When a technology start-up from Singapore entered Jakarta in 2021, they hired software developers under fixed-term contracts (PKWT) to test the market. After two years, some contracts were extended again—until employees challenged the arrangement, arguing that the law required conversion into permanent status. The case highlighted the strict limits surrounding PKWT in Indonesia.

What is PKWT?

A Fixed-Term Contract (Perjanjian Kerja Waktu Tertentu – PKWT) is designed for temporary, project-based, or seasonal work. It must be in writing, in the Indonesian language, and registered with the Ministry of Manpower’s online system.

Duration & Extension Rules

Under Government Regulation (PP) No. 35 of 2021, PKWT may last for:

• Up to 5 years maximum (including extensions and renewals).
• After that, the contract must convert into an indefinite-term (PKWTT) if employment continues.
• Probation periods are not allowed under PKWT.

Case Example: Manufacturing Sector Dispute

In 2018, a manufacturing company in Bekasi was sued by workers after repeatedly renewing PKWT contracts beyond the legal limit. The Industrial Relations Court ruled in favor of the employees, ordering the company to recognize them as permanent staff (PKWTT) and provide severance rights.

Daily Workers (PKHL)

Indonesia also recognizes Harian Lepas (PKHL), or daily workers, often used in hospitality, agriculture, or construction. PKHL is a type of PKWT but limited to work calculated daily. If a worker is engaged continuously for 21 days or more in a month for three consecutive months, the law may interpret it as permanent employment.

Best Practices for Employers

• Clearly identify whether the role is temporary or permanent.
• Avoid excessive renewals that risk conversion.
• Register PKWT contracts with the Ministry of Manpower.
• Seek legal review to prevent disputes.

Conclusion

PKWT offers flexibility but is strictly regulated. Employers who misuse PKWT risk legal disputes and forced conversion to permanent employment. For foreign investors, compliance ensures both workforce flexibility and long-term stability.

References

• Law No. 13 of 2003 on Manpower (as amended by Law No. 11 of 2020 – Omnibus Law).
• Government Regulation (PP) No. 35 of 2021 on Fixed-Term Employment, Outsourcing, and Termination.
• Supreme Court Decision No. 196 K/Pdt.Sus-PHI/2018 – Case on conversion of PKWT to PKWTT.
• ILO Indonesia – Employment Practices Reports.
• The Jakarta Post, “Workers Win PKWT Conversion Case in Bekasi,” 2018.