Fixed-Term Contracts in Indonesia Now Cap at 2 Years: What to Check in Your Staff Contracts

Indonesia's Law Number 27 of 2026 on Employment Protection, in force since 28 October 2026, caps a fixed-term employment contract at 2 years. In Indonesia this contract is called PKWT (perjanjian kerja waktu tertentu). According to kumparanBISNIS (9 November 2026), a PKWT can be extended only twice, each time for at most 1 year, giving a maximum of 4 years if both extensions are used.

For small businesses that rely on contract staff, this is the change that will be felt first. This article sets out the Indonesia fixed-term contract rules as reported, then gives a practical way to take stock of the contracts you have running.

What changed

kumparanBISNIS writes that the 2-year limit sits in Article 82 paragraph (2) of the Employment Protection Law. Before this, Article 8 paragraph (1) of Government Regulation 35/2021 allowed a time-based PKWT of up to 5 years.

Fortune Indonesia (9 November 2026) adds several provisions worth noting:

• The employer must give notice of an extension no later than seven days before the contract ends.
• A PKWT must be in writing, in Indonesian, and registered within three working days.
• A PKWT may not contain a probation period.
• A PKWT is only for work that is one-off, seasonal, tied to a new product, or non-permanent. Using one for permanent work converts the relationship by operation of law into PKWTT, the open-ended contract held by permanent employees.

What the sources do not explain

Three things are missing from the coverage, and we will not guess at them:

• Transitional provisions. Nothing explains what happens to contracts signed before 28 October 2026. Do not conclude on your own that old contracts are automatically safe or automatically in breach.
• Compensation pay and penalties. The amounts are not recorded in the sources.
• Where and how to register. The sources give the three working day deadline but not the office or the method.

All three are worth raising with your local manpower office or a consultant, and checking against the text of the law on the State Secretariat's legal documentation site (JDIH).

Step one: build a contract list

From here on, this is our advice. Before deciding anything, you need to know where each contract stands. Make one simple table with these columns for every contract employee:

• Name and the work they do day to day.
• Start date of the first contract.
• Extension history: how many times and for how long.
• End date of the current contract.
• Whether the contract is in writing and in Indonesian.
• Whether it contains a probation clause.
• The nature of the work: one-off, seasonal, tied to a new product, non-permanent, or in truth work that exists all year.

The last column is the one that needs the most honesty. A cashier who works every day all year is hard to describe as seasonal. Extra hands for the December peak are easier to explain that way.

Step two: sort them

From that table, sort contracts into three groups:

1. Ending within 60 days. These come first. Notice of an extension is due no later than seven days before the end date, so the decision has to be made well before that.
2. Total time on contract near or past the limit. Count from the first contract's start date and the number of extensions. Take these to a consultant, because they touch the transitional provisions that remain unclear.
3. Work that is in fact permanent. This is the group at risk of becoming a permanent employment relationship by operation of law.

Step three: decide one by one

For each contract there are essentially three choices:

• Extend, if the work still fits the nature of a PKWT and extensions remain. Tell the employee in writing before the seven-day deadline and keep the proof.
• Convert to permanent, if the work continues and you need the person. For many small firms this is the simplest choice for core roles.
• End at expiry, if the work is truly finished. Do it in an orderly way and check your end-of-contract obligations with a consultant, since compensation amounts are not recorded in the sources we read.

Avoid deciding in bulk. Two employees with the same start date can fall into different groups because their work differs.

Tidy up new contracts from today

For contracts you sign from now on, a few things are clear enough from the coverage to apply straight away:

• Put the contract in writing, in Indonesian.
• Leave probation out of a PKWT.
• State the work clearly and why it is temporary.
• Set calendar reminders 30 days and 14 days before the contract ends.

The reminders sound trivial, but in a small business contracts often pass their end date without anyone noticing. Keep the contract list in the same place as your other staff data. If attendance, leave and payroll are already recorded per person, for example in Polynusa, the contract list only needs matching against data you already hold.

Note: this article summarises news reports and is not legal advice. Confirm how the rules apply to the contracts in your business with an employment consultant or your local manpower office.

Sources

• kumparanBISNIS, 9 November 2026
• Fortune Indonesia, 9 November 2026

FAQ

How long can a fixed-term contract run under the new law?

According to kumparanBISNIS, at most 2 years, extendable twice for up to 1 year each time, so 4 years in total at most.

Can a fixed-term contract include a probation period?

No. Fortune Indonesia reports that a fixed-term contract may not contain probation.

What happens to contracts signed before 28 October 2026?

The sources we read do not explain the transitional provisions, so this needs checking against the text of the law or with a consultant.