Employment contracts may be familiar to some companies, especially long-established companies. But apparently, there are still many companies that make mistakes in making employment contracts. In fact, employment contracts are regulated in Law No. 13 of 2003 concerning Manpower. According to the law, an employment contract is an agreement between employees and employers that contains the terms of employment, rights, and obligations of the parties. In this article, we will explain six mistakes that often occur in making employment contracts that you need to avoid.
What is an employment contract?
Before discussing further about mistakes in making it, KH pals need to first understand what an employment contract is. An employment contract or agreement is defined as an agreement between an employee and an employer that contains the terms of employment, rights, and obligations of the parties. Basically, an employment contract regulates the rights and obligations of employees and companies that apply as binding rules. However, keep in mind, the rights and obligations made must be in accordance with applicable laws and work regulations in Indonesia. Unlike contracts in general, which allow the parties to regulate the contents, employment contracts are specifically regulated in Law 13/2003. This is done to protect the rights of employees and reduce inequality between employees and companies.
Mistakes Often Made in Making Employment Contracts
When accepting new employees to work for a company, the first thing to do is to sign an employment contract. However, many company management do not know how to make an employment contract properly so there are still many mistakes found. Here are six mistakes that often occur and should be avoided in making employment contracts:
Not Knowing the Legal Terms of Employment Contract
There are still many company management who do not understand the terms of a valid employment contract. In fact, a work agreement is not wrong if it does not meet the legal requirements of a work contract. So what exactly are the terms and examples of a valid employment contract? Here are some things that must be in the employment contract:
- Company name, company address, and type of business
- Name, gender, age, and address of workers
- Job title or type of work
- Place or location of work
- Wages and payment method
- Working conditions that contain the rights and obligations of employers and workers
- Period of validity of the agreement
- Place and date the employment agreement was made
- Signature on stamp duty by all parties
The legal requirements of the employment contract are in accordance with Article 54 of Law 13/2003, which must be included in the employment contract. If the employment contract made does not contain the above matters, it is considered invalid.
No Balance between the Two Parties
A simple legal principle in making an employment contract is the balance that both parties, the employer and the employee, get. That is, each party must give and receive something to make the contract binding. If the contract is not balanced, the company will not run effectively. Too many things in favor of the company will make the chances of employees quitting greater and recruitment costs increase. Conversely, if too much is in the employee’s favor, the company can go bankrupt.
Does not include a time limit
Every employment contract must include a time limit or expiration date. The inclusion of this time limit is also important, especially if the company’s employee status is a contract employee or PKWT (Specific Time Work Agreement). Not only to know when the contract is finished, the inclusion of a time limit is also important to anticipate if the employee has changed positions or positions. If in the future there are changes such as salary, benefits, procedures, and facilities, the company is obliged to renew the employment contract.
Does not include contract cancellation terms
The employment contract also needs to contain conditions for the cancellation of the employment contract. This clause can explain in writing the cancellation of the employment contract before the term of the agreement.
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Such provisions can be in the form of written notice by either party or can be in the form of reasons, the earliest time to apply or the consent of both parties in canceling the employment contract.
Work Disguised as a Periodic Contract
Another common mistake is when companies do not include a fixed time limit, but instead use the term auto-renewal. The term will certainly mislead employees and become unbalanced. It is not appropriate because contract employees usually do not get additional facilities like permanent employees, such as pension programs or insurance. According to the terms of the employment agreement, the employee’s employment contract must pay attention to matters such as:
- There are parties as recipients and employers
- Bound within a clear timeframe
- Clarity of salary, benefits, and facilities
- Contains the rights and obligations of all parties
- Contains the employment protection provided
- The agreement of each party
This can be obtained if the contract is made with the correct terms or agreements and does not favor one party.
Not making contracts according to legal requirements
Many business owners or companies still consider contracts as mere formalities and are only considered as evidence of an agreement if there is a dispute or problem in the future. In addition, many only realize the importance of a contract when they are already caught in a problem. At that time, they just check the contents of the contract and often find that the contents do not match their expectations or even harm one of the parties. Therefore, it is very important to understand how to make an employment contract correctly, in accordance with applicable law. The Civil Code (KUHPerdata) is the legal basis that regulates contracts in Indonesia.
KH Contact
Those are the mistakes that often occur in making employment contracts. To avoid these mistakes, you can utilize professional legal services from Kontrak Hukum.
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With Kontrak Hukum, you can be assisted in making or checking employment contracts and other types of contracts more easily and quickly, in just 24 hours!
So, what are you waiting for? For booking information, please visit the KH – Contract Services page. If you have any questions, don’t hesitate to consult with us at Ask KH and Direct Message (DM) to Instagram @kontrakhukum. With KH, #semuajadiberes!
