PKWT vs PKWTT Guide 2026 | Check Your Exposure in 2 Minutes

PKWT vs PKWTT in Indonesia: The Complete Guide to Employment Contract Classification for PT PMA Companies (2026)

Table of Contents

1. What Are PKWT and PKWTT?
2. When Can PKWT Legally Be Used?
3. The Five Triggers That Automatically Convert PKWT to PKWTT
4. What Happens When a Contract Is Reclassified
5. PKWT: Full Compliance Requirements
6. PKWTT: Full Compliance Requirements
7. Compliance Checklist for New PT PMA Entities
8. Frequently Asked Questions

What Are PKWT and PKWTT?

Indonesian employment law recognizes exactly two contract structures. There is no third category, and there is no informal "contractor" status under the Manpower Law for anyone functioning as an employee classification is binary.

| | PKWT | PKWTT | | ------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | | Full name | Perjanjian Kerja Waktu Tertentu | Perjanjian Kerja Waktu Tidak Tertentu | | Type | Fixed-term | Permanent / indefinite | | Maximum duration | 5 years total, including all extensions | No end date | | Probation period allowed? | No — a probation clause in a PKWT is void by operation of law | Yes, up to 3 months (Article 12, PP 35/2021) | | Must be in writing? | Yes, mandatory | Can be written or verbal, though written is best practice | | Manpower Office registration | Required within 3 days (online) or 7 days (offline) of execution — Article 14, PP 35/2021 | Not required | | Severance on termination | No UP (severance pay) or UPMK (long-service pay) | Full statutory severance package applies | | Compensation at contract end | Proportional compensation: (months served ÷ 12) × 1 month's salary — Articles 15–16, PP 35/2021 | Not applicable — termination triggers severance instead | | Available to foreign nationals (TKA)? | Yes — PKWT is the only contract type legally available to foreign employees | No — PKWTT is not available to foreign nationals under any circumstance |

The legal basis for this structure sits in the Manpower Law (Law No. 13/2003), as amended by the 2023 Job Creation Law (Law No. 6/2023), with the operational detail durations, registration deadlines, mandatory clauses, and compensation formulas set out in PP 35/2021.

When Can PKWT Legally Be Used?

This is the single most common point of failure for new PT PMA entities, and it is worth stating plainly: PKWT is not a flexibility mechanism. It is not a way to "try someone out" before committing, and it cannot be chosen simply because a founder prefers shorter-term obligations or wants to defer severance exposure.

PKWT is legally valid only for work that is inherently temporary, project-based, seasonal, or otherwise bounded by a defined endpoint. PKWTT is the correct classification for any function that is ongoing and continuous, regardless of how the company chooses to label it.

Where PKWT is legally valid

• One-time or project-based work with a clearly defined scope and endpoint
• Seasonal work tied to product or business cycles
• Work reasonably expected to be completed within a limited period (e.g., an 18-month ERP implementation, a defined construction phase)

Where PKWT is not valid

• Ongoing sales roles — these represent a recurring revenue function with no natural endpoint
• Permanent compliance, finance, or audit positions
• Core engineering or technology roles that run continuously
• Any role where the underlying work itself has no defined end, regardless of how the individual contract is worded The test is about the nature of the work, not the intent of the employer. If the company would still need someone performing that function in three years' time — irrespective of who occupies the role — the work is permanent, and PKWTT is the only legally correct classification. This is the single most frequent misclassification error observed in newly established PT PMA entities: labelling a first sales hire, first compliance analyst, or first engineering lead as "contract" in order to preserve flexibility, when the function itself is permanent by nature.

The Five Triggers That Automatically Convert PKWT to PKWTT

Indonesian law does not require a court ruling or lengthy dispute process for reclassification. Conversion happens automatically, by operation of law, the moment any of the following five conditions is met.

| # | Trigger | How It Typically Happens in Practice | | --- | -------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | | 1 | The PKWT includes a probation clause | A Singapore- or regionally-templated contract is used, carrying over a standard 3-month trial period that is legally void in a fixed-term Indonesian contract | | 2 | The PKWT is for work that is continuous or permanent in nature | An ongoing sales, technology, or operations function is labelled a "project" to justify fixed-term status | | 3 | The PKWT is not properly documented in writing | A verbal offer is extended and formal paperwork is delayed or never completed | | 4 | The PKWT exceeds the 5-year cumulative duration cap | Repeated contract extensions are executed without tracking total cumulative duration across all terms | | 5 | The PKWT fails to meet other mandatory statutory requirements | Missing an Indonesian-language version of the contract, or failing to register it with the Manpower Office within the required window |

On probation specifically: Under Article 12 of PP 35/2021, a probationary period (masa percobaan) is legally available only to PKWTT employees, and is capped at three months. If a company inserts a probation clause into a PKWT, that clause does not merely become unenforceable — Indonesian courts and the Manpower Office treat its presence as evidence the contract was never a genuine fixed-term arrangement in the first place, which is itself a basis for full reclassification.

What Happens When a Contract Is Reclassified

Reclassification is not prospective — it does not simply change the contract's status going forward. If an employee or the Manpower Office challenges a PKWT and demonstrates it fails to meet the legal criteria for fixed-term employment, the contract is treated as having been PKWTT from its original start date, and prior periods of service are counted toward statutory entitlements accordingly.

Severance components under Article 156, Manpower Law (as amended by Law 6/2023)

| Component | What It Covers | Basis | | --------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | | UP (Uang Pesangon / Severance Pay) | 1 month's salary per year of service, capped at 9 months | Article 156, Manpower Law | | UPMK (Uang Penghargaan Masa Kerja / Long-Service Pay) | A progressive scale based on tenure — applies only once an employee has reached at least 3 years of continuous service | Article 156, Manpower Law | | UPH (Uang Penggantian Hak / Compensation Pay) | Unused annual leave, relocation or return costs, and any other entitlements specified in the contract or company policy | Article 156, Manpower Law; PP 35/2021 |

Applicable multipliers on top of these base components vary depending on the specific reason for termination under PP 35/2021 (for example: efficiency-driven termination, company merger or acquisition, or health-related termination each carry different multiplier schedules) — this is the mechanism by which total exposure escalates well beyond the base UP + UPMK + UPH calculation.

Illustrative scale of exposure: a single misclassified hire — for example, someone engaged on a rolling six-month "contractor" basis at a monthly salary of Rp 15,000,000 — can, if challenged after eighteen months to two years of continuous engagement, generate a dispute carrying several months of backdated entitlements plus associated legal costs. For a founding team managing runway carefully in the twelve months before a Series A, this is rarely a cost that has been modeled or budgeted for.

<div style="width:100%; max-width:960px; margin:0 auto;">
  <iframe 
    src="https://script.google.com/macros/s/AKfycbzj-EeS0cOaPkQanJ7EM5qhikcSXJzwi6wtPMlAS7Oa9d6Ze1DTr_DV02MhEeS9YgHo/exec"
    width="100%" 
    height="950"
    frameborder="0"
    scrolling="yes"
    style="border:none; border-radius:14px; display:block;">
  </iframe>
</div>

PKWT: Full Compliance Requirements

Where PKWT genuinely is the correct classification — a defined project, a seasonal role, foreign national employment — the following requirements apply without exception.

Duration limits

The maximum cumulative PKWT period is 5 years, including all extensions (Article 8, PP 35/2021). A company may contract directly for the full five-year term, or in shorter increments, provided the cumulative total across all terms and extensions does not exceed five years. If the position is still required once the five-year limit is reached, it must convert to PKWTT — there is no further extension mechanism available.

Compensation at contract end

Under Articles 15–16 of PP 35/2021, a worker employed continuously for at least one month under a PKWT is entitled to compensation calculated on length of service when the contract concludes:

| Service Duration | Compensation Formula | | --------------------- | -------------------------------------------------------------------- | | Full 12 months served | 1 month's salary | | Under 12 months | (months worked ÷ 12) × 1 month's salary | | Over 12 months | Same proportional formula, calculated across the full service period |

This compensation-at-end-of-contract entitlement does not apply to foreign nationals (TKA) employed under PKWT — an explicit exclusion under Article 15(5), PP 35/2021.

Mandatory formal requirements

• Must be written in Indonesian. A bilingual version is best practice, but the Indonesian-language version legally prevails in the event of any discrepancy between language versions.
• Must be registered with the Manpower Office within 3 days (online submission) or 7 days (offline submission) of execution — Article 14, PP 35/2021.
• Must contain all mandatory clauses specified under Article 13, PP 35/2021 (see checklist below).

PKWTT: Full Compliance Requirements

For core, ongoing hires — sales, compliance, technology leadership — PKWTT is almost always the legally correct classification, and it carries its own distinct set of compliance obligations.

PKWTT is available exclusively to Indonesian citizens. Foreign nationals cannot be employed under a PKWTT under any circumstances — TKA employment in Indonesia is only ever structured through PKWT.

Probation

Per Article 60 of the Manpower Law and Article 12 of PP 35/2021, a probationary period — capped at three months — is available only to PKWTT employees, and must be expressly stipulated in the written contract to be enforceable.

Termination cost structure

Terminated PKWTT employees are entitled to UP, UPMK (once the 3-year tenure threshold is met), and UPH, generally totaling between one and nine-plus months of salary depending on tenure and the specific reason for termination, per PP 35/2021 (see the severance components table above).

Additional minimum obligations to build into every PKWTT contract

| Obligation | Requirement | | --------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | Minimum wage | Jakarta Provincial Minimum Wage (UMP) 2026: Rp 5,729,876/month — this figure resets annually each January and must be reconfirmed at the start of each calendar year | | Annual leave | Minimum 12 days annual leave, plus applicable public holidays | | THR (religious holiday allowance) | 1 month's salary for employees with ≥12 months' tenure, prorated below that threshold, payable no later than 7 days before the relevant religious holiday — Permenaker 6/2016 | | Social security | Full BPJS Ketenagakerjaan (employment) and BPJS Kesehatan (health) registration within 30 days of the employee's start date | | Overtime | Calculated and paid per the overtime provisions of the Manpower Law | | Data protection | Employee personal data handling must comply with the Personal Data Protection Law, Law No. 27/2022 |

Compliance Checklist for New PT PMA Entities

1. Conduct a role-by-role classification audit. Map every current and planned hire against the PP 35/2021 criteria. An ongoing function is PKWTT. A bounded project is PKWT. There is no legally defensible grey area.
2. Draft in Indonesian, bilingual where practical. Best practice is to execute Indonesian and English versions simultaneously, with the Indonesian version explicitly controlling in the event of a discrepancy.
3. Remove any probation clause from PKWT drafts. Probation is a PKWTT-only mechanism, capped at three months.
4. Register every PKWT with the Manpower Office within 3 days (online) or 7 days (offline) of execution.
5. Set a PKWT duration tracker. Cumulative duration across all terms and extensions must not exceed 5 years — a review checkpoint at year 4 allows time to plan a clean conversion to PKWTT or contract conclusion.
6. Confirm all mandatory clauses are present (Article 13, PP 35/2021): identities of both parties; job description and work location; salary, allowances, and benefits; rights and obligations of both parties; duration terms (PKWT) or probation terms (PKWTT); and date of signing.
7. Align contract salary structures with BPJS and PPh 21 (income tax) reporting. The salary figures stated in the employment contract must match what is reported to BPJS and to the tax authority (DJP) via Coretax.

Frequently Asked Questions

What is the difference between PKWT and PKWTT in Indonesia? PKWT (Perjanjian Kerja Waktu Tertentu) is a fixed-term employment contract limited to a maximum cumulative duration of 5 years, used only for temporary, project-based, or seasonal work. PKWTT (Perjanjian Kerja Waktu Tidak Tertentu) is a permanent, indefinite-duration contract used for any ongoing function, and is the only contract type under which statutory severance (UP and UPMK) applies on termination.

Can a PKWT include a probation period? No. A probationary period is legally available only to PKWTT employees, capped at three months (Article 12, PP 35/2021). A probation clause inserted into a PKWT is void, and its presence is often treated as evidence the contract was not a genuine fixed-term arrangement.

What happens if a PKWT is used for a permanent role? The contract automatically converts to PKWTT by operation of law. This conversion applies retroactively to the original start date, meaning the employee's full period of service — from the beginning of the original PKWT — counts toward statutory severance entitlements.

How long can a PKWT contract last in Indonesia? A maximum of 5 years in total, including all extensions (Article 8, PP 35/2021). This is a cumulative cap across the full relationship, not a per-contract limit.

Can foreign nationals (TKA) be employed under PKWTT in Indonesia? No. Foreign nationals can only be legally employed in Indonesia under a PKWT. PKWTT is not available to foreign nationals under any circumstances.

Is a foreign national entitled to compensation when their PKWT ends? No. The proportional compensation payable at the end of a PKWT term is explicitly excluded for foreign nationals (TKA) under Article 15(5), PP 35/2021.

What severance is owed to a PKWTT employee? Three components: UP (severance pay, up to 9 months' salary based on tenure), UPMK (long-service pay, applicable only once tenure reaches 3 years), and UPH (compensation for unused leave and other contractual entitlements) — with multipliers applied depending on the specific reason for termination under PP 35/2021.

Does a PKWT need to be registered with the government? Yes. Every PKWT must be registered with the Manpower Office (Disnaker) within 3 days of execution if submitted online, or within 7 days if submitted offline, per Article 14 of PP 35/2021.

What is the current Jakarta minimum wage (UMP) for 2026? Rp 5,729,876 per month. This figure is set provincially and resets annually each January, so it should be reconfirmed at the start of every calendar year rather than assumed constant.

Which law governs employment contracts in Indonesia? The Manpower Law (Law No. 13/2003), as amended by the Job Creation Law (Law No. 6/2023), sets the overarching framework. Government Regulation PP No. 35/2021 provides the operational detail — durations, registration timelines, mandatory clauses, and compensation formulas — for both PKWT and PKWTT arrangements.

Send Us Your Riskiest Contract. We'll Redline It — Free. No Call Required. Click Here

Pick the one PKWT you're least sure about. Send it over. We'll mark up exactly where it would get challenged and what it would cost you if it did — back in your inbox within 48 hours. If you want to talk it through after that, we're around. If not, you keep the redline either way.

This article is provided for general informational purposes and reflects Indonesian Manpower Law and PP 35/2021 as of 2026. It does not constitute legal or tax advice. Employment contract classification depends on the specific facts of each role and engagement, and should be confirmed against current regulations at kemnaker.go.id and peraturan.go.id, or reviewed individually before contracts are executed.