Garment: Employment Security

What is an employment contract?

Employment contract is an agreement between worker and employer which contains terms and conditions of the work, and the obligations of the parties. The manpower regulation in Indonesia recognizes 2 kinds of employment contract, a Fixed Terms Contract (PKWT/contract) and Permanent Contract (PKWTT).

What is a fixed terms contract?

A fixed terms contract is a working agreement for a given and limited period, because the nature of the work is not permanent, excluded from core business or seasonal.

What is a permanent contract?

A permanent contract is a working agreement for an indefinite period of time, and may be applicable to all kinds of work.

What are the terms of a fixed terms contract for a garment worker?

The general terms apply to all sectors, i.e. it must be an agreement between the parties, the proficiency of the parties (before the law), particular things to be agreed upon, and the particulars must be legal. Such general terms of an agreement are required by the law in Indonesia.

Other terms according to the Manpower regulation are: the proper identity of the parties, particular work or position agreed by the parties, the wage (which cannot be below the regulation), the period of the agreement, and the working location. Additional terms require a double original contract, in which each party holds the same legal power. The employer is required to register their contracts with workers at the local manpower office, stating the kind of work the contracted job relates to.

Can a fixed terms contract be applied to all kinds of work in the garment sector?

A fixed terms contract cannot be applied to all kind of work in garment sector. The kind of works that can be covered with a fixed terms contract must be temporary (between 6 months to 3 years) and cannot be related to the core business.

What is core business work?

Core business work is a job related to the main business of the company, meaning that if such work is disrupted or stopped, it will impact the production process directly and indirectly.

How long is the period of a fixed terms contract?

The period of a fixed terms contract allowed by the law is 2 years maximum. This period is applied to all fixed terms contract, in all sectors.

Can a fixed terms contract be extended?

According to the Manpower regulation a fixed terms contract can be extended once for a period not exceeding 1 year. For extension purpose of a fixed terms contract the employer must first issue a notification of extension at least 7 days prior to the end of the fixed terms contract period.

Can a fixed terms contract be renewed?

A fixed term contract can be renewed under the same terms after a 30 days' break prior to the new contract.

What are the consequences if a garment worker employed with contract extension more than 1 time or signed a working contract more than twice?

If a worker signed an employment contract once and signed an extension twice (in effect signed 3 employment contracts, of which 2 extensions), than the working contract can no longer be extended. The employer must decide whether to promote the contract status to become permanent or to terminate the fixed terms contract by the end of the last period.

What are the consequences if an employment contract is terminated before its period ends?

If one decided to terminate an employment contract before its period ends, then the party who terminates the contract must pay a sum of money equal to the worker’s wage until the end of the period. For example, if an employment contract agreed for 1 year (12 months), and at the 6th month one party decides to end the contract, then that party must pay to the other party an amount of money equal to 6 months of the worker’s wage.

Is a probation period allowed for a fixed terms contract in the garment sector?

As in all fixed terms contract, a probation period is not allowed. For a fixed terms contract the working period starts at the first day of employment.

Most of the employment contracts in the garment sector are made oral, is that legal?

Oral agreement can only be made for a permanent contract, under the condition that the permanent contract will follow. Therefore, all oral contracts usually are considered to be permanent.

What are the consequences if an employment contract is violating regulations, but the worker already signed it?

If a fixed terms contract is violating a regulation, then the contract will become null and turn automatically into a permanent contract. Fundamental regulations that may change a fixed terms contract into a permanent contract are:

• The job agreed in the agreement includes core production.
• The job agreed in the agreement is a permanent job in the company.
• The employment agreement exceeds more than 1 time and extends for 1 time (2nd employment contract), without a break.
• The employment contract must be made in 2 copies, one for every party.
• The employment contract does not include a probation period in the clause

If an employee’s contract changes from a fixed term contract into a permanent contract, which one is the basis of the employee’s working period?

If a fixed terms contract changes into a permanent contract the basis of the employee’s working period is the fixed terms contract, because a working period started from day 1 of the first employment.

If a probation period existed, which one is used to count the working period?

If a permanent contract started with a probation period, then the employee's working period started since the first day of probation, because a working period started since the first employment.

What can end an employment?

An employment may be ended because of:

• the end of a contract period
• request by one party (for contract or permanent)
• the worker's pension
• the worker's death

What are considered to be the rights of a garment worker whose contract ended?

If the contract ends because its time is up and the employer refuses to extend it or promote the worker, the worker has no rights, as long as the contract fulfilled all the requirements. If the contract is in fact violating the Manpower regulation the worker is considered to be dismissed by the employer and therefore has the right of severance pay.

What are the rights of a garment worker who is dismissed by the employer?

A garment worker who is dismissed by the employer is entitled to 2x severance pay, 2x appreciation of working period, supplementary benefit (15% of severance pay and appreciation of working period) and payment of other benefits (annual leave, religious bonus, etc).

Because most of the garment workers are female, can a worker be dismissed for reasons of pregnancy/in labor?

A pregnant or in labor worker cannot be dismissed. There are strict regulations that require a female worker who is giving birth must be returned to their previous position, after delivery.

What are the rights of garment workers whose company closed down (became bankrupt)?

All garment workers who are dismissed because the company closed, are entitles to: 1x severance pay, 1xappreciation of working period, supplementary benefit (15% of severance pay and appreciation of working period) and payment of other benefits (annual leave, religous bonus, etc).

What are the rights of garment workers whose company merges or changes ownership?

All garment workers whose company merge or change of ownership are entitled to choose, i.e. either to continue or to end the employment. If the worker choses to end the employment, the worker is entitled to: 1x severance pay, 1x appreciation of working period, supplementary benefit (15% of severance pay and appreciation of working period) and payment of other benefits (annual leave, religous bonus, etc). If the worker choses to continue the employment, then the working period in the new company will be a continuance of the old company. If the new employer decides to start all over (from 0 year), then the previous working period must be settled first using the same calculation as if the worker had been dismissed by the company.

What are the rights of garment workers who committed a severe violation?

All garment worker who are dismissed because of a severe violation (after warning letter 3), are entitled to: 1x severance pay, 1x appreciation of working period, supplementary benefit (15% of severance pay and appreciation of working period) and payment of other benefit s(annual leave, religious bonus, etc). However, if the violation is a criminal act as proven by a court verdict, the worker is entitled only to the supplementary benefit (15% of severance pay and appreciation of working period) and payment of other benefits (annual leave, religious bonus, etc).

What are the rights of garment workers who retire?

All garment worker who retires is entitled to: 2x severance pay, 2x appreciation of working period, supplementary benefit (15% of severance pay and appreciation of working period) and payment of other benefits (annual leave, religious bonus, etc). If the company registered the worker to a retirement scheme funded by the company (other than BPJS), and the benefit is equal or above than what the regulation prescribes, the company is no longer obliged to pay anything regarding pension rights. If the company registered the worker to a retirement scheme funded by the company (other than BPJS), and the benefit is below what the regulation prescribes, the company is obliged to pay the difference regarding pension rights. If the company registered the worker to a retirement scheme funded by both the company and the worker (other than BPJS), the company is obliged to pay the percentage of the fee paid by the worker.

What are the rights of a garment worker who resigns?

A garment worker who resigns, if the resignation fulfills all the requirements, is entitled to: supplementary benefit (15% of severance pay and appreciation of working period) and payment of other benefits (annual leave, religous bonus, etc), and all benefits included in the company regulation/CBA.