Employer of Record in Indonesia

Businesses can only operate smoothly in Indonesia if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Indonesia below, to avoid any compliance issues.

Employment Contract Requirements

In Indonesia, employment is governed by Law No. 13 of 2003 on Manpower. Contracts must be in Indonesian using the Latin alphabet, with the Indonesian version being legally binding. Employment contracts should outline:

• Employee details
• Position and type of work
• Salary details
• Contract period

Onboarding Process

We can help you get a new employee started in Indonesia quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Indonesia

In Indonesia, standard working hours are either 7 hours per day, totaling 40 hours per week for six-day workers, or eight hours per day, amounting to 40 hours per week for five-day workers.

Overtime in Indonesia

In Indonesia, exceeding standard weekly hours constitutes overtime, governed by contract terms or collective agreements, with a maximum of 3 hours per day and 18 hours per week allowed. Overtime compensation on weekdays starts at 150% of the regular hourly wage, rising to 200% for subsequent hours.

Probation Period in Indonesia

The maximum probation period in Indonesia is 3 months. This probation period can only be applied to employees who are on permanent employment contracts (known as indefinite-term contracts). Probation is not applicable to fixed-term (temporary) employment contracts.

Fiscal Year in Indonesia

1 January - 31 December is the 12-month accounting period that businesses in Indonesia use for financial and tax reporting purposes.

Payroll Cycle in Indonesia

The payroll cycle in Indonesia is usually monthly, with employees being paid on or before the last working day of each calendar month.

Minimum Wage in Indonesia

The minimum wage for employees in Indonesia is typically13,532.77 IDR - 31,671,12 IDR per hour, amounting to ~2,165,244 IDR - 5,067,381 IDR per month for a typical 40 hour work week.

Bonus Payments in Indonesia

In Indonesia, employees are entitled to the mandatory Tunjangan Hari Raya (THR) bonus, equivalent to one month's salary, ahead of significant religious holidays (Hari Raya Idul Fitri for Muslims, Christmas for others). THR comprises the base salary and a fixed monthly allowance, adjusted for those with less than a year of service. Additional bonuses are not mandatory.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 10.24%- 11.74% on top of the employee salary in Indonesia.

Employee Payroll Tax Contributions

In Indonesia , the typical estimation for employee payroll contributions cost is around 4%.

Individual Income Tax Contributions

In Indonesia, employment taxes operate under the Pay As You Earn system. Individual income tax rates in the country vary from 5% to 30%, and the calculation follows a progressive rate structure as follows:

Pension in Indonesia

Pensions in Indonesia are administered through the BPJS Manpower Social Security Program, which consists of Old Age Insurance (mandatory contributions from both employers and employees) and Pension Insurance (where only employers contribute). Participation in these programs is mandatory under Indonesian employment law to ensure financial support for retirement.

In Indonesia, employers seeking to hire foreign nationals must navigate a multifaceted process involving several permit types, including the Expatriate Placement Plan (RPTKA), Work Permit (IMTA), and Limited Stay Permit (KITAS). The application process can span from several weeks to months, necessitating thorough preparation and timely submissions. Renewal of work permits should be initiated before expiration to maintain legal employment status. Additionally, Indonesia offers the E33G remote worker visa for digital nomads, subject to specific income and employment criteria. Employers should be cognizant of challenges such as complex regulations, processing delays, and cultural integration, and consider engaging professional services to ensure compliance and facilitate a seamless hiring process.

Mandatory Leave Entitlement in Indonesia

The annual leave entitlement in Indonesia is 12 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Indonesia

Annually, the government in Indonesia has the authority to determine whether public holidays that coincide with weekends will be rescheduled to a weekday or forfeited altogether.

Paid Time Off in Indonesia

In Indonesia, paid leave is specified in the employment contract, ensuring a minimum of 12 days of annual paid leave after one year of service. Employees who have worked continuously for six years with the same employer can also take one month of leave in their seventh and eighth years of service.

Maternity Leave In Indonesia

Pregnant employees are entitled to 3 months of paid leave, with 1.5 months taken both before and after childbirth. The employer covers 100% of their salary during this period, and the leave cannot be extended.

Paternity Leave In Indonesia

Employees are given two days of paid paternity leave, during which they receive 100% of their average salary. The employer is responsible for covering this payment, and the leave duration cannot be extended.

Sick Leave In Indonesia

In Indonesia, there is no specified limit on sick leave duration. Compensation during sick leave varies depending on the duration of absence and is paid by the employer as follows:

Parental Leave In Indonesia

In Indonesia, there is no specific legal provision addressing parental leave.

Bereavement Leave

Employees receive two days of paid leave in the event of the passing of a 1st or 2nd-degree relative.

Marriage Leave

Indonesian employees are eligible for three days of leave to attend their own marriage rites, or two days if it involves their child's wedding

Adoption Leave

Adoptive parents in Indonesia enjoy the same leave entitlements as natural parents. This includes three months of paid leave for female employees and two days of paid leave for fathers.

Termination Process in Indonesia

In Indonesia, prior to termination, employers are required to engage in negotiations with employees or labor unions to explore alternatives. If termination becomes necessary, clear written explanations for the reasons must be provided. Valid grounds for employee dismissal in Indonesia include:

• Violation of the employment agreement
• Imprisonment of the employee
• Extended illness of the employee for more than 12 months
• Unjustified absence from work for more than five days, after being notified twice

Notice Period in Indonesia

In Indonesia, there is no legally mandated minimum notice period. However, customary notice periods for employer-initiated terminations are as follows:

• During the probation period: no mandatory notice period
• Minimum notice period: 30 days for indefinite-term contracts
• For employee-initiated terminations, the minimum notice period is also 30 days.

Severance in Indonesia

Severance pay is mandatory, if applicable, and is determined based on the employee's length of service as follows:

• Less than 1 year of employment: 1-month wage
• 1 year or more but less than two years: 2 months' wage
• 2 years or more but less than 3 years: 3 months' wage
• 3 years or more but less than four years: 4 months' wage
• 4 years or more but less than 5: 5 months' wage
• 5 years or more but less than 6: 6 months' wage
• 6 years or more but less than 7: 7 months' wage
• 7 years or more but less than 8: 8 months' wage
• 8 years or more: 9 months' wage