Authors:
Raniah Salsabila, Owen Alberto Liem, Nadya Zahra Prasetio, Nawfal Aulia, Qisha Quarina
Bidang Kajian Microeconomics Dashboard 2025
Executive Summary
- In Indonesia, work agreements are divided into 2 (two), i.e. fixed-term contract (Perjanjian Kerja Waktu Tertentu/PKWT) and indefinite-term contract (Perjanjian Kerja Waktu Tidak Tertentu/PKWTT).
- The implementing regulations for work agreements are contained in the Law No. 13/2003 on Employment, which was later amended through Law No. 11/2020 on Job Creation or the Omnibus Law, and Government Regulation No. 35/2021.
- There are differences between the two work agreements, i.e. the length of service, nature of work, employment rights, and employment protection for workers.
- Despite being eligible to the same social protection programs, fixed-term contract workers are prone to risks due to the limited nature of the work agreement, lack of labour regulations, restricted social program coverage, and susceptibility to income exploitation.
- Specifically, only a small portion of PKWT workers are covered by employment insurance programs despite being eligible for the programs, indicating the mismatch between regulations and company policies.
- Demographically, PKWT workers tend to be younger and less educated than the PKWTT workers.
- The number of workers experiencing termination of employment has increased from year to year with PKWT workers being more vulnerable to termination of employment.
- In addition, compared to the PKWTT workers, the PKWT workers have a higher percentage of no engagement in the labour union, implying that PKWT workers have a lower incidence of social dialogue in the labour market.
- Lastly, most PKWT workers lie within the lower income deciles (within the 1st-5th decile), placing them in a financially vulnerable segment of society.
