One of the employment issues in Indonesia related to annual leave is whether employees with Contract Employee (in bahasa we call “PKWT” Employee) for 1 year entitled to annual leave ? and if entitled to annual leave, can it be converted into money ?. This issue occurs both for Indonesian employees and foreign employees who actually can only work in Indonesia with a contract system (PKWT).

PKWT employees whose work contract period is 12 months, are not entitled to annual leave, because after that 12 months, there is no longer a working relationship between the company and the workers.

If the PKWT employee has a working period of more than 12 months, then after the twelve months, he/she is entitled to annual leave of at least 12 days. And if this annual leave is not utilized by workers until the end of the work agreement, then there is no provision in the Prevailing Laws which requires the conversion of the right amount of leave into money. It is different if the PKB or Company Regulations stipulate compensation, then if so the provisions of the PKB and the Company Regulations will be binding on the Parties, but for “termination of employment relationship”, the company is obliged to pay the remaining unused leave as stipulated in Article 156 of the Manpower Law.

Law No. 13 of 2003 concerning Manpower as amended by Law no. 11 of 2020 concerning the Omnibus Law (Labor Law) does not differentiate between PKWT and PKWTT in the calculation and determination of annual leave rights for employees. Therefore, the legal basis for calculating annual leave for PKWT and PKWTT employees is the same, namely Article 79 of the Labor Law which states:

“The leave as referred to in paragraph (1) letter b that must be given to workers / laborers, namely annual leave, is at least 12 (twelve) working days after the worker / laborer has worked for 12 (twelve) months continuously“.

The key word for the provisions of Article 79 paragraph (3) of the Labor Law is “AFTER”, which means, based on the provisions of the legislation, the right to annual leave for at least 12 days only appears after working for 12 months continuously. With this scheme, the employees have the right to take annual leave for the current year for the following year, and so on.

With this concept of understanding, for PKWT employees whose contract period is only one year (12 months), it means that the working relationship between the company and the employee ends at the same time as the right to leave for the employee should arises.

The determination of the right to annual leave after working for 12 consecutive months is based on the premise that it is necessary to establish a qualifying period of 12 months. Such conditions are deemed necessary as a driving factor towards “stability of employment”. Apart from that there is no reason to give this break to workers who have just arrived at work (Vide: Explanation of Article 2 of Law No. 21 of 1954 concerning the Stipulation of Labor Rest Regulations). Based on the objective of the provision of annual leave, it can be understood that the provision of leave after working continuously for 12 months is for employees who are still working at the company, not for employees who have finished their work period exactly in the twelfth month.

Thus it can be concluded that, PKWT employees whose work contract period is 12 months, are not entitled to annual leave, because after that 12 months, there is no longer a working relationship between the company and the workers.

However, if the PKWT employee has a working period of more than 12 months, then after the twelve months, he / she is entitled to annual leave of at least 12 days. And if this annual leave is not utilized by workers until the end of the work agreement, then there is no provision in the Prevailing Laws which requires the conversion of the right amount of leave into money. It is different if the PKB or Company Regulations stipulate compensation, then if so the provisions of the PKB and the Company Regulations will be binding on the Parties.

However, if the employment relationship is terminated due to a “termination of employment relationship”, the company is obliged to pay the remaining unused leave as stipulated in Article 156 of the Manpower Law.

Regards