Fixed-term contracts (PKWT) vs permanent employment (PKWTT) and probation: what to know
When you receive a job offer, one of the first things to check is the type of employment. Are you being hired as a contract employee or a permanent employee? The difference determines how long you work, what you receive when the job ends, and whether a probation period is allowed.
Resmi.ID Team · 4 min read ·
Photo: Vitaly Gariev / Unsplash
This article summarises the rules currently in force: the Manpower Law as amended by the Job Creation Law (UU 6/2023) and Government Regulation (PP) 35/2021. We also touch on changes now under way so nothing catches you off guard.
Two types of employment agreement
A PKWT (fixed-term employment agreement) is a contract for a set period or until a specific job is finished. This is what people call being a "contract employee". A PKWTT (indefinite-term employment agreement) has no end date; this is a "permanent employee".
A PKWT may only be used for work that is not permanent in nature, such as work expected to finish within a fairly short time, seasonal work, or work tied to new products or activities still being trialled. It may not be used for permanent work. If these conditions aren't met, the PKWT automatically becomes a PKWTT by law.
Key rules for fixed-term contracts (PKWT)
- It must be in writing, in Indonesian and in Latin script. If there is a bilingual version and the texts differ, the Indonesian version prevails.
- A time-based PKWT can last at most 5 years, including extensions.
- A completion-based PKWT ends when the work is done, and the agreement must define the scope and what counts as "done".
- No probation is allowed. If a probation clause is included anyway, it is void by law and your service time still counts.
- When the PKWT ends, you are entitled to compensation pay (uang kompensasi), provided you have worked at least 1 month continuously.
Calculating compensation pay
Under PP 35/2021, a 12-month contract earns compensation of 1 month's wage. For contracts shorter or longer than 12 months, it is proportional: months worked divided by 12, multiplied by 1 month's wage.
Example: a 6-month contract at Rp4,800,000 a month gives 6/12 × Rp4,800,000 = Rp2,400,000. If the contract is extended, compensation is paid when the original term ends, and again when the extension ends.
Probation is only for permanent employees
Probation may only be applied to a PKWTT, and it can last at most 3 months under Article 60 of Law 13/2003. The probation terms must be stated in the employment agreement or, if the agreement is verbal, in the appointment letter. If it isn't in writing, there is no probation.
During probation, the employer may not pay below the applicable minimum wage. So the practice of "80% salary during probation" is not allowed if it brings your pay below the minimum wage in your area.
If the company wants to end the employment during probation, PP 35/2021 requires a written termination notice at least 7 working days in advance. For workers past probation, the notice period is 14 working days.
Red flags in a contract
- You are put on contract after contract for core work that is clearly permanent, such as day-to-day finance admin, for years.
- The contract includes a probation period even though you are a PKWT worker.
- Probation for a permanent employee exceeds 3 months, or is "extended" without any basis.
- You aren't given a copy of the contract, or the terms are only given verbally.
- There is no compensation clause, or the company says "contract workers get nothing when it ends".
Questions you can ask HR
Asking about your employment status is normal and professional. You might say: "May I ask whether this position is PKWT or PKWTT? If it's PKWT, how long is the term and is there a chance of becoming permanent?"
For permanent roles, also ask: "How long is the probation period, and what indicators are used to decide whether I pass?" A clear answer is usually a sign of a well-run hiring process.
When your contract ends
About a month before your contract expires, ask openly about the company's plans: will the contract be extended, converted to permanent employment, or ended? This clarity gives you time to prepare, including starting to look at other jobs if needed.
If the contract ends, make sure compensation pay is calculated on the correct length of service and actually paid. Also ask for a certificate of employment (paklaring) stating your position and dates of employment, as this is often requested when you apply elsewhere.
The rules are changing
In Decision 168/PUU-XXI/2023, the Constitutional Court asked lawmakers to draft a new manpower law separate from the Job Creation Law. On 6 October 2026, the House of Representatives (DPR) passed the Labour Protection Law (UU Pelindungan Ketenagakerjaan). According to the Ministry of Manpower (Kemnaker), it only takes effect after a one-year transition period from its promulgation.
During the transition, the rules described above remain the reference. Watch Kemnaker's official announcements for details of changes to PKWT and probation, and don't rely on fragments of information circulating on social media.
References
- Hukumonline — Pengaturan PKWT dan PHK dalam PP 35/2021
- Hukumonline — Pengaturan pekerja kontrak pasca UU Cipta Kerja
- Hukumonline — Landasan hukum masa probation
- CNBC Indonesia — UU Pelindungan Ketenagakerjaan disahkan, kapan efektif berlaku
This information is general. For important decisions, check the latest rules at official sources or consult the relevant authorities.
