Understanding the types of employment contracts in Indonesia is a critical first step for companies planning to hire local talent.
Before onboarding employees, foreign companies need to understand local employment agreement; including contract structures, worker protections, and employer obligations.
This guide explains the main employment contract types in Indonesia and how Employer of Record (EOR) services can simplify the hiring process.
Types of Employment Contracts in Indonesia
Indonesia recognizes several types of employment contracts, each designed for different employment needs. Choosing the right contract is essential to ensure compliance with labor regulations and to align with your business objectives.
1. Permanent Employment Contract (PKWTT)
A Permanent Employment Contract, known as PKWTT (Perjanjian Kerja Waktu Tidak Tertentu), employees are considered permanent staff and entitled to full statutory benefits.
A probation period of up to three months may apply, followed by strong protection regarding termination and severance.
2. Fixed-Term Employment Contract (PKWT)
A PKWT (Perjanjian Kerja Waktu Tertentu) is a fixed-term contract used for temporary, project-based, or seasonal work.
These contracts must be in writing and follow strict rules on duration, renewal, and end-of-contract compensation.
3. Daily or Casual Employment Agreements
Daily or casual employment agreements are typically used for short-term work paid on a daily basis.
These arrangements are common in industries such as logistics, retail, and manufacturing. If work continues beyond the legal limit, the arrangement may be reclassified as permanent employment.
4. Outsourced or Third-Party Employment Arrangements
Outsourced employment involves hiring workers through licensed third-party providers for non-core business activities.
These arrangements are regulated and limited to specific job categories to avoid compliance risks.
Local Employment Agreements in Indonesia
Local Employment Agreements in Indonesia must comply with national labor laws, collective labor agreements (if applicable), and company regulations. Contracts should clearly define job roles, compensation, working hours, benefits, termination terms, and dispute resolution mechanisms.
Written agreements in Bahasa Indonesia are mandatory. Any discrepancies between foreign-language versions and the Indonesian version will default to the Bahasa Indonesia text in legal disputes.
Key Considerations for Foreign Companies Hiring in Indonesia
Hiring in a foreign market involves several must-know factors:
- Mandatory Benefits: You must provide BPJS (Social Security and Health Insurance).
- THR (Religious Holiday Allowance): A mandatory 13th-month salary paid before major religious holidays.
- Termination Laws: Indonesia has pro-employee labor laws; terminating staff requires strict adherence to legal calculations and procedures.
Understanding cultural expectations, communication styles, and local employment norms also plays a significant role in building strong and sustainable employment relationships.
What is an Employer of Record (EOR) in Indonesia
An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of a foreign company. In Indonesia, the EOR becomes the legal employer, handling employment contracts, payroll, taxes, benefits, and compliance.
This allows foreign companies to hire employees in Indonesia without establishing a local legal entity, significantly reducing setup time and regulatory risk.
Why Choose Abhitech as Your Employer of Record in Indonesia
Abhitech offers a seamless bridge between your global goals and local Indonesian talent.
1. Fast Onboarding and Legal Compliance
Skip the months of paperwork. Abhitech ensures your types of employment contracts are drafted correctly from day one, getting your team up and running in a fraction of the time.
2. Payroll, Tax, and Benefits Administration
We handle the complexities of Indonesian tax (PPh 21) and statutory benefits (BPJS), ensuring your employees are paid accurately and on time, every time.
3. Simplified Hiring Process for Foreign Companies
Navigating the bureaucracy of a new country is daunting. We act as your local HR department, so you can focus on your core business strategy.
4. Dedicated Support for HR and Employee Management
From managing leave requests to handling contract renewals, our team provides personalized support for both the employer and the employee.
How Abhitech Helps Companies Hire in Indonesia Efficiently
Abhitech streamlines the entire hiring process by combining local expertise with practical EOR solutions.
Companies can onboard talent quickly, remain compliant with labor regulations, and adapt their workforce strategy without long-term commitments.
This approach is ideal for market testing, remote teams, project-based hiring, and long-term workforce expansion.
Other Recommended Employer of Record Companies in Indonesia
While Abhitech offers deep-rooted local expertise, several global platforms also facilitate hiring in the region. These providers are best suited for companies managing a diverse workforce across multiple continents.
1. Deel
Deel is a global leader in remote hiring, favored by tech startups for its streamlined, automated platform. It excels at managing both international contractors and full-time employees through a centralized dashboard.
2. Remote
Remote focuses on owning its local entities to ensure high standards of IP protection and data security. It is a reliable choice for companies seeking a consistent HR experience and standardized benefits for a globally distributed team.
3. Globalization Partners (G-P)
G-P is an enterprise-grade solution tailored for large corporations and multinational firms. They provide a high-touch service model designed to handle complex international expansion and large-scale workforce management.
Hire Indonesian Talent Easily with Abhitech
Choosing the right local partner is essential for compliant and sustainable hiring in Indonesia. A clear understanding of employment contracts and Local Employment Agreements in Indonesia helps companies avoid regulatory risks and delays.
Abhitech supports foreign companies as a trusted Employer of Record (EOR), ensuring all employment arrangements comply with Indonesian labor laws. From contract management to payroll, tax, and statutory benefits, every aspect of local employment is handled efficiently.
Stay informed about Indonesia’s employment landscape by exploring our blog, and reach out to the Abhitech team for tailored guidance on hiring and compliance.
FAQ About EOR Services in Indonesia
1. What type of employment contract should foreign companies use in Indonesia?
The choice depends on business needs. PKWTT is suitable for long-term roles, while PKWT works best for project-based or temporary positions. An EOR can help determine the most compliant option.
2. Do employment contracts in Indonesia need to follow local regulations?
Yes. All employment contracts must comply with Indonesian labor laws and be written in Bahasa Indonesia to be legally enforceable.
3. Can foreign companies hire employees in Indonesia without a local entity?
Yes. By using an Employer of Record, foreign companies can legally hire employees without establishing a local company.
4. How does an EOR help manage employment contracts in Indonesia?
An EOR drafts compliant contracts, manages payroll and benefits, ensures tax compliance, and handles employment administration on behalf of the foreign company.
5. Is using an Employer of Record suitable for long-term hiring in Indonesia?
Yes. EOR services are suitable for both short-term and long-term hiring, especially for companies seeking flexibility and compliance without entity setup.
