Labor & Employment
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Ministry of Manpower (Kemenaker) Directive & PP 35/2021 Enforcement
Ministry of Manpower Enforces Compensation Pay Rules for Fixed-Term Employment Contracts (PKWT)
Kementerian Ketenagakerjaan Tegakkan Aturan Uang Kompensasi PKWT Berdasarkan PP 35/2021
Executive Legal Takeaway
Employers are reminded that ending or extending a fixed-term contract (PKWT) triggers a statutory compensation payment calculated based on the employee's tenure.
The Ministry of Manpower has released practical guidelines reiterating the mandatory compensation payment (uang kompensasi) that employers must disburse to fixed-term workers (PKWT) upon completion or termination of their employment contract.
Key Legal Provisions:
1. **Statutory Calculation (PP 35/2021):**
- For an employee serving 12 consecutive months: 1 month of wage.
- For an employee serving between 1 month and 12 months: (tenure in months / 12) * 1 month of wage.
- For contracts longer than 12 months: proportional prorated calculation.
2. **Registration with Disnaker:** Fixed-term contracts must be registered online with the local Manpower Office (Disnaker) within 3 working days of signing.
3. **Restrictions on Core Production Roles:** PKWT contracts cannot be used for permanent, continuous production processes; improper classification can result in judicial reclassification as permanent employment (PKWTT) by the Industrial Relations Court (PHI).
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