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Mutual Agreement Employment Template for Indonesia

This document is a comprehensive employment agreement governed by Indonesian law, specifically complying with Law No. 13 of 2003 on Manpower (as amended by Job Creation Law No. 11 of 2020) and related regulations. It establishes the terms and conditions of employment through mutual agreement between employer and employee, covering essential aspects such as compensation, benefits, working hours, leave entitlements, and termination provisions. The agreement ensures compliance with Indonesian labor law requirements while protecting both parties' interests and clearly defining their rights and obligations within the employment relationship.

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What is a Mutual Agreement Employment?

The Mutual Agreement Employment contract serves as a foundational document for establishing employment relationships in Indonesia, used when hiring both permanent and fixed-term employees. This document is essential for companies operating in Indonesia to ensure compliance with local labor laws while clearly defining the terms of employment. It incorporates mandatory provisions required by Indonesian law, including those specified in Law No. 13 of 2003 on Manpower and its amendments, while allowing flexibility for company-specific requirements. The agreement is particularly important as it provides legal protection for both employers and employees, covering crucial aspects such as compensation, benefits, working conditions, and termination procedures, all within the framework of Indonesian employment regulations.

What sections should be included in a Mutual Agreement Employment?

1. Parties: Identification of the employer and employee, including their complete legal names, addresses, and positions

2. Background: Context of the employment relationship and purpose of the agreement

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

4. Term of Employment: Duration of employment, including start date and whether it's fixed-term or permanent

5. Position and Duties: Employee's job title, role, responsibilities, and reporting relationships

6. Work Location: Primary workplace location and any flexibility arrangements

7. Working Hours: Standard working hours, overtime provisions, and rest periods as per Indonesian labor law

8. Compensation and Benefits: Salary, mandatory allowances, bonuses, and other benefits

9. Leave Entitlements: Annual leave, sick leave, religious holiday leave, and other statutory leave provisions

10. Social Security: BPJS Healthcare and Employment participation details

11. Confidentiality: Protection of company confidential information and trade secrets

12. Intellectual Property: Ownership of work products and innovations created during employment

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

14. Governing Law: Confirmation of Indonesian law application and dispute resolution procedures

15. Execution: Signature blocks and formal closing of the agreement

What sections are optional to include in a Mutual Agreement Employment?

1. Probationary Period: Terms of initial probation period (only for permanent employment agreements)

2. Non-Competition: Post-employment competition restrictions (must be reasonable and limited in scope)

3. Mobility Clause: Provisions for potential relocation or transfer between offices

4. Performance Review: Structure and frequency of performance evaluations

5. Commission Structure: Detailed commission calculations for sales or performance-based roles

6. Remote Work Provisions: Specific arrangements for remote or hybrid working models

7. Training Requirements: Mandatory training programs and professional development obligations

8. Company Policies: Reference to and incorporation of specific company policies

9. Language Provisions: For bilingual contracts, specifying which language version prevails

What schedules should be included in a Mutual Agreement Employment?

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

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

3. Schedule 3 - Company Policies: Key company policies and procedures referenced in the agreement

4. Schedule 4 - Confidential Information: Specific types of confidential information covered by the agreement

5. Appendix A - Required Documents: List of documents required from employee (certificates, permits, etc.)

6. Appendix B - Benefits Summary: Detailed description of all employee benefits and eligibility criteria

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

Employment Contract

Cost

Free to use

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