WORK AGREEMENT FOR SPECIFIED PERIOD, OUTSOURCING, WORKING HOURS AND PERIOD OF REST, AND TERMINATION OF EMPLOYMENT

In order to improve the quality of the productive and competitive Indonesian workforce, the direction of development policy in the manpower sector focuses on efforts to create the widest possible job opportunities and increase protection of rights and welfare for workers, both at work and after the end of the employment relationship. Therefore, the Government of the Republic of Indonesia stipulates Government Regulation Number 35 of 2021 concerning Work Agreement for Specified Period, Outsourcing, Working Hours and Period of Rest, and Termination of Employment (PP No. 35/2021).

Work Agreement for Specified Period (PKWT) based on PP No. 35/2021

PKWT is based on the period or completion of a certain job. PKWT cannot be made for work that is permanent in nature.

PKWT shall be made for a maximum of 5 (five) years and can be extended if the work has not been completed, provided that the total period of PKWT and its extension does not exceed 5 (five) years in total. The working period in the event of PKWT extension will still be counted from the beginning of the employment relationship based on the PKWT.

PKWT shall be based on the completion of work based on the agreement of the parties as outlined in the Work Agreement. PKWT for other certain works with non-permanent types or characteristics or activities in terms of period and volume of work and payment of wages based on attendance can be done with a Daily Work Agreement.

Daily work agreement can be made if the workers work less than 21 (twenty-one) days in 1 (one) month.

If the work is done by the worker for more than 21 (twenty-one) working days for 3 (three) consecutive months, by law such employment relationship between the worker and the company shall be a Work Agreement for Unspecified Period (PKWTT).

Compensation

PKWT Compensation shall be given to workers who have worked for at least 1 (one) month continuously. If the PKWT is extended, the compensation shall be given at the end of PKWT period before its extension. The next compensation shall be given after the period of PKWT extension ends or is completed.

The calculation for the amount of compensation shall be done based on the working period of the worker from the beginning of the employment relationship based on the PKWT, as follows:

1. PKWT compensation for 12 (twelve) consecutive months shall be 1 (one) month Wage;
2. PKWT compensation for 1 (one) month or more but less than 12 (twelve) months shall be calculated proportionally as follows:

   working period × 1 (one) month Wage

   12 (twelve)
3. PKWT compensation for more than 12 (twelve) months shall be calculated proportionally as follows:

   working period × 1 (one) month Wage

   12 (twelve).

Outsourcing Company

The employment relationship between the Outsourcing Company and the workers is in the form of PKWT or PKWTT, which shall be made in writing. In the event of the Outsourcing Company employs the workers based on PKWT, the work agreement shall include the transferring conditions for rights protection of the workers in the event of a change in outsourcing companies and as long as the job description is the same.

The outsourcing company shall be a legal entity and comply with the Business Licensing issued by the Central Government.

Working Hours

Every Employer shall be obliged to implement the following working hours:

1. 7 (seven) hours in 1 (one) day and 40 (forty) hours in 1 (one) week for 6 (six) working days in 1 (one) week; or
2. 8 (eight) hours in 1 (one) day and 40 (forty) hours in 1 (one) week for 5 (five) working days in 1 (one) week.

Companies in certain business sectors may apply less or more working hours than the standard working hours.

Overtime Work can only be done for a maximum of 4 (four) hours in 1 (one) day and 18 (eighteen) hours in 1 (one) week, excluding overtime work done during weekly period of rest and/or official holidays.

The calculation for overtime pay shall be as follows:

1. The first hour of overtime work shall be 1.5 (one point five) times the Wage per hour; and

2. For each subsequent hour of overtime work shall be 2 (two) times the Wage per hour.

Termination of Employment

Should Termination of Employment (PHK) take place, the Employer shall be obliged to pay the dismissed worker severance pay and/or reward for service pay and compensation pay for rights.

The severance pay shall be given with the following calculation:

The reward for service pay shall be given with the following calculation:

The compensation pays that shall be received includes:

1. Annual leaves that have not been taken and have not expired;
2. Costs or expenses for transporting the worker and his or her family back to the point of hire where the worker accepted to work;
3. Other compensations that are stipulated under the Work Agreement, Company Regulations, or Collective Work Agreement.

The worker who is terminated due to the following reasons:

1. acquisition of the company which results in the changes of working conditions and the workers are not willing to continue the employment relationship;
2. termination due to  efficiency because of the losses suffered by the company;
3. the company is liquidated due to losses for 2 (two) years continuously or not continuously;
4. the company is liquidated due to force majeure;
5. the company is in a suspension of debt payment obligations due to losses;
6. the company went bankrupt;
7. the worker violates the work agreement, company regulations, or collective work agreement after previously given the first, second, and third warning letters respectively.

has the right to severance pay amounting to 0.5 (zero point five) times the stipulation, reward for service pay of 1 (one) time the stipulation, and compensation pay for rights in accordance with the stipulation.

The worker who is terminated due to retirement shall be entitled to severance pay amounting to 1.75 (one point seventy five) times the stipulation, reward for service pay of 1 (one) time the stipulation, and compensation pay for rights in accordance with the stipulation.

Severance pay of 2 (two) times the stipulation shall only be received by the worker who is terminated due to prolonged illness, disability due to work accidents, and death, with reward for service pay of 1 (one) time the provision, and the compensation for rights.

With the issuance of PP No. 35/2021, all laws and regulations which constitute the implementing regulations of Law Number 13 of 2003 concerning Manpower which regulate working hours in certain business sectors or works, are declared to remain valid as long as do not contradict with PP No. 35/2021.