Indonesia PKWTT vs PKWT: Permanent and Fixed-Term Employment Contracts (2026)

Indonesian employment law under the Manpower Law (GR 35/2021) recognizes two employment contract types. PKWTT (Perjanjian Kerja Waktu Tidak Tertentu) is a permanent/indefinite contract. PKWT (Perjanjian Kerja Waktu Tertentu) is a fixed-term contract with a maximum duration of 5 years. Each type has distinct rules for probation, termination, and compensation.Omnibus Law 11/2020 and Law 13/2003, amended by

What Is a PKWTT (Permanent Employment Contract)?

A PKWTT is an indefinite-term employment contract with no end date. PKWTT is the default contract type in Indonesia. If the employment contract does not specify a fixed term, or if the PKWT terms are violated, the contract is deemed a PKWTT. PKWTT can be written or verbal: a verbal employment agreement is automatically a PKWTT.

PKWTT employees receive the strongest protections. Probation is permitted: maximum 3 months. Termination requires severance pay, long service pay, and compensation pay under GR 35/2021. PKWTT employees are entitled to all statutory benefits: BPJS, THR, annual leave (12 days minimum), and overtime pay. Aniday's EOR Indonesia (Aniday EOR Indonesia) issues PKWTT contracts for permanent roles.

What Is a PKWT (Fixed-Term Employment Contract)?

A PKWT is a fixed-term contract for work that is temporary in nature, seasonal, related to a new product/activity, or for trial/exploration purposes. Maximum total duration: 5 years (including renewals and extensions). PKWT must be written in Bahasa Indonesia. If written in a foreign language, a Bahasa Indonesia version must accompany it, and the Indonesian version prevails in disputes.

PKWT contracts cannot include a probation period. If a probation clause is included, it is null and void, and the PKWT automatically becomes a PKWTT. PKWT must be registered with the local manpower office (online registration via WLKP system). Failure to register does not invalidate the PKWT but exposes the employer to administrative sanctions.

How Do PKWTT and PKWT Compare?

What Is PKWT Compensation?

GR 35/2021 introduced mandatory PKWT compensation. At the end of a PKWT contract (including non-renewal), the employer must pay compensation of 1 month salary per 12 months of service. Service less than 12 months is pro-rated. This compensation is separate from and in addition to THR, unused leave payment, and final salary.

Example: PKWT for 2 years at IDR 10,000,000/month. PKWT compensation at end: 2 × IDR 10,000,000 = IDR 20,000,000 ($1,270). This applies regardless of the reason for contract end: whether the contract simply expires, is not renewed by the employer, or is not renewed by the employee. The compensation is mandatory for all PKWT endings.

When Does a PKWT Become a PKWTT?

A PKWT automatically converts to PKWTT in five circumstances. First, the PKWT includes a probation clause. Second, the PKWT exceeds 5 years total duration. Third, the PKWT is for work that is continuous/permanent in nature (not temporary or project-based). Fourth, the PKWT is not in writing. Fifth, the PKWT terms violate mandatory requirements under the Manpower Law.

Conversion to PKWTT means the employee receives permanent employment protections including severance pay, long service pay, and full termination compensation under GR 35/2021. Employers should carefully structure PKWT contracts to avoid unintended conversion.

Can a PKWT be renewed multiple times?

Yes, within the 5-year maximum total duration. GR 35/2021 removed the previous limit of 2 renewals. The PKWT can now be renewed any number of times provided the total duration (original + all renewals) does not exceed 5 years. Each renewal must be documented in a written amendment registered with the manpower office.

What happens if a PKWT is terminated early by the employer?

If the employer terminates a PKWT before expiration, the employer must pay compensation equal to the remaining salary for the unexpired term. Example: 2-year PKWT terminated after 8 months: the employer pays 16 months remaining salary. This is in addition to PKWT compensation (pro-rated for 8 months). Early termination by the employee requires the employee to pay the same amount to the employer.

Can foreign workers be hired on PKWTT?

No. Foreign workers in Indonesia must be hired on PKWT (fixed-term) contracts. This is because foreign workers hold KITAS (Limited Stay Permit) with a fixed validity. The PKWT duration must match the KITAS validity. Foreign workers cannot receive PKWTT contracts. The maximum PKWT duration for foreign workers follows the same 5-year rule.

Is there a minimum duration for PKWT?

No minimum duration is specified. A PKWT can be for any period up to 5 years. Short-term PKWTs (weeks or months) are permitted for genuinely temporary work. Daily workers can be engaged on PKWT-like terms for less than 21 days per month. If a daily worker works 21+ days per month for 3 consecutive months, the arrangement is deemed PKWTT.

Does PKWT compensation affect BPJS JHT withdrawal?

No. PKWT compensation and BPJS JHT (Old Age Savings) are separate entitlements. PKWT compensation is paid by the employer at contract end. JHT is accumulated from monthly BPJS contributions and can be withdrawn when the employee reaches 56, becomes permanently disabled, dies, or after 1 month of unemployment. Both are payable: they do not offset each other.

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