Contracts in Indonesia

Overview by

The Active Population in Figures

Main Indicators 2008 2007 2006 2005
Labor Force 111 477 447 108 131 058 106 281 795 105 802 372
Labor Force (Annual Growth, %) - 1.70 0.40 1.80
Rate of Activity (%) - - - -
Unemployment Rate (%) 8.5 9.8 10.5 10.3

Source: Institute of statistics (BPS)

Employed Persons, by Occupation (% of Total Labor Force) 2007
Agriculture 43.3%
Industry 18.0%
Services 38.7%

Source: CIA World Factbook 2008

For Further Statistics
Ministry of Labor and Transmigration
For Further Information About the Labor Market
Ministry of Labor and Transmigration

Management of Human Resources



Method of Recruitment
Recruitment is taking place more and more using Internet. A hiring interview is most often planned, but relations, contacts or references are very important.
Recruitment Agencies
A list of recruitment agencies is available on the website Kelly search Asia
Recruitment Websites
JobDB, Asia-Pacific recruitment website

The Contract

Type of Contract
The work contract is essentially governed by the law and to a lesser extent by individual negotiation and collective agreements. Hiring conditions are strict and the formality of the work contract is rather rigid.

There are two types of contracts: fixed term and open-ended.

Breach of Contracts
  • Retirement
There are different forms of retirement: early retirement, retirement, leaving after an extension.
  • Dismissals
The law lays down restrictions concerning the dismissal of an employee who has worked more than three months in a company. If there is no agreement between the partieson the financial compensation, the employer must obtain an authorization from the Ministry of Labor.
  • Other Possible Methods
Redundancy, disciplinary dismissal, resignation, the contract reaches its term.
Labor Laws
NATLEX, the ILO website

Dispute Settlement


Conciliation Process

Cases of Dispute
Unfair dismissal, late or non payment of wages and violence are the most frequent work problems.
  • Legal Framework
Law n°22 of 2004 on agreements relative to industrial labor disputes.
  • Procedure
Before a dispute is taken to a special tribunal, two-party negotiation, mediation, conciliation or arbitration must be tried. If they come to an understanding, a written agreement must be drawn up by the parties in the form of a deed registered with a local tribunal.

Judicial Structures

  • Legal Framework
Law n°22 of 2004 on agreements relative to industrial labor disputes.
  • Competent Legal Body
Tribunal of Commerce

Social Partners

Social Dialogue and Involvement of Social Partners
We can mention the ASPEK Indonesia union.
Unionization Rate
Less than 4% of the active population (formal and informal sectors) and 14% of the active population (formal sector).
Trade union congress of Indonesian workers (KSPI)
National Front for the Indonesian workers' struggle (FNPBI)
Regulation Bodies
Ministry of Labor and Transmigration

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    U.S. Department Of Commerce, Indonesia