Employment Agreement  Preparation of company documents for employees in a company, including employment agreements, employee’s tax card (NPWP) registration (for employees who are required to have an NPWP), employee’s social security (BPJS Ketenagakerjaan) registration, employee’s healthcare (BPJS Kesehatan) registration, and employee’s payslips. For employees who have left the company, including a work certificate and a certificate for disbursement of social security (BPJS Ketenagakerjaan), each employee will be given proof of withholding income tax article 21 on tax payments deposited by the company during the working period, be it for salary, religious holiday (THR) bonus, as well as severance pay.

In the following, we explain how to fulfill the required documents for employees, first, we will discuss how to make the employment agreement. According to article 54 of Law No. 13/2003, a written employment agreement must contain at least:

1. Name, company address, and type of business.
2. Name, gender, age, and address of the worker.
3. Position or type of work.
4. Place of work.
5. The number of wages and the method of payment.
6. Conditions of work that specify the rights and obligations of employers and workers.
7. Starting and the period of validity of the work agreement.
8. Place and date of the work agreement made.
9. Signatures of the parties in the work agreement.

Meanwhile, the terms of the employment agreements are considered valid according to the provisions in Article 52 paragraph 1 of Law no. 13 of 2003 affirms that the employment agreement is made on the basis of:

1. Both sides agree.
2. The ability or ability to take legal actions.
3. There is a work that was promised.
4. The agreed work does not conflict with public order, morals, and the prevailing laws and regulations.

Types of work agreements according to the expiry date can be distinguished as follows:

Fixed Term Employment Agreement (PKWT)

Fixed Term Employment Agreement (PKWT)

A fixed-term employment agreement (PKWT) whose workers are often referred to as contract employees is an employment agreement between employees and employers to establish a working relationship for a certain period of time or for certain workers. PKWT must meet the following requirements:

1. Based on a maximum period of three years or the completion of a certain job.
2. Made in writing in 3 copies: for employees, employers, and Manpower Office (Permenaker No. Per-02/ Men/1993), if it is made verbally it is stated as an indefinite work agreement.
3. In Indonesian and in Latin letters or in Indonesian and in foreign languages ​​with Indonesian as the main language.
4. There is no probation period, if required, the work agreement is null and void (Article 58 of Law No.13 / 2003).

Law No. 13 of 2003 article 57 paragraph 1 states that “an employment agreement for a fixed term is made in writing and must use Indonesian and Latin letters”. Even though the parties are foreigners, the applicable law in the agreement is Indonesian Labor Law, therefore PKWT must be made in Indonesian, with translation into English. All provisions that are legally binding are those written in Indonesian. The English language in the fixed-term employment agreement is only a translation so that the parties understand the contents. The use of foreign workers at Representative Offices of Foreign Companies must also comply with Indonesian labor regulations.

Therefore, if our labor provisions regulate a right for foreign workers that the employer must comply with, then these rights must be given to the foreign worker. For example regarding labor social security, a foreign worker is also entitled to obtain a BPJS Ketenagakerjaan, just like an Indonesian citizen.

Indefinite Work Agreement (PKWTT)

Indefinite Work Agreement (PKWTT)

Based on Article 1 point 2 Decree of the Minister of Manpower and Transmigration of the Republic of Indonesia Number KEP. 100/MEN/VI/2004 Regarding the Provisions for the Implementation of a Fixed-Time Work Agreement, the meaning of an Indefinite Time Work Agreement is a work agreement between workers and employers to establish a permanent working relationship. The workers are often called permanent employees. Apart from being written, PKWTT can also be made verbally and is not required to be approved by the relevant manpower agency. If PKWTT is made verbally, the company is obliged to make a letter of appointment for the employee concerned.

PKWTT may require a probation period for a maximum of 3 (three) months, if someone regulates it for more than 3 months, then by law since the fourth month, the worker has been declared a permanent worker (PKWTT). During the probationary period, the Company is obliged to pay the workers’ wages and the wages cannot be lower than the applicable minimum wages.

Basically, the work agreement does not have to be in writing. Based on Article 50 and Article 51 of Labor Law No. 13 of 2003, a working relationship occurs because of the existence of a work agreement between an entrepreneur and a worker, in which a work agreement can be made in writing or verbally. However, there are exceptions in the case of a work agreement for a certain time (PKWT). In Article 57 of Law No.13/2003, it is stated that PKWT must be made in writing and must use Indonesian and Latin letters.

Non-written non-permanent contracts are declared as indefinite time employment agreements (PKWTT). In addition, if a company does not make a written employment agreement (PKWTT) with its workers, the employer is obliged to make a letter of appointment for the worker concerned (Article 63 of the Labor Law). The letter of appointment contains at least the following information:

a. Name and address of the worker;
b. Date started work;
c. Type of work; and
d. The number of wages.

Indoservice, an experienced outsource human resource service and payroll management provider, ready to ease your hassle. We will be more than happy to assist your employee onboarding process, draft the employment agreement, payroll service, EoR, and other related services. Contact us now to get special offers.


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