Can Contract Employees Be Subject to a Probationary Period? Here Are the Legal Provisions

Introduction

Employers frequently evaluate the performance of new employees before deciding whether to continue the employment relationship. For this purpose, employers implement a probationary period at the beginning of the working period. However, issues arise when employers apply a probationary period to employees under a Fixed-Term Employment Agreement (Perjanjian Kerja Waktu Tertentu, "PKWT") or contract employees. This condition can disadvantage employees, particularly if the employer terminates employment on the grounds that the employee failed the probationary period to avoid the obligation to fulfill the employee's rights. Therefore, employees and employers must understand the prohibition on imposing a probationary period under a PKWT to ensure that the employment relationship complies with the prevailing laws and regulations.

Legal Basis

The prohibition on implementing a probationary period for PKWT employees is regulated under Law Number 13 of 2003 on Labor as amended by Law Number 6 of 2023 on the Enactment of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation into Law ("Labor Law") and Government Regulation Number 35 of 2021 on Fixed-Term Employment Agreements, Outsourcing, Working Hours and Rest Periods, and Termination of Employment Relationship ("GR 35/2021").

Article 58 Paragraphs (1) and (2) of the Labor Law

“(1) A fixed-term employment agreement cannot require a probationary period.

(2) In the event that a probationary period is required as referred to in paragraph (1), the required probationary period shall be null and void and the period of service shall continue to be calculated.”

This provision prohibits employers from including a probationary period requirement for employees employed based on a PKWT. Employers can only apply a probationary period in an employment relationship based on an Indefinite-Term Employment Agreement (Perjanjian Kerja Waktu Tidak Tertentu, "PKWTT"). If an employer includes a probationary period provision in a PKWT, such provision is null and void. Null and void means that from the outset, the requirement lacks binding legal force, while the Employment Agreement remains valid. Furthermore, the invalid probationary period continues to be calculated as part of the employee's period of service.

Article 12 Paragraphs (1) and (2) of GR 35/2021

“(1) A PKWT cannot require a probationary period.

(2) In the event that a probationary period is required, the required probationary period shall be null and void and the period of service shall continue to be calculated.”

GR 35/2021 also stipulates that a PKWT cannot require a probationary period. Therefore, employers who employ employees based on a PKWT are obligated to calculate the period of service from the first day the employee begins working. The period of service remains calculated even if the Employment Agreement includes a probationary period provision that is null and void. This calculation of the period of service serves as the basis for fulfilling the employee's rights, including the provision of compensation money upon the expiration of the PKWT.

Sanction Risks for Violators

Employers who include a probationary period in a PKWT may face several legal consequences, including:

1. The probationary period provision in the PKWT is null and void, meaning the employee remains employed under the PKWT from the first day of work as set forth in Article 58 paragraph (2) of the Labor Law.

2. If the employer terminates the employee's employment before the expiration of the PKWT term on the grounds that the employee failed the probationary period, the employer is obligated to pay compensation to the employee. The amount of such compensation shall be equal to the employee's wages until the expiration date of the Employment Agreement term as set forth in Article 62 of the Labor Law.

3. In addition to compensation, the employer is also obligated to provide compensation money to the employee. The amount of such compensation money is calculated proportionally based on the period of service performed in accordance with Article 17 of GR 35/2021.
   

Strategic Steps to be Taken

Employees and employers can take the following steps to ensure that the execution of the Employment Relationship complies with laws and regulations:

1. Employees scrutinize the draft Employment Agreement thoroughly before signing it to ensure that the working conditions do not conflict with the prevailing laws and regulations, in accordance with the principles of making an Employment Agreement under Article 52 paragraph (1) letter d of the Labor Law.

2. Employees submit an objection to the employer if the draft Employment Agreement still includes a probationary period provision in the PKWT, so that the Employment Agreement agreed upon by the parties remains compliant with the provisions of Article 52 paragraph (1) letter a of the Labor Law.

3. Employees retain a copy of the Employment Agreement and evidence indicating the start date of work to be used in the event of a dispute. Article 54 paragraph (3) of the Labor Law requires the employer and the employee to each obtain 1 (one) copy of the Employment Agreement that has the same legal force.

4. Employees may pursue dispute resolution through bipartite negotiations if the employer terminates their employment, in accordance with the industrial relations dispute resolution mechanism set forth in Article 136 paragraph (1) of the Labor Law.
   

Confused by complicated legal provisions? Veritask has AiYU – a Legal AI that can help analyze the legal provisions you need in accordance with Indonesian laws. Try it for free now! 

Recommendations

Employers and employees can implement the following steps to reduce the risk of violating PKWT provisions:

1. Employers draft the Employment Agreement according to manpower needs and the type of employment relationship to be used. If the employer requires time to evaluate the employee's performance, the employer can utilize a PKWTT scheme because Article 60 paragraph (1) of the Labor Law permits the implementation of a working probationary period for a maximum of 3 (three) months.

2. Employers do not use a PKWT as a recruitment trial tool. In addition to causing the probationary period provision to be null and void based on Article 58 paragraph (2) of the Labor Law, using a PKWT for such purpose can create double obligations in the form of compensation payments (equal to the remaining wages until the contract term expires) as well as proportional compensation money payments if the employer terminates employment before the PKWT term expires.

3. Employees understand their basic rights before signing the Employment Agreement to identify provisions that conflict with laws and regulations. Article 54 paragraph (2) of the Labor Law prohibits an Employment Agreement from containing provisions that conflict with the prevailing laws and regulations.
   

Closing

The Labor Law and GR 35/2021 prohibit employers from requiring a probationary period for employees employed based on a PKWT or contract employees. If the Employment Agreement still includes a probationary period provision, such provision is null and void, but the PKWT remains valid and the employee's period of service continues to be calculated from the first day of work. Therefore, employers cannot use a probationary period as a basis to terminate employment before the expiration of the PKWT term. In addition to remaining obligated to calculate the employee's period of service, an employer who prematurely terminates a PKWT may also be required to bear two separate financial obligations, namely paying compensation equal to the employee's remaining unpaid wages until the contract expiration date as set forth in Article 62 of the Labor Law and providing compensation money calculated based on the period of service completed in accordance with Article 17 of GR 35/2021. To avoid violations, employers need to use the type of Employment Agreement that matches manpower needs and apply a probationary period only in employment relationships based on a PKWTT, as permitted by Article 60 paragraph (1) of the Labor Law. On the other hand, employees need to scrutinize the draft Employment Agreement before signing it, submit objections if the PKWT still contains probationary period provisions, keep a copy of the Employment Agreement and proof of starting work, and seek resolution through bipartite negotiation in the event of an Employment Relationship dispute.