5 Important Points About Compensation Money for Fixed-Term Employment Contract (PKWT) Workers

Companies must allocate costs to pay compensation money for PKWT workers. The compensation for PKWT workers is based on Government Regulation Number 35 of 2021 as an implementation of the Job Creation Law.

At the end of last year, the government enacted the Job Creation Law, one of which regulates the amendments to Law Number 13 of 2003 concerning Manpower. In the Job Creation Law, there is a regulation about the compensation for PKWT (Fixed-Term Employment Contract) workers. Compensation for PWKT workers is regulated in detail in PP No. 35/2021 concerning PKWT, Transfer of Working Time and Rest Time, and Layoffs (PP 35/2021). With this regulation, companies must allocate costs to pay compensation money for their PKWT workers. Then, what are the rules regarding this compensation? Do all PKWT workers receive compensation?

1. Compensation is provided for workers who have worked at least one month

The requirements for PKWT workers to get compensation money at the end of the PKWT are that they have worked at least one month continuously. In accordance with Article 15 paragraph (3) PP 35/2021, “Compensation money as referred to in paragraph (1) is given to Workers/Laborers who have worked at least 1 (one) month continuously”.

2. If the contract is renewed, the compensation is given before the contract is extended and when the contract extension is completed.

On further investigation, the compensation money for PKWT workers is not only given when the PKWT is finished, but is also given when the extension period ends if the PKWT is extended. Article 15 paragraph (4) of PP 35/2021 states that “If the PKWT is extended, the compensation money is given at the completion of the PKWT period before the extension and for the extension of the PKWT period, the next compensation money is given after the extension of the PKWT period ends or is finished”.

3. How to calculate compensation money

The amount of severance pays for PKWT that is regulated is not small. The compensation money will be calculated according to the length of service with a calculation of one month’s wages of work. The amount of severance pay is regulated further and in detail in Article 16 paragraph (1) PP 35/2021. As for one month’s wages, which are used as the basis for calculating PKWT compensation money, it consists of the basic wage and fixed allowances. Except for companies that apply non-permanent allowances or no allowances, the calculation basis is only from the basic wage, as stated in Article 16 paragraph (2) to (4) PP 35/2021.

This compensation money is given in accordance with the completion of the working period. If the completion of a job is faster than agreed upon in the PKWT, the calculation of the compensation money is calculated up to the time the job is finished.

Whereas, for PWKT workers, who work for more than 12 months, the calculations are:

period of employment	x 1 month’s wages
12

4. Compensation money is still given even if one of the parties ends the contract before it is completed

In addition, compensation money is still given to PKWT workers, if one of the parties ends the work relation before the end of the determined period stipulated in the PKWT. The amount of the severance pay is still calculated based on the period of time that has been completed by the worker/laborer.

5. Compensation money is not given to foreigners

The compensation money for PKWT workers only applies to workers who are Indonesian citizens. Thus, the companies are not required to pay compensation money for the foreign workers.

 

Author: Dominicus Mahardian Yudhit/Hasyry Agustin

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