Expanding into
Indonesia

Employment contracts in Indonesia can be for a fixed term or an unspecified time period. Employment contracts for an indefinite term can be verbal or written. If written, the agreement must include:

• Name and address of the employer
• Name, age, address, and gender of the employee
• Job title and job description
• Place of work
• Wages and how they will be paid
• Start date of employment
• Other terms and conditions of employment contract
• Date of contract execution
• Signature of both parties.

If the employment contract for an indefinite term is verbal, the employer must provide the employee with a letter of appointment. The letter of appointment needs to include:

• Name and address of the employee
• Date the work is to start
• Type of job or work
• Amount of wages.

Fixed-term contracts must be in writing and in Indonesian. If not executed in writing, the contract will be deemed to have an indefinite term. Fixed-term contracts cannot exceed two years in length. Extending a contract for one year is allowed. Employment contracts with no specified end date may include a probationary period of up to three months. There is no probationary period in a fixed-term contract.

Employees may work up to 40 hours a week over either five or six days. Daily hours are limited to seven hours a day for a six-day work week or eight hours a day for a five-day work week. Overtime is allowed but limited to three hours a day and 14 hours a week. Employees must provide written consent to work overtime and consent cannot be coerced or compelled.

Employers must provide continuous leave to employees who are ill if they provide a doctor’s statement. The wages for sick leave are calculated by percentage based on the number of months of sick leave the employee takes. Female workers are entitled to paid leave on the first and second days of menstruation if they are ill and they cannot perform their work.

Female employees receive three months of fully paid leave, with one and a half months taken before the birth and one and a half months taken after the birth. Leave may be extended if certified in writing by an obstetrician or midwife. In the event of a miscarriage, female employees are entitled to one and a half months of leave. Employers must provide special facilities for mothers to breastfeed during working hours. Male employees receive two days of paid paternity leave.

Employers must pay a mandatory bonus, known as Tunjangan Hari Raya (THR) or religious holiday bonus, to all employees with at least one month of service.

Employees receive paid annual leave of 12 days and this increases to a month after six years of service. The employee must work for at least a year to be eligible for their first 12 days of paid leave. Vacation leave can be carried over into the next year but must be used within six months from the time it is accrued. Employees also receive two days paid leave for the:

• Circumcision of a child
• Baptism of a child
• Marriage of a child
• Death of a child

• New Year’s Day (Jan. 1, 2022)
• Chinese New Year (Feb. 12, 2021; Feb. 1, 2022)
• Ascension Day of the Prophet Muhammad (March 11, 2021; March 1, 2022)
• “Nyepi” Bali Hindu New Year (March 14, 2021; March 3, 2022)
• Good Friday (April 2, 2021; April 15, 2022)
• Labor Day (May 1, 2021; May 1, 2022)
• Eid al-Fitr (May 13, 2021; May 3, 2022)
• Ascension Day of Jesus Christ (May 13, 2021; May 26, 2022)
• Buddhist Holy Day of Waisak (May 26, 2021; May 16, 2022)
• Idul Adha (July 20, 2021; July 10, 2022)
• Islamic New Year (Aug. 10, 2021; July 30, 2022)
• Independence Day (Aug. 17, 2021; Aug. 17, 2022)
• Birthday of the Prophet Muhammad (Oct. 19, 2021; Oct. 8, 2022)
• Christmas Day (Dec. 25, 2021; Dec. 25, 2022)

Indonesia provides health insurance through a government insurance company, funded by employer and employee contributions.

An employment contract can be terminated at the end of the contract period (if for a fixed term), by the employer or by the employee. Employers are not required to provide notice before dismissing an employee. However, employers must negotiate the termination of employment with the labor union, if there is one, or the employee. If an agreement cannot be reached, the employer must get approval from the Industrial Relation Court (IRC). If a mutual termination agreement was signed, it needs to be filed with the IRC. IRC approval is not required if the employee is still on probation, provided that these terms were agreed to in writing. The probation period cannot exceed three months. Employers can terminate an employment relationship for the following reasons:

• Violation of rules and regulations (including three warnings)
• Declaration of insolvency by the employer;
• Employee reaches pension age of 55;Employee abandons position for five days
• The employee is incarcerated

Employees cannot be terminated for:

• Race, religion, ethnicity, political beliefs, opinions, gender, color, physical conditions or marital status
• Missing work due to an illness certified by a doctor for more than 12 consecutive months
• Disability or illness caused by an occupational disease certified by a doctor where the recovery period cannot be determined
• Missing work for religious reasons, or to fulfil obligations to the state
• Missing work to get married
• Being related by blood or marriage to another employee within the business (unless prohibited under a relevant labor contract or collective bargaining agreement)
• Becoming pregnant, having a miscarriage or nursing a child
• Becoming a member of a labor union or participating in labor union activities either outside of work hours or during work hours with permission of the employer
• Reporting the employer to the authorities for committing a crime.

An employee who is wrongfully terminated for one of the above reasons must be rehired. When a termination has taken place, the employer is required to pay the separated employee severance and/or a sum of money as a reward for services rendered.