In general, an employment agreement in Indonesia shall be entered into for either a fixed or an indefinite term.
Fixed-term employment agreements are subject to more strict requirements than indefinite-term employment agreements. A fixed-term employment agreement must be in writing and in the Indonesian language. The parties typically provide that the English version of a bilingual agreement will prevail in the event of a conflict or inconsistency. If not in writing, a fixed-term employment agreement is deemed an indefinite-term employment agreement. Additionally, a fixed-term employment agreement cannot include a probation period.
A fixed-term employment agreement that is based on a certain period of time (unlike seasonal contracts, etc.) may last for up to two years, and may be “extended” once for a maximum period of one year. Then, after a grace period of at least 30 days, it can be “renewed” one time for a maximum period of two years.
An indefinite-term employment agreement may provide for a probation period of up to three months. In the event an indefinite-term employment agreement is made verbally, the employer is required to provide a letter of appointment to the employee. The letter shall contain at least the following information: (i) the employee’s name and address, (ii) the date the work commences, (iii) the type of work, and (iv) the employee’s proposed wages.
Fixed-term contracts must be in writing and in the Indonesian language or in a bilingual format. Given new legislation governing the use of Indonesian language in contracts generally, we recommend that both fixed and permanent employment agreements be executed in Indonesian or in a bilingual Indonesian and English format. It is prudent to assume that in the event of a conflict or inconsistency, the Indonesian-language version shall prevail.
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