The employment sector is an integral part of national development as explained in the 2005-2025 Long-Term Development Plan written in Chapter IV of the Attachment to Law Number 17 of 2007 concerning the 2005-2025 National Long-Term Development Plan which stated that the vision of national development for 2005-2025 is to realize an independent, advanced, just, and prosperous Indonesian society through accelerated development in various fields, one of which is supported by the employment/human resource factor.
One of the ways to help accomplished developments in employment sector is through legal regulations/frameworks that can provide legal certainty, effectiveness, comprehensiveness, and are based on the principle of fairness to realize a harmonious, dynamic, and equitable industrial relations. The public or Indonesian people themselves can also participate in realizing these legal regulations, one of which is by submitting a request for a judicial review of the laws in the employment sector, as currently regulated by Law Number 13 of 2023 concerning Employment (“Law No. 13/2003”) as amended by Law Number 6 of 2023 concerning Job Creation (“Law No. 6/2023“) to the Constitutional Court.
Partai Buruh, Federasi Serikat Pekerja Metal Indonesia (FSPMI), Konfederasi Serikat Pekerja Seluruh Indonesia (KSPSI), Konfederasi Persatuan Buruh Indonesia (KPBI), Konfederasi Serikat pekerja Indonesia (KSPI), and 2 (two) individual workers/laborers (“Applicants”) are part of the community that participated in realizing this. Through Constitutional Court Decision No. 168/PUU-XXI/2023 which was read on 30 October 2024 by the Constitutional Court (“Decision No. 168/2032”), it was conveyed that the petition for judicial review of the Law No. 6/2023 by the Applicants was granted by the Constitutional Court partly on the following aspects:
- Foreign Workers
- Fixed-Term Employment Agreements (PKWT)
- Outsourcing
- Leave Entitlements
- Wages
- Industrial Dispute Resolution
- Severance and Benefits
In Decision No. 168/2023, the Constitutional Court also recommends the formation of a new Manpower Law to harmonize both Law No. 13/2003 and Law No. 6/2023 in terms of employment. The reasons are that not all materials/substances in Law No. 13/2003 were accommodated in Law No. 6/2023, and there are far too many changes in Law No. 6/2023 due to multiple judicial review. So far, there have been 37 (thirty-seven) judicial reviews against Law Number 6/2023 and Law No. 13/2003.
5-year term setting for PKWT
The changes for Fixed-Term Employment Agreements (PKWT) can be found on decision point 4 and 5 of Decision No. 168/2023, summarized as follows:
- Article 56 paragraph (3) in Article 81 number 12 of Law No. 6/2023 was changed to “The period for completion of a certain job is made no more than 5 (five) years, including if there is an extension” from previously “The period or completion of a certain job as referred to in paragraph (2) is determined based on the Work Agreement.”; and
- Article 57 paragraph (1) in Article 81 number 13 of the Law No. 6/2023 must be interpreted as “A fixed-term work agreement must be made in writing using the Indonesian language and Latin letters” from previously “A fixed-term work agreement is made in writing and must use the Indonesian language and Latin letters.”
Due to the changes made on Article 56 paragraph (3) in Article 81 number 12 of Law No. 6/2023 because of Decision No. 168/2023, the PKWT period/term setting is no longer based solely on the work agreement agreed upon by the parties as stated in Article 81 number 12 of Law 6/2023, but must instead adhered to the maximum period of 5 (five) years including its extensions as mandated in Decision No. 168/2024.
Additionally, the interpretation of period/term setting of PKWT regulated in Government Regulation Number 35 of 2021 concerning Employment Agreement for A Specified Period Of Time, Outsourcing, Working Time And Leave, And Termination Of Employment (“GR No. 35/2021”) which is the implementing regulation of the Law No. 6/2023 shall also be adjusted accordingly. If previously, for example, the period/term setting for PKWT for certain jobs is regulated solely based on the agreement of the parties in the contract, then the period/term setting in the agreement itself shall be adjusted with the period of no more than 5 (five) years including its extensions in line with Decision No. 168/2023.
Mandate to have a PKWT in writing
Another provision decided in Decision No. 168/2023 on the aspect of PKWT is the reformulation of Article 57 paragraph (1) in Article 81 number 13 of the Law No. 6/2023 by adding the word “must/shall” before the phrase “Fixed-Term Employment Agreement” so that Article 57 paragraph (1) in Article 81 number 13 of the Law No. 6/2023 reads as follows “A fixed-term employment agreement must be made in writing using the Indonesian language and Latin letters.” This reformulation clarifies and reinforces the requirement for PKWT to be in a written form.
In consideration of the foregoing the Constitutional Court provides interesting rationale in the consideration page 567 of Decision No. 168/2023. While the Constitutional Court declined to restore the previous Article 57 of Law 13/2003 as requested by the Applicants, The Constitutional Court, however, recognized the laborers/workers who had served in good faith under unwritten PKWT arrangements prior to Law 6/2023, they should be converted to permanent employees under PKWTT as stipulated in the previous Article 57 paragraph (2) as this would uphold fairness and better support their employment rights.
Obligation for Employers
With Decision No. 168/2023 now being legally binding, it is anticipated that the relevant parties including Employers/companies that engage workers based on PKWT shall comply with the Decision No. 168/2023 and adjust the company’s policies and work arrangements accordingly.
For workers/laborers engaged under unwritten PKWT after the enactment of Law No. 6/2023, a written work agreement/contract must be promptly executed with a period/time setting in line with the mandate in Decision No. 168/2023 which limits the term to 5 (five) years including its extensions.
It is also recommended for employers/companies to amend any existing written PKWT after the enactment of Law No. 6/2023 and Decision No. 168/2023 if the period/term setting does not comply with the period/term setting stipulated in Decision No. 168/2023, and to modify the Company Regulations if the period/term setting of the PKWT in the Company Regulations is contrary to the period/term setting stipulated in Decision No. 168/2023.
