Did you know, PKWT and PKWTT are two types of work agreements that apply in Indonesia. Where PKWT itself is a Specific Time Work Agreement or known as a contract employee, while PKWTT is an Indefinite Time Work Agreement or also known as a permanent employee. Both of these agreements have a legal basis recognized by the state. However, in practice, it turns out that there are still many companies and workers themselves who do not understand PKWT and PKWTT. As a result, it is still common to find companies that hire employees not in accordance with the applicable provisions. Well, therefore, these two types of employment agreements are important to know so that KH Friend can find out the type of work, agreement documents, and rights that can be obtained when there is a Termination of Employment or PHK. Considering this is very crucial because it involves the employment status of the workers and the credibility of the company itself. Let’s see the full explanation!
What is an Employment Agreement?
Before discussing more about PKWT and PKWTT and their differences, KH pals need to first understand what a work agreement is. According to Article 1 of Law No. 13 of 2003 concerning Manpower (Manpower Law), a work agreement is an agreement between a worker and an employer that contains working conditions, rights, and obligations of the parties. By agreeing to a work agreement, an employee has a legal bond and obligations that must be fulfilled to the company where he works. Conversely, the company also has an obligation to fulfill employee rights such as providing wages, registering employees in health and employment insurance programs, and the right to leave for employees. The government has established the rules of employment agreements that aim to provide for both parties. Thus, economic growth can be maintained, and public welfare can be achieved. Based on Article 56 of the Manpower Law, there are two types of work agreements, namely the Fixed-Term Work Agreement (PKWT) and the Indefinite Time Work Agreement (PKWTT). The main difference between PKWT and PKWTT is based on the period of time or completion of a certain job.
What is a non-permanent contract?
PKWT is a contract made between employees and companies to establish a working relationship within a predetermined time. In non-permanent contracts, there are still general provisions governing work relations between companies and employees such as the rights and obligations of each party, along with positions, wages, and other provisions. However, what makes it different is that there is a time limit on the employment relationship because employees are not employed permanently but only for a certain period of time, According to Article 59 of the Manpower Law, PKWT can only be made for certain jobs which according to the type and nature or work activities will be completed within a certain time, such as:
- Work that is only completed in one go, with a maximum completion time of three years;
- Work that will only exist seasonally; or
- Work related to new products and activities or additional products that are still being tested.
The Labor Law expressly prohibits the establishment of PKWT for permanent jobs through Article 59. So, if you want to hire an admin staff, you cannot hire the employee based on PKWT because the position is a job that is continuously needed. In addition, PKWT that is based on a fixed term has a maximum period of two years and can only be extended once for a period of one year.
What is PKWTT?
PKWTT is a work contract or agreement made for an indefinite period of time so that employees are permanently employed. Unlike PKWT, which must be made in writing and recorded at the Manpower Office, PKWTT must be made in written or oral form, and is not required to be recorded at the Manpower Office. If the company chooses to make PKWTT in oral form, the company is required to make a letter of appointment to the employee which contains several things such as:
- Employee name and address
- Date when the employee will work
- The type of work the employee will perform
- The amount of wages that employees will receive
Although PKWTT can be made verbally, it should still be written because in addition to being able to regulate in detail the additional rules that apply to employees, PKWTT made in writing can be used as evidence if there is a conflict between the employee and the company in the future.
What is the difference between non-permanent contracts and permanent contracts?
These two types certainly have differences. For more details, see the differences between the two in the following table:
| PKWT | PKWTT | |
| Time | Has a time limit or completion of work has been determined | No time limit and can continue until retirement age or death |
| Termination of Labor (PHK) | HK based on the agreement that has been agreed in the agreement, does not have to go through the Industrial Relations Dispute Resolution Institution. | Layoffs for certain reasons, must go through the Industrial Relations Dispute Resolution Institution process |
| Obligations during layoffs | Dismissed in accordance with the agreed time, there is no obligation for the company to pay severance pay and long service pay. | The company is obliged to provide a certain amount of compensation in the form of award money, compensation money, or severance pay (except if the layoff is caused by certain reasons). |
| Trial Period | No probation is allowed. If imposed, probation is null and void and deemed never to have existed. | A probationary period can be established |
| Employment Contract | Employment agreements must be made in writing in Latin letters, in the Indonesian language. | Employment agreements can be made in writing or orally |
| Listing | Must be registered with the labor office | Not required to be registered with the labor office |
How to Make PKWT and PKWTT in accordance with the Labor Law?
Employment agreements that regulate the employment relationship between companies and employees cannot be ignored, considering that the provisions regarding employment relationships are regulated in detail in laws and regulations. According to Article 54 of the Manpower Law, work agreements, both PKWT and PKWTT must at least contain several things as below:
- Company name, address, and type of business
- Name, gender, age, and address of workers
- Job title or type of work
- Place of work
- The amount of wages and how they are paid
- Working conditions that contain the rights and obligations of employers and employees
- Commencement and validity period of the employment agreement
- Place and date the employment agreement was made
- Signatures of the parties to the employment agreement
Apart from those mentioned above, several other rules can also be added, such as company information that must be maintained by employees, to provisions regarding the prohibition of employees who resign and are terminated to work in competing companies. This is an explanation of the differences between PKWT and PKWTT. Making a work agreement may be considered complicated and confusing because there are many rules that must be considered in the Manpower Law and other supporting regulations.
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However, with an employment agreement, it can protect the company and employees because they feel more secure about the rights that will be obtained during the employment relationship.
KH Contact
For KH friends who are still hesitant to make a good and correct PKWT and PKWTT letter, you can contact Kontrak Hukum. As a digital legal platform, we can help KH pals to make PKWT and PKWTT letters in just 24 hours, 100% online without face to face with prices starting from Rp900 thousand! For ordering information, please visit KH Services – Contract page. Or if you have other questions, just consult with us at Ask KH and via direct message to Instagram social media @kontrakhukum.
