In order to improve the quality of the workforce and competitiveness due to the dynamics of globalization and the rapid development of technology industries, changes have occurred in the social and economic order, including the manpower sector. Hence, the government did an enactment of Job Creation Law. On February 02nd 2021 The government issued Government Regulation Number 35 of 2021 on Work Agreement for a Specified Period of Time, Outsourcing, Working Hours, Working Relations and Rest Periods, and Termination (“GR 35/2021”).

Since the enactment of Job Creation Law, there has been a new provision in the labor regulations in Indonesia called Compensation of Work Agreement for a Specified Period of Time (“Kompensasi Perjanjian Kerja Waktu Tertentu – Kompensasi PKWT)”. This term was no longer about employee salaries and benefits, but about employee rights given by the company. This contract compensation has become one of the changed articles in manpower law no. 13 of 2003.

PKWT Compensation is given to employees who have worked for at least one month.

In accordance with article 15 paragraph (3) of GR 35/2021, the provisions for contract employees who receive that compensation are those who have worked for minimum or at least one month continuously and it is given at the end of the contract. The provision of the PKWT compensation doesn’t apply for TKA (Foreign Employee) who are working under PKWT in Indonesia.

PKWT Compensation is still given even though one of the parties ends the contract period before the end time.

The compensation money is still given to the employee even though the employee resigned before the end of time or when the company gave the termination to the employee. The nominal of the PKWT Compensation will be proportionally calculated upon 1 month salary.

How much money will employees receive under the PKWT Compensation regulations?

In Article 16 paragraph (1) of GR 35/2021, the amount of the compensation namely:

PKWT employee who have worked for 12 (twelve) months continuously are given an amount of 1 (one) month’s wage;

PKWT employee who have worked for 1 (one) month or more but less than 12 (twelve) months are given a proportionally calculated amount of: period of service/12 x 1 (one) month’s wage; and

PKWT employees who have worked for more than 12 (twelve) months are given a proportionally calculated amount of: period of service / 12 x 1 (one) month’s wage.

Those are some things about the PKWT Compensation. Thus, for those of you who have studied about employee contracts, should be prepared to provide more budget for employee compensation at the end of the PKWT.