewable after the contract period ends.

2. Fixed employment contract 

A fixed employment contract (PKWT) is used for a specified amount of time, typically for a project or a predetermined length of time. The employee’s job automatically ends when the contract period expires.

3. Part-time employment contract

A part-time employee contract is a labour agreement with a working time of less than 7-8 hours per day or less than 35-40 hours per week. It is also a mutual understanding that pay is included in the contract. Part-time workers are frequently students looking for extra pocket money.

4. Outsourcing employment contract

When a business contracts with a third-party service provider to complete tasks, they employ this agreement. Although the person is officially an outsourced service provider employee, they are employed by the company.

5. Probationary employment contract

This agreement is used when the employer wants to evaluate an employee’s fit for a specific position. An offer of a permanent contract will be extended to the employee if they do well throughout the typically brief contract period of several months.

How to hire employees in Indonesia?

Hiring employees in Indonesia requires establishing a legally recognised business entity, typically through registration with the Ministry of Manpower (MOM) and obtaining necessary permits. This process involves submitting required documents, paying registration fees, and obtaining a unique registration number.

Alternatively, you can partner with a licensed Employer of Record (EoR) service provider like Native Teams. EoRs manage various aspects of employment administration on your behalf, including payroll processing, employee benefits administration, and compliance with social security contributions. This approach simplifies hiring, reduces administrative burdens, and ensures compliance with Indonesian labour laws.

Native Teams offers comprehensive services in Indonesia, handling responsibilities such as payroll administration, human resources functions, taxation affairs, etc. If you’re looking to hire employees in Indonesia efficiently and without navigating complex bureaucratic processes, leveraging Native Teams’ services can streamline your hiring process effectively.