The sources of labor laws in Indonesia are widely dispersed among a number of national laws and regulations, presidential decrees and ministerial decrees. The main sources of employment law in Indonesia are:
In general, these laws and regulations are applicable to all “employee”, regardless of their position (i.e. whether they are managerial or non-managerial employees) or their status (i.e. whether they are indefinite or definite period employees). However, there are some provisions that exempt certain groups of employee from receiving certain benefits, for example: managerial employees are not entitled to overtime.
Written employment agreement must at least contain the following (Art. 54):
Besides the general content requirements as abovementioned, there are special requirements also applicable to employment agreements, as follows:
In general, following an initial three-month probation period, indefinite-term employees can be dismissed only with the approval of the relevant industrial dispute settlement institution on the basis of repeated, well-documented violations of written rules. The calculation of severance pay for indefinite-term employment agreement type is stipulated in Art. 156(2) of Manpower Law.
A fixed-term employment agreement must be made in writing in the Indonesian language using the Latin alphabet. An agreement that does not fulfill these requirements shall be regarded as an indefinite-term employment agreement (Art. 57(1) and (2) Manpower Law). In the event that a fixed-term employment agreement is written in both the Indonesian language and a foreign language, then the Indonesian text shall prevail in case of any discrepancy (Art. 57(3)).
Definite term employee may only work for a definite period of time, specific or definite project or on a daily or part-time basis. Definite term employee can be divided into full-time as well as part-time employee.
An employer who intends to extend a fixed-term employment agreement shall notify the relevant employee in writing no later than seven (7) days prior to the expiration of the initial term (Art. 59 (5)).
Fixed-term contracts may also be renewed. A renewal can only be made after a period of thirty (30) days has passed from the completion period of the initial fixed-term employment agreement. Such renewal can only be done once for period of no longer than two (2) years (Art. 59 (6)).
In light of the above, a fixed-term employment agreement can last for a maximum of five (5) years, i.e., three (3) years for the initial term plus the extension thereof and two (2) years for the renewal.
A fixed-term employment agreement that does not fulfill these requirements shall be regarded as an indefinite-term employment agreement (Art.59 (7)).
There is no specific provision in the Manpower Law that requires an indefinite-term employment agreement to be made in Indonesian language. However, with regard to the Law No. 24 of 2009 regarding State’s Flag, Language, Emblem and National Anthem, which states that Indonesian language shall be used in memorandum of understanding or agreement involving Indonesian private institution or Indonesian private individual, it is advisable that an indefinite-term employment agreement is also made in writing using Indonesian language.
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