The Indonesian government has recently introduced significant changes to the Fixed-Term Employment Agreement (PKWT) regulations, impacting both employers and employees. As we delve into the key provisions of these new rules, it’s essential to understand their implications and adapt accordingly.
Following a Constitutional Court (MK) decision to revise the employment section of Law No. 6 of 2023—which ratified Perppu No. 2 of 2023 on Job Creation—key changes have been made to fixed-term employment agreements (PKWTs). Article 56 paragraph (3), in Article 81 number 12, was deemed unconstitutional unless interpreted to extend the maximum duration of PKWTs to five years, including renewals.
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This extension grants businesses greater flexibility in workforce planning, particularly for roles tied to specific projects or temporary needs, while providing clarity on contract limits for both employers and employees.
Employees who got terminated by the company are now entitled to compensation, including severance pay and unused leave benefits. This provision aims to safeguard the rights of workers and ensure fair treatment, even in cases of early termination.
The new regulations also impose stricter guidelines on outsourcing arrangements. Businesses must now ensure that outsourcing contracts comply with labor laws and provide adequate protection for outsourced workers. This includes clear contractual terms, fair wages, and social security benefits.
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This new PKWT regulations mark a significant shift in Indonesia’s labor landscape. By understanding the key provisions and their implications, businesses can navigate these changes successfully. Proactive planning, legal counsel, and effective communication are crucial to ensure compliance and maintain a positive work environment.
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