Compliance
Fixed-Term vs. Permanent Contracts in Indonesia: Key Differences and Compensation Explained

Understanding the distinctions between a Fixed-Term Contract (PKWT) and a Permanent Contract (PKWTT) in Indonesia is essential for both employers and employees. Here’s a comprehensive breakdown of their differences, particularly regarding compensation and contractual obligations:


Fixed-Term Contract (PKWT)


Duration:


Contract periods can be 3, 6, 9, or 12 months.


Compensation:


Employees receive compensation upon the contract's maturity.


Probation:


No probation period is required.


Contract Renewal:


PKWT can be renewed upon expiration.


Permanent Contract (PKWTT)


Probation:


A probation period of 3 months is standard.


Severance and Rewards:


Termination: If the contract ends due to termination, the company must pay severance pay and UPH (unused annual leave, costs, expenses, and other stipulated compensations).

Resignation: If the contract ends due to resignation, the company must pay a service reward and UPH.


Severance Pay and Service Reward Calculation


Termination Severance Pay:


  • < 1 year: 1 month's wages
  • 1 to < 2 years: 2 months' wages
  • 2 to < 3 years: 3 months' wages
  • 3 to < 4 years: 4 months' wages
  • 4 to < 5 years: 5 months' wages
  • 5 to < 6 years: 6 months' wages
  • 6 to < 7 years: 7 months' wages
  • 7 to < 8 years: 8 months' wages
  • 8 to < 9 years: 9 months' wages
  • 9 to < 12 years: 9 months' wages
  • 12 to < 15 years: 9 months' wages
  • 15 to < 18 years: 9 months' wages
  • 18 to < 21 years: 9 months' wages
  • 21 to < 24 years: 9 months' wages
  • > 24 years: 9 months' wages
  • Service Reward for Resignation:


    < 1 year: 0

    1 to < 2 years: 0

    2 to < 3 years: 0

    3 to < 4 years: 2 months' wages

    4 to < 5 years: 2 months' wages

    5 to < 6 years: 2 months' wages

    6 to < 7 years: 3 months' wages

    7 to < 8 years: 3 months' wages

    8 to < 9 years: 4 months' wages

    9 to < 12 years: 5 months' wages

    12 to < 15 years: 6 months' wages

    15 to < 18 years: 7 months' wages

    18 to < 21 years: 8 months' wages

    21 to < 24 years: 10 months' wages

    > 24 years: 10 months' wages