Important Consideration When Preparing an Indonesian Employment Contract

When preparing or signing an Indonesian Employment Contract, both parties are signing over a list of obligations and responsibilities over each other, as well as rights, where the knowledge and use of the Indonesian Manpower regulations will come in handy (Indonesian Labour Law Act 13 years 2003).

Terms and Conditions of an Employment Contract

An Employment Contract in Indonesia can have two different time frames: specified and unspecified [article 56]. The Employment Contract for a specified term period is done for a maximum 2 years, and can be extended for another 1 year. The agreement’s duration mostly depends on the scope and completion of the job, but not limited to it. [article 59(4)] The employment contract with an unspecified term period requires an initial probation period, which by law has to be no longer than 3 months. [article 60(1)]

The Employee

For a future employee, there are a lot of things to pay attention to when signing a contract. This includes counting different requirements for an Indonesian and foreign employee in Indonesia.

• Working Permit (for foreign employee)
• Personal Data and Confidentiality
• Scope of the Work and Responsibilities
• Working Hours (40 hours/week)
• Employment and Probation Periods
• Local Insurance (social security)
• Annual Leave – (counting a total of 12 days starting after 1 year of work in the company, excluding probation period)
• Maternity Leave – (total of 3 months period)
• Holiday Leave and other Leaves
• Termination Clause

The Employer

The companies that take responsibility when hiring new staff have to include pinpoints in the agreement that will secure the position of the new staff member, besides the one above mentioned:

• Termination clause
• Confidentiality clause

In order to be legally binding, employment contracts need to be drafted in the Indonesian language, with English offered as a translation – should one or more parties be foreigners.

Be sure to have the agreement duly stamped after details are verified with an Indonesian Stamp Duty.