A year is enough: the story of fixed-term contracts in the era of free trade

Products entering developed markets are not only tested for quality but also for their production footprint. Are workers protected? Are contracts fair? Are outsourcing practices non-exploitative?

Jakarta — In a nation that deeply values flexibility, there is one thing that apparently can force inflexibility: the global market’s desire for certainty, particularly the certainty that workers do not remain permanently in “temporary” status.

Consequently, when the Coordinating Minister for Economic Affairs stated on Friday (27 February) that workers under Fixed-Term Work Agreements (PKWT) and outsourced workers would be regulated anew in the revised Labour Law, this must be viewed not merely as a technical update, but as an acknowledgement that excessive flexibility can transform into prolonged uncertainty.

This deflexibilisation occurred after Indonesia signed the Agreement on Reciprocal Trade (ART) with the United States, a nation that has long believed in free markets, except when such freedom threatens its own economy.

In this document, Indonesia is required to limit work contracts to a maximum of one year. After that, workers must either be made permanent or dismissed.

One year or twelve months is a firm deadline, like a romantic relationship that prospective in-laws finally force to become serious marriage prospects or break up entirely.

Compare this with clauses in the Cipta Kerja Law and Government Regulation 35/2021 which permitted contracts lasting up to five years including extensions. Five years is sufficient time to marry, have children, or pay down a mortgage. Yet ironically, five years can pass without employment certainty.

For some, this reversal may feel ironic, since it does not stem from domestic concern but from a trade agreement with a foreign partner. There is indeed a bitter tone to it. In a manner of speaking, we appear only willing to renovate our house when important guests are visiting.

However, it would be mistaken to stop at cynicism. Because precisely at this point an opportunity opens when external pressure can become an internal catalyst. If America truly demands restrictions on PKWT and outsourcing, then the more important question is: is this actually Indonesia’s own need as well?

The Constitutional Court previously annulled several employment law cluster articles in the Cipta Kerja Law, meaning there is a constitutional correction demanding reorganisation. Now the government has pledged to integrate everything into the new Labour Law.

Momentum