JAKARTA, Indonesia – Indonesia’s garment industry, a key driver of the nation’s economy, is navigating updated regulations surrounding fixed-term employment contracts, known as PKWT. Novel guidance, issued through Law No. 6/2023 on Omnibus Law, aims to clarify rules for these contracts, balancing the need for business flexibility with the protection of worker’s rights. The Ministry of Manpower developed the updated guidelines with support from the Better Work Indonesia (BWI) program, a joint initiative of the International Labour Organization (ILO) and the International Finance Corporation (IFC).
The revisions approach at a critical time for the sector, which faces increasing pressure to remain competitive in the global market. PKWT contracts are frequently used in the garment industry to respond to fluctuating demand and seasonal production cycles. Although, their implementation has often presented challenges, including ambiguities around contract duration and eligibility for fixed-term arrangements. Addressing these issues is seen as vital to strengthening legal certainty and ensuring sustainable growth.
Harmonizing Understanding of Fixed-Term Contracts
The updated guidelines are intended to serve as a shared reference point for both employers and workers in the export-oriented garment sector. “We expect a harmonized understanding in the application of PKWT in accordance with prevailing regulations, thereby strengthening legal certainty, enhancing productivity and ensuring the sustainability and competitiveness of Indonesia’s garment industry supply chain in the global market,” said Indah Anggoro Putri, Director General of Industrial Relations and Social Security at the Ministry of Manpower.
Since 2018, the BWI program has collaborated with the Ministry of Manpower through national stakeholder consultations to develop these guidelines. The program’s work has focused on bridging gaps in understanding and application of the law, providing factories with practical tools to align with national regulations while maintaining efficient operations. The guidelines offer structured explanations and examples to clarify complex legal requirements.
Addressing Common Compliance Challenges
While PKWT contracts offer businesses the flexibility needed to navigate a competitive export market, their implementation isn’t without its hurdles. Common issues include determining the appropriate length of contracts, identifying which types of work are suitable for fixed-term arrangements, and ensuring full adherence to all relevant employment regulations. These challenges can lead to disputes and potential legal complications.
A ‘Living Document’ for Evolving Regulations
The ILO views the updated guidelines as a crucial step towards clarifying the legal framework and promoting balanced employment practices. “The ILO is pleased that the updated guidelines serve as a practical reference to clarify the legal framework, strengthen compliance and support balanced employment practices that uphold workers’ rights while maintaining the competitiveness of Indonesia’s garment industry,” stated Simrin Singh, ILO Country Director for Indonesia and Timor-Leste.
The guidelines were developed through close consultation with key directorates within the Ministry of Manpower, including the Directorate of Labour Inspection, the Directorate of Industrial Relations and Wages, and the Legal Bureau. This collaborative approach aimed to align the guidance with current legal provisions, enforcement practices, and the realities faced by factories and workers. Singh emphasized that the guidelines are designed to be a “living document,” subject to future review and revision as regulations evolve.
To facilitate wider adoption, English and Korean versions of the guidelines have been created. Dissemination activities, including sub-national sessions involving over 100 labor inspectors and industrial relations mediators from Greater Jakarta, Banten, Central Java, West Java, and the Special Region of Yogyakarta, were conducted between September and October 2025. Outreach to factories engaged over 200 representatives from enterprises participating in the BWI program. In November 2025, the English and Korean versions were introduced to international buyers, aiming to strengthen alignment across the supply chain.
Satrio Adipratama, Compliance Manager of PT Ungaran Sari Garments in Semarang, Central Java, highlighted the importance of balancing business needs with decent working conditions. “The biggest challenge today is adapting to rapidly changing global market trends… the management of PKWT remains a crucial aspect in maintaining the balance between business continuity and creating decent working conditions.”
The ongoing refinement of Indonesia’s fixed-term employment contract regulations reflects a broader effort to create a more stable and equitable labor environment within the country’s vital garment industry. Further updates and clarifications are expected as the guidelines are implemented and feedback is gathered from stakeholders. The next phase of the BWI program will focus on monitoring the impact of the new guidelines and providing ongoing support to factories and workers.
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