As HRD, you must understand how the contract extension rules will be applied in the company.

 

These rules will be used as the basis for the implementation of PKWT, namely when the PKWT is extended.

 

With these contract extension rules, the company can provide certainty about how an employee can get the opportunity to extend the contract. 

 

So what are the contract extension rules and how is the contract extension process itself?

 

What is Meant by Contract Extension?

 

Contract extension is a process carried out by extending the duration of an employee's work that has previously been determined in the employment agreement.

 

To extend this employment contract, it is carried out based on an agreement between the employee and the employer and usually a performance evaluation and other considerations will be carried out first.

 

In the employment agreement regulations in Indonesia, there are two types of employment agreements that apply, namely PKWT or Fixed Term Employment Agreement and PKWTT or Indefinite Term Employment Agreement.

 

For this contract extension, it is used in the PKWT type of employment agreement.

 

In PKWT, the employment agreement is made based on a certain time, so that when there is still a need for workers, an extension of the employment contract can be carried out.

 

This is a very important process because it will underlie the relationship between the employer and the employee.

 

For the company, by making this contract extension, it means that the company can retain employees with good performance without having to re-recruit.

 

Why is it Important to Understand Contract Extension Rules?

 

Both employees and companies must understand the rules regarding contract extensions.

 

This is because the contract extension rules are the basis that will be used in establishing an employment relationship between workers and employers.

 

Implementing the rules in contract extensions is an important part where it will show that as an employer you have complied with the applicable rules.

 

Here are some important reasons why contract extension rules are important to do:

 

• As a form of job certainty that will help employees plan for a better future. This rule will be the basis for whether employees can get a contract extension or have the opportunity to become permanent employees in the company.

 

• Employees can know their rights and obligations during the employment contract period, such as salary, benefits, and working hours. From here, employees can avoid mistakes that can occur and maximize the benefits provided. 

 

• Contract extensions that are carried out without a clear status will hinder careers. With this regulation, you know when the contract extension limit can be carried out. 

 

• Understanding these contract extension regulations is part of compliance with the existing Employment Law, the aim of which is to protect the rights of employees and also the company. 

 

• With this regulation, the company can establish good relationships with employees so that later employees can work well and have the motivation to increase productivity

 

What are the Contract Extension Rules in Indonesia?

 

Here are some rules that discuss the extension of work contracts that apply in Indonesia, what are they?

 

A. Employment Law No. 13 of 2003

 

The first regulation that discusses contract extension is the Manpower Law No. 13 of 2003.

 

This Law discusses PKWT which can be applied to temporary jobs.

 

This contract is used for jobs that can be completed within a certain period of time, not for jobs that continue indefinitely.

 

Some points in this Manpower Law that discuss contract extension include:

 

• Article 59 paragraph (1): A work agreement for a fixed period of time may only be made for certain work which, according to the type and nature or activity of the work, will be completed within a certain period of time.

 

• Article 59 paragraph (2): A work agreement for a fixed period may only be made for a specific job which, according to the type and nature or activity of the job, will be completed within a certain period of time.

 

• Article 58: A work agreement for a fixed period of time may not require a trial period. If a trial period is required in the work agreement as referred to, the required trial period shall be null and void by law.

 

B. PP No. 25 of 2021

 

The second regulation is Government Regulation (PP) Number 35 of 2021.

This PP explains the contract extension deadline, length of work hours, and requirements for layoffs.

Here are some of the main points in it:

 

• Duration of Extension of Employment Contract: Extension of employment contract must be done within a certain time limit and made in writing, namely 7 days before the employment contract ends.

 

• Extension Limit: PKWT can be extended once a year. If the extension is made without a formal (written) extension, the status will change to PKWTT.

 

• PKWT based on the time period as referred to in Article 5 paragraph (1) can be made for a maximum of 5 (five) years.

 

• In the event that the PKWT time period as referred to in paragraph (1) will end and the work carried out has not been completed, the PKWT can be extended with a time period according to the agreement between the Employer and the Worker/Laborer, with the provision that the total time period of the PKWT and its extension is no more than 5 (five) years.

 

C. Limitations on Contract Extension

 

Based on PP Number 35 of 2021, the limitations in contract extensions are explained as follows:

 

• PKWT can be extended once after the initial contract, where the duration is one year and the extension is one year.

 

• If the work is not finished after the work contract ends, an extension can be made if both parties agree. However, make sure this extension is made in writing.

 

How does the Contract Extension Process Work?

 

The following are the steps taken in the work contract extension process:

 

• Conduct Job Evaluations

 

The first step that can be taken to extend the contract is to conduct a performance evaluation.

 

Performance evaluation is carried out to assess how the employee's performance is, whether it is good or not.

 

This performance is related to the contribution given by the employee or employee productivity.

 

From the results of this performance evaluation, it can later become the basis for a decision on extending the work contract.

 

• Discuss with Employees

 

The next step is to have a discussion with the employee, namely regarding feedback from the employee.

 

This includes asking about obstacles while working and whether the employee has the desire to continue the employment contract.

 

• Start Drafting Documents

 

The next step is to start preparing documents related to the extension of the employment contract,

As is known, PKWT must be made in written form so this document is an important part that should not be underestimated.

 

• Signature of the Employment Contract

 

The last is the signing of the employment contract, which is done after the contract extension document is completed.

 

The signing of this employment contract is done by both parties, namely the employee and HRD who is the representative of the employer.

 

What are the Rights and Obligations in Contract Extension?

 

When an employment contract is extended, there are several rights and obligations held by the company and employees. For the company, with the extension of the contract, it means that the company has the right to obtain labor from the employees concerned. The company has the right to provide work to employees according to what is in the employment contract.

 

As for its obligations, the company is obliged to provide wages according to the agreement, this includes allowances and other benefits. Then what about the rights and obligations held by employees? Every employee who gets a contract extension has the right to receive a salary and allowances according to what is in the employment contract agreement. This includes the right to a safe and discrimination-free work environment, so that employees can work comfortably.

 

As for their obligations, every employee whose contract is extended has the obligation to work according to the agreement in the employment contract. Employees must also have good performance so that they have the opportunity to get an employment contract extension.

 

What are the Factors that Influence Contract Extension?

 

Here are some factors that influence employee contract extensions:

 

• Job Assessment

 

The first factor is the existence of a performance assessment conducted by HRD to employees.

 

This performance assessment is conducted to see how the employee's performance is, whether it is good or not.

 

If the performance is good, then HRD will offer a contract extension to the employee concerned.

 

• There is a Performance Improvement

 

The second factor is the increase in performance.

 

Employees with good performance are very valuable assets for the company, so if there are employees with performance that continues to improve, the company certainly does not want to lose them.

 

The company will offer a contract extension for the increase in performance made by employees.

 

• There is a Company Need

 

The next factor is because of the company's need for the position.

 

When the work cannot be completed within the work contract period, the company still has a need for the position.

 

Thus, this provides an opportunity for employees to fill the position.

 

• Good Relationship with Superiors

 

Having a good relationship with your boss and coworkers will increase your chances of contract extension.

 

This is because people who are able to establish good relationships have open communication that will affect their future work.

 

• Based on Internal Policy Rules

 

Each company has its own internal rules and policies that will be the basis for extending the work contract.

 

There are companies that do have rules regarding the limits of work contract extensions.

 

This can be used as a basis for extending the work contract.

 

Conclusion

 

That was the explanation regarding the rules for extending employment contracts that can be a reference for you. From the explanation of the article above, it can be seen that the rules for extending contracts are discussed in the Manpower Law and PP No. 35 of 2021.

 

These contract extension rules can also be based on the rules held by the company internally. Therefore, it is important for each company to have its own rules that will be the basis for the working relationship between employees and the company. To support these rules, the company must manage employees properly and correctly.