Adapting to Change: Updated Fixed-term Employment Contract Guidance for Indonesia’s competitive garment industry

JAKARTA, Indonesia (ILO News) - The Ministry of Manpower, with support from Better Work Indonesia (BWI) programme, a joint initiative of the ILO and the International Finance Cooperation (IFC), has continued to update and revise the regulations on Fixed-Term Employment Contract (PKWT). The recent update was issued through the Law No. 6/2023 on Omnibus Law.

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.

Indah Anggoro Putri, Director General of Industrial Relations and Social Security at the Ministry of Manpower

Indah Anggoro Putri, Director General of Industrial Relations and Social Security at the Ministry of Manpower, welcomed the development of this PKWT implementation guideline for the export-oriented garment sector as a shared reference for both workers and businesses. "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."

Since 2018, the BWI programme has collaborated with the Ministry of Manpower through national stakeholder consultations to develop guidelines on PKWT. The guideline has served as a practical tool to bridge gaps in understanding and application of the law. By offering structured explanations and examples, it has helped factories align with national regulations while maintaining productive and competitive operations.

The PKWT guideline has been revised through a series of close consultations with key directorates within the Ministry of Manpower in Indonesia. 11/2025

PKWT contracts support business flexibility in a highly competitive export market. However, their implementation has often been accompanied by compliance challenges. Common issues include determining the appropriate duration of contracts, identifying types of work eligible for fixed-term arrangements and ensuring adherence to other regulatory provisions governing employment contracts.

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.

Simrin Singh, ILO Country Director for Indonesia and Timor-Leste

As labour regulations and their implementation continue to evolve, the guideline has been revised through a series of close consultations 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. These consultations aimed to align the guidance with current legal provisions, enforcement practices and the realities faced by factories and workers in the sector.

Simrin Singh, ILO Country Director for Indonesia and Timor-Leste, emphasized that the updated guideline is designed as a living document, open to future review and revision in line with regulatory developments and emerging issues. "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."

PKWT contracts support Indonesia's business flexibility in a highly competitive export market.

To strengthen the implementation and utilization of the guidelines, English and Korean versions have been developed, and a series of dissemination activities were rolled out over one month from September to October 2025. More than 100 labour inspectors and industrial relations mediators from Greater Jakarta, Banten, Central Java, West Java and the Special Region of Yogyakarta participated in these sub-national sessions.

The biggest challenge today is adapting to rapidly changing global market trends... Thus, the management of PKWT remains a crucial aspect in maintaining the balance between business continuity and creating decent working conditions.

Satrio Adipratama, Compliance Manager of PT Ungaran Sari Garments

During the same period, outreach to factories engaged over 200 representatives from enterprises participating in the BWI programme. The series concluded with the introduction of the English and Korean versions of the guidelines to international buyers and broader constituents in November 2025, helping to strengthen alignment and awareness across the supply chain. This introduction aimed to support more predictable employment practices, reinforce compliance with national labour regulations and foster constructive industrial relations across the export-oriented garment sector.

One of the participating BWI factories, PT Ungaran Sari Garments in Semarang, Central Java, emphasized the importance of balancing business continuity with the creation of decent working conditions. Compliance Manager Satrio Adipratama stated: "The biggest challenge today is adapting to rapidly changing global market trends. This requires improving the skills and flexibility of the workforce to ensure continued adaptation. Thus, the management of PKWT remains a crucial aspect in maintaining the balance between business continuity and creating decent working conditions."