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Labor Agreement Template for Indonesia

A comprehensive employment contract governed by Indonesian law, specifically compliant with Law No. 13 of 2003 on Manpower and the Job Creation Law (Omnibus Law). This agreement establishes the formal employment relationship between an employer and employee in Indonesia, detailing essential terms including position, compensation, benefits, working hours, leave entitlements, and termination provisions. The document incorporates mandatory requirements under Indonesian labor regulations, including social security (BPJS) participation, while allowing for customization based on specific employment terms and company policies.

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What is a Labor Agreement?

The Labor Agreement serves as the primary document establishing an employment relationship in Indonesia, governed by Law No. 13 of 2003 on Manpower, the Job Creation Law (Omnibus Law), and related implementing regulations. This document is required for all formal employment relationships in Indonesia, whether for fixed-term or permanent positions. It must include mandatory provisions prescribed by law, such as working conditions, compensation structures, and social security participation. The agreement can be customized based on the position level, industry requirements, and company policies, while maintaining compliance with Indonesian labor regulations. Regular updates may be needed to reflect changes in labor laws or employment terms.

What sections should be included in a Labor Agreement?

1. Parties: Identification of the employer and employee with complete legal names and addresses

2. Background: Brief context of the employment relationship and purpose of the agreement

3. Definitions: Definitions of key terms used throughout the agreement

4. Position and Duties: Detailed description of the employee's role, responsibilities, and reporting structure

5. Term of Employment: Duration of employment (fixed-term or permanent) and probation period if applicable

6. Working Hours and Location: Standard working hours, overtime provisions, and primary work location

7. Compensation and Benefits: Salary, allowances, bonuses, and mandatory benefits including BPJS participation

8. Leave Entitlements: Annual leave, sick leave, religious holidays, and other permitted absences

9. Employee Obligations: General duties, compliance with company policies, and standard of conduct

10. Company Policies: Reference to and incorporation of relevant company policies and procedures

11. Termination: Grounds for termination, notice periods, and severance provisions

12. Governing Law: Specification of Indonesian law as governing law and relevant jurisdictions

13. Execution: Signature blocks and execution requirements

What sections are optional to include in a Labor Agreement?

1. Confidentiality: Required for positions with access to sensitive information or trade secrets

2. Intellectual Property: Necessary for creative, technical, or research positions where IP creation is expected

3. Non-Competition: For senior positions or roles with access to sensitive business information, subject to Indonesian law restrictions

4. Mobility Clause: For positions that may require relocation or regular travel

5. Performance Metrics: For roles with specific performance targets or commission-based compensation

6. Training Commitments: When specific training is provided with associated commitments or bonds

7. Remote Work Provisions: For positions allowing work from home or remote working arrangements

8. Commission Structure: For sales positions or roles with variable compensation components

What schedules should be included in a Labor Agreement?

1. Schedule 1 - Job Description: Detailed description of roles, responsibilities, and key performance indicators

2. Schedule 2 - Compensation Details: Breakdown of salary components, allowances, and benefits

3. Schedule 3 - Company Policies: Key company policies that form part of the employment terms

4. Schedule 4 - Leave Policy: Detailed leave policies and procedures

5. Schedule 5 - Confidentiality Agreement: Detailed confidentiality obligations if applicable

6. Appendix A - Required Documents: List of required documents for employment (e.g., certificates, permits)

7. Appendix B - BPJS Registration: Social security and health insurance registration details

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Indonesia

Document Type

Service Agreement

Cost

Free to use

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