Annual Leave Entitlement in Indonesia: Manpower Law

Indonesia’s annual leave rule is short, specific, and surprisingly easy to get wrong. Under the Manpower Act, every employee who completes 12 months of continuous service is entitled to 12 working days of paid annual leave — known locally as cuti tahunan. The Job Creation Law and Government Regulation No. 35 of 2021 (PP 35/2021) tightened the rules around payout on termination and the long-rest entitlement that follows six years of service.

This guide walks through what the statute requires in 2026, how cuti tahunan accrues, how it interacts with fixed-term contracts (PKWT), and the pitfalls that catch foreign employers and local HR teams off guard when an employee resigns with banked leave.

Key takeaways

• The Manpower Act guarantees 12 working days of paid annual leave per year after 12 months of continuous service.
• The legal basis sits in Article 79 of Manpower Act No. 13/2003, as amended by the Job Creation Law and Government Regulation No. 35 of 2021 (PP 35/2021).
• Annual leave is paid at the employee’s regular salary during the leave period.
• Employees with six years of continuous service are entitled to a separate long-rest leave entitlement on top of cuti tahunan.
• Unused annual leave must be paid out on termination under PP 35/2021 — a forfeiture clause in the contract cannot override this.
• The Manpower Act is silent on year-end carry-over, so the rules in your company regulations (peraturan perusahaan) or collective agreement govern that question.

The statutory entitlement: 12 working days after 12 months

Article 79 of Manpower Act No. 13 of 2003 sets the floor for paid annual leave in Indonesia. Once an employee completes 12 consecutive months of service with the same employer, they are entitled to a minimum of 12 working days of paid annual leave in the year that follows.

Three points are worth pulling out:

• The entitlement is in working days, not calendar days. Weekends and public holidays are not counted toward the 12-day allocation.
• The entitlement crystallises after the first 12 months of continuous service. Employees in their first year do not have a statutory right to cuti tahunan, although many employers grant pro-rated leave by policy.
• Annual leave is paid at the employee’s regular salary — base pay plus fixed allowances under the contract.

Many Indonesian employers offer more than 12 days through company regulations or collective labour agreements (Perjanjian Kerja Bersama), particularly in financial services, technology, and multinational subsidiaries. The 12-day figure is the statutory minimum, not a recommended target. For a regional comparison, our guides on annual leave entitlement in Malaysia and annual leave entitlement in Singapore show how Indonesia’s floor sits relative to its neighbours.

Long-rest leave after six years of service

Indonesia is unusual in the region in offering a separate long-rest leave entitlement (istirahat panjang) on top of cuti tahunan. Under Article 79 and the implementing regulations, an employee who has worked continuously for the same employer for six years is entitled to a long-rest period — typically two months — taken in the seventh and eighth years of service.

The detailed mechanics for long-rest leave sit in the company regulations or collective agreement. The statute sets the minimum trigger and broad shape; the employer’s internal rules fill in the schedule, pay rate, and whether the long-rest period replaces or supplements the standard 12 days for that year. Long-rest leave is most commonly seen in larger Indonesian employers and government-linked companies.

Eligibility: who gets cuti tahunan

The Manpower Act applies to all employees performing work for an employer in exchange for wages. The key eligibility test for paid annual leave is 12 months of continuous service with the same employer.

Permanent employees (PKWTT)

Indefinite-term employees on a Perjanjian Kerja Waktu Tidak Tertentu (PKWTT) qualify for the full 12-day entitlement once they pass their first anniversary. The clock runs from the start date and resets only if continuity of service is broken.

Fixed-term contract employees (PKWT)

Employees on a Perjanjian Kerja Waktu Tertentu (PKWT) — fixed-term contract — are also entitled to cuti tahunan after 12 months of continuous service. The Job Creation Law and PP 35/2021 reinforced this point: a fixed-term label does not strip the statutory entitlement once the 12-month threshold is crossed.

For PKWT contracts shorter than 12 months, no statutory entitlement to cuti tahunan accrues. Many employers nevertheless grant pro-rated leave by company policy, particularly where the same employee renews into a longer engagement.

Probationary employees

Probationary periods (masa percobaan, capped at three months for permanent roles) sit inside the qualifying 12 months. Probation does not delay or reset the count toward the annual leave threshold.

Pay during annual leave

Cuti tahunan is paid at the employee’s regular salary, calculated on the same components used for ordinary monthly pay. For most employees this means:

• Basic salary (gaji pokok)
• Fixed allowances (tunjangan tetap) such as a contractual transport or housing allowance

Variable elements are generally excluded — for example, performance bonuses, overtime, and reimbursement of one-off expenses. The exact composition of the leave pay should mirror what you pay for an ordinary working day under the contract. Where the company regulations spell out a specific formula, that formula governs, provided it does not fall below the statutory wage components.

Employer obligations under the Manpower Act and PP 35/2021

Pulling the statutory rules together, employers in Indonesia have five core obligations on annual leave:

1. Grant 12 working days of paid annual leave per year to every eligible employee after 12 months of continuous service.
2. Pay the employee’s regular salary during the leave period.
3. Agree the timing of leave with the employee — annual leave cannot be unilaterally imposed or unilaterally refused without reasonable operational grounds.
4. Pay out unused annual leave on termination, regardless of the reason for separation, under PP 35/2021.
5. Maintain accurate leave records showing entitlement, leave taken, and the running balance for each employee.

Failure on any of these can be raised with the local Disnaker (Dinas Tenaga Kerja) office, which can mediate the dispute and, where necessary, refer the matter onward through the industrial relations courts.

Termination payout: the PP 35/2021 rule

Before the Job Creation Law, the rules around paying out unused annual leave on termination were inconsistently applied. PP 35/2021 settled the position: when employment ends — whether by resignation, dismissal, mutual termination, retirement, or the expiry of a fixed-term contract — any accrued and unused annual leave must be paid out as part of the final settlement.

The payout is calculated at the employee’s regular daily rate of pay multiplied by the number of unused leave days. Contractual clauses that purport to forfeit unused leave on termination are unenforceable to the extent they conflict with the statutory entitlement.

Carry-over and expiry of unused leave

Unlike some neighbouring jurisdictions, the Manpower Act does not specifically address carry-over of unused annual leave into the following year. The default position in practice is that unused cuti tahunan expires at the end of the leave year unless the employer’s company regulations or collective agreement explicitly allow carry-over.

If your company regulations are silent on the point, you have flexibility — but document the rule clearly. Common employer policies in Indonesia include:

• A strict use-it-or-lose-it rule, with cuti tahunan expiring at year-end
• A capped carry-over of three to six days into the next leave year
• A rolling 18- or 24-month window during which the employee must use the leave

Whatever rule you adopt, write it into the peraturan perusahaan and apply it consistently. The key safeguard is that you cannot use a forfeiture rule to escape the termination payout obligation under PP 35/2021 — leave that is unused at the date of separation must be paid out, even if it had not yet been “consumed” under the carry-over rule.

Common pitfalls

The same handful of errors come up repeatedly when foreign employers and growing local companies work through Indonesian leave compliance. Audit your processes against this list.

1. Granting leave only after the second year

Some handbooks confusingly suggest cuti tahunan begins after two years of service. The statute is clear: the entitlement begins after 12 months of continuous service, with the 12 days available in the year that follows. Delaying the entitlement to year two is a breach of Article 79.

2. Forgetting the termination payout under PP 35/2021

The single most common source of dispute on departure is unpaid annual leave. Build the unused-leave payout into your standard offboarding workflow so it cannot be missed, and reflect it on the final pay slip alongside any severance, long-service award, and compensation for rights that accrue under the Manpower Act.

3. Treating fixed-term workers as ineligible

A PKWT employee who completes 12 months of continuous service is entitled to cuti tahunan in the same way as a PKWTT employee. Excluding fixed-term workers as a class is a frequent error — particularly on long-running contracts that have been silently extended past the one-year mark.

4. Failing to maintain leave records

Indonesian wage and leave records are reviewable by Disnaker. Where the employer cannot produce records, the employee’s account of leave taken is generally accepted. A missing or incomplete leave register quickly becomes a financial liability on termination, especially for tenured staff with several years of unused balance to argue over.

5. Overlooking long-rest leave

Long-rest leave after six years of service is sometimes ignored by employers without a formal company regulation. The statutory trigger exists regardless of whether the employer has codified it — though the practical scheduling does need to be agreed in advance. For a broader view of how various leave types fit together, see our overview of the main types of leave employers manage.

Frequently asked questions

How many days of annual leave do Indonesian employees get?

The Manpower Act sets a minimum of 12 working days of paid annual leave per year after 12 months of continuous service. Many employers offer more through company regulations or collective labour agreements, particularly in professional services and multinational subsidiaries. Employees with six years of continuous service are also entitled to a separate long-rest leave period.

Can annual leave be carried forward into the next year in Indonesia?

The Manpower Act does not specifically address carry-over of unused annual leave. The position depends on the employer’s company regulations (peraturan perusahaan) or collective agreement. Common policies range from strict use-it-or-lose-it rules to capped carry-over of a few days into the next leave year.

Are fixed-term contract workers entitled to annual leave?

Yes. Employees on a PKWT (Perjanjian Kerja Waktu Tertentu) are entitled to cuti tahunan once they complete 12 months of continuous service, on the same terms as permanent employees. For fixed-term contracts shorter than 12 months, no statutory entitlement accrues, although the employer may grant pro-rated leave voluntarily.

What happens to unused annual leave when an Indonesian employee leaves?

Under Government Regulation No. 35 of 2021, any accrued and unused annual leave must be paid out as part of the final settlement, regardless of the reason for termination. A contractual forfeiture clause cannot override this obligation, and the payout is calculated at the employee’s regular daily rate of pay.

What is long-rest leave in Indonesia?

Long-rest leave (istirahat panjang) is a separate entitlement available to employees with six years of continuous service with the same employer. The detailed rules — duration, pay rate, and timing — are set in the company regulations or collective agreement, with the Manpower Act setting the minimum trigger.

What rate of pay applies during cuti tahunan?

Annual leave is paid at the employee’s regular salary — typically basic pay plus fixed allowances under the contract. Variable elements such as performance bonuses, overtime, and one-off reimbursements are excluded.

Putting it into practice

If you employ staff in Indonesia, the operational checklist is short:

1. Confirm your company regulations or contracts state the cuti tahunan entitlement clearly, at or above 12 working days after 12 months of service.
2. Make sure your HR system grants the entitlement automatically on the 12-month anniversary, and tracks it separately from public holidays.
3. Configure leave pay to use the employee’s regular salary, including fixed allowances.
4. Build the unused-leave payout into the offboarding workflow so PP 35/2021 is satisfied automatically on every termination.
5. Add long-rest leave to your tenure milestones for employees approaching six years of service.
6. Keep accurate leave records that survive a Disnaker audit.

A modern leave management system handles the 12-month qualifying threshold, the working-day count, and the termination payout calculation automatically — so the next time someone resigns at year four with banked cuti tahunan, the final pay slip is correct without anyone having to dig through PP 35/2021.

Sources

• Ministry of Manpower (Kementerian Ketenagakerjaan) — Annual leave (primary source)
• Manpower Act No. 13 of 2003 (jdih.kemnaker.go.id)
• Government Regulation No. 35 of 2021 (PP 35/2021) on Fixed-Term Employment Contracts, Outsourcing, Working Time and Rest Time, and Termination of Employment

Last updated: 4 May 2026. This article is general guidance, not legal advice. For complex cases — including disputes over PKWT eligibility, long-rest leave scheduling, or termination payouts — consult an Indonesian-qualified employment lawyer.