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Indonesian Labor Law: Contract Employee Rights upon Contract Termination

Indonesian Labor Law: Contract Employee Rights upon Contract Termination

There are many sources for downloading or books especially writing about Indonesian labor law. But still, elaborating the law is a challenging issue for the human resource departments and the employees themselves. Nowadays both parties are more aware that a written contract is beneficial to prevent any disputes in the future. Particularly for the contract employee, the document is expected to state the employees’ obligation as well as their rights, including the severance pay or separation money after the term of the contract is over and other rights of both parties, and when there is a contract breach.



A contract employee is an employee that is hired by the company to complete certain assignments within a specific period. This particular employee is not a permanent worker and bound by the agreement stated in the contract. This is the main reason a contract employee has to be cautious when signing the agreement. Nowadays, many law consultants are offering a preliminary free consultation for employee contract review. Ones can even ask for online advice to for helping to check if the contract is fair and is including all of the aspects necessary to make it legal.



Regulated by the Indonesian Law Act 13 of 2003 regarding Manpower – Article 56, other than bound by time restriction, it is stated that the contract can also be made according to upon the completion of the working assignment. In the case of one of parties cannot fulfill the contract other than force major circumstances regulated on Article 61 (1) – such as employee decease or a certain condition forcing the termination of the contract, Article 62 says that the party that ends the contract is obligated to pay quid pro quo or damages to the other party with the amount specified in the contract.



Other than paying damages, the employee is also expected to perform the Article 162 (4):

– the employee is obliged to give one-month prior notice on writing, at least 30 (thirty) days before the effective resignation date.
– free of any work commitment;
– still performing the best of his or her working duty until the resignation date is effective.


When the contract employee decided to end the contract but already fulfill his or her obligation to pay the damages to the employer to compensate rights pay:

– the compensation of the unused annual leave and is still valid;
– the transportation expenses occurred for the employee and his or her family to the place where the employee has been accepted to work.
– housing replacement, medication, as well as nursing are established at 15% (fifteen percent) of the severance pay as appreciation for those who meet the conditions;
– and other things that are recognized in the employee agreement, company regulations or the joint venture agreement.


Reference: Severance of contract employee


In special cases where there are disputes about the contract, the employee can always bring the case to The Industrial Relations Court to get a fair justification. For some people, severance pay is not just about the amount of money, but also about work ethics and professionalism.


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