Functions of the Work Contract and Examples

The sign of an employee starting work at the company he is aiming for is the signature of a work contract agreement.

The letter is not only important for the company, but for the employees themselves, where they will know their respective obligations and rights.

A work contract agreement is not only about an agreement but has a legal content that both parties really have to do.

Therefore, the letter should not be made carelessly, let alone just for formality.

However, apart from containing the above, there are other functions that companies and employees need to know. What are the functions? This is the Review

What is a Work Contract Agreement?

A work contract agreement is a verbal agreement between an entrepreneur and a worker for an agreed period of time, which contains the terms of employment, rights and obligations of both parties.

The employment letter is given on the employee’s first day of work or the day before the employee will work.

Also read: 10 important criteria for choosing a suitable job

Of course, the work contract letter must contain company policies that are in accordance with the applicable Manpower Act in Indonesia.

Based on Law No.13 / 2003 article 52 paragraph 1 on regulating manpower, it states that the work contract agreement must contain the following bases;

  • Agreement from both parties
  • Ability to take legal actions
  • There is work that has been promised
  • The work does not conflict with applicable laws, morals, or norms prevailing in society.

Legal terms of employment contract based on law

There are several conditions that must be fulfilled by the company when making a work contract agreement, namely;

1. The existence of an employer and workers

As is well known, between job givers and workers do not have the same position. Likewise, an employer is a worker who has a position above and the position below is the worker himself.

Therefore, the employer has the right to govern the workers. The right to rule itself must be accompanied by the conditions, rights and obligations that both of them can get and fulfill.

2. The existence of the Implementing Party

Implementing parties are workers who have been appointed by the company. They will work in accordance with the provisions and agreements in the work agreement.

3. There is a work agreement within a specified time

Workers will work in accordance with the period determined and determined by the employer.

4. There is a Wage Received

One of the goals of workers to carry out work is to be able to get income from the wages they will receive each month at a mutually agreed nominal.

In this era, wages are received in the form where the wages will be adjusted to the type of work and also according to the statutory regulations regarding minimum wages in certain areas.

In addition to getting a basic wage or salary, the company can also provide appropriate allowances for both workers and their families because this is stated in (Article 1 letter a Government Regulation No. 8 of 1981 concerning Wage Protection).

5. There is an agreement

Of course, the work letter that is made must have an agreement between the two, especially by the worker.

With this agreement, it means that both of them have a sense of sincerity to work and employ prospective employees.

Before signing the work contract agreement, the worker must read it carefully and then ask what he has not understood.

In the process, the worker is also able to cancel the job, if an agreement has not been formed.

6. There is authority

According to applicable law, the party making the employment contract must be declared a legal subject.

Basically, all of these people have the power to award contracts, except for children, adults who are still placed under supervision, and people who are mentally ill.

7. The object set must be clear

It is important to do so in order to achieve the desired goals, and not create a fictitious contract or harm certain parties.

Also read: 15 salary negotiation tips during a job interview

Elements in the Work Contract Agreement

Based on the conditions above, the elements contained in the work contract agreement are as follows;

  • Name, address and type of business (Company).
  • Employee’s name, gender, age and address.
  • Position or type of work.
  • Workplace
  • The amount of the salary and the method of payment.
  • Various work conditions that contain the rights and obligations of the company and employees.
  • The deadline for the work contract.
  • Place and date of work contract made and
  • Signatures of both parties in the work contract along with the company seal.
  • Article on compensation and about limits on liability
  • Article on dispute resolution
  • Article on confidentiality, if any, and it is urgent to be included in the work contract agreement.

What is the function of a work contract agreement?

Seeing how important this work contract agreement is, the functions of the work contract are as follows;

1. Serves as authentic evidence

Provide authentic evidence, that the worker and employer have made an agreement to be carried out together in accordance with their rights and obligations.

2. Provide a sense of calm for both parties

The existence of a work contract agreement can provide a sense of calm for both parties who have promised to carry out what is written in the letter.

Therefore, when you work with someone, make sure to have a clear work contract, where the points are in accordance with what is stipulated in the law.

In addition to knowing your rights and obligations, a contract letter is also very useful for protecting you legally if something goes wrong.

3. Knowing and clarifying the rights and obligations of both parties

If the rights and obligations are stated in writing, it can potentially be forgotten and legally weak in the future.

Therefore, it must be made in writing where your rights and obligations are clearly stated in the letter.

The rights and obligations written in the work letter can help both parties consistently implement them.

Therefore, before you sign a work contract agreement, be sure to read it carefully so that the company won’t harm you.

4. Avoid and reduce disputes

When working, it is not impossible for disputes to occur, be it disputes between employees and employees, or between employees and leaders.

Of course, one of the factors in avoiding and reducing these disputes is the existence of a work contract agreement which usually contains regulations in the company itself.

5. As a reference when there is a case or dispute

Disputes that are usually unstoppable and become serious problems are about wage distribution issues or about other rights and obligations that the company or employee has not fulfilled.

If you or the company, this can be brought to the realm of law where as a reference you can see the work contract agreement.

In other words, you have the right to sue someone who ignores their rights and obligations based on what has been written in the employment contract.

Benefits of having a work contract for the company

The work contract letter is basically made because it wants to protect both parties, namely the worker and the employer, from problems that may arise in the future.

However, apart from having these benefits, there are other benefits that you should know, namely;

1. The company will look more professional

It is an open secret, that not all companies still neglect not to make work contract agreements.

Usually this is done because there is mutual trust in the capital, considering that the people they employ still have a history of close kinship.

In addition, usually the company has not been established for long and thinks it is not “appropriate” to issue the letter.

In fact, by making the letter, the company you lead can look more professional.

Of course this is very beneficial for your company, which can be better known or expand the network to work together in various ways.

2. Equalizing Perceptions Between Company and Client

What happens if your company has grown and then does a lot of business deals from many companies then the agreement is just remembered?

Of course this will have a bad effect on your company. They will not believe and even lose trust so they will not cooperate.

So, of course, to avoid this, there must be a similarity in perception, which can be stated in a cooperation contract agreement.

With the existence of a cooperation agreement letter and containing these rules, it can be a reference for both parties to exercise their rights and obligations.

Example of a Cooperation Contract Agreement

Number: 286 // SPR // Example / 01

That is precisely on Thursday, January 30, 2020 the enactment of the agreement between the two parties with the data listed below, namely:

Name: Afifah Ridwansyah
Position: Head of Marketing Division
Address: Airbase No. 116 Bandung City.
As the first party from PT. Adi Yaksa Kencana, and
Name: Renata Wibawa
Birthplace: Bandung, January 23, 1987
No KTP; 357486900000333388
Position: Marketing Assistant
Address: Gunung Puntang no 89

Declared as the second party stated that he has committed the work system agreement as follows:

Provisions 1

  1. The First Party has the right and authority in determining the policies that apply in the work system. As well as the right to terminate or continue working relations with the second party.
  2. And the second party is obliged to follow and carry out the applicable provisions set by the first party.

Provision II

  1. This work contract agreement is valid from the stipulation of the first party as the holder of the position starting from February 2, 2020 to July 2, 2020, during that time, the second party is an employee at PT PT. Adi Yaksa Kencana.

Provision III

And the second party is obliged to carry out all work within 8 hours and 6 working days during the week.

And the wages that the second party is entitled to receive is a salary of Rp.5,000,000.

Bandung, January 30, 2020
First Party Second party
Afifah Ridwansyah Renata Wibawa

One example of an employment agreement that can be used as a reference.

Also read: Employment Agreements: 5 Important Things About Employee Contracts

This is the information regarding the function of the work letter and its examples, I hope this information is useful for you.


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