Startups & Business › Indonesia
PKWT and PKWTT
Fixed-term versus permanent employment contracts under Indonesian labor law.
Also known as: PKWT, PKWTT, fixed-term contract Indonesia, permanent employment Indonesia
Indonesian labor law distinguishes PKWT (fixed-term contracts, for temporary/project work with maximum durations and renewal rules) from PKWTT (permanent/indefinite employment). The type determines end-of-contract rights, severance exposure (pesangon), and how endings must be handled — choosing wrong (or blurring the line in practice) creates liability that surfaces at termination.
PKWT: fixed term, specific work, ends by expiry (with statutory completion pay rules)
PKWTT: indefinite, full protections, endings follow dismissal/severance procedures
Use PKWT for genuinely temporary needs (projects, seasonal peaks, probation-like evaluation where allowed) and PKWTT for the team you are building. The law restricts PKWT scope precisely because misclassification is the classic abuse — regulators look at substance over labels.
The classic mistakes:
- Permanent roles on rolling PKWTs. Renewing fixed terms indefinitely for core team members invites reclassification plus backdated obligations. Permanent work gets permanent contracts.
- Verbal terms, written surprises. Offer letters promising one thing, contracts stating another, practice doing a third. Align all three before day one (employment contract).
- Termination improvisation. Ending either type without following its procedure (notice, severance computation, bipartite settlement attempts) converts routine exits into disputes. Procedure first, always.
- Ignoring regulatory movement. Labor rules (including the omnibus-law lineage reforms) shift rights and thresholds. Confirm current law with counsel at each hiring wave, not once at founding.
- Foreign staff on local templates. Expat employment layers immigration status atop labor type. Coordinate both or risk a contract valid in one regime and void in practice.
Default: PKWTT for builders, PKWT only for genuinely temporary work, everything written, procedures followed to the letter. See letting people go for endings done right.