Indonesia

Indonesia PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Indonesia to companies willing to enter the Indonesian market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Indonesia.  Nevertheless our solution allows you to start the operations in Indonesia within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So by law they would be our employees, on our local payroll, 100% compliant but will work on your behalf.

Indonesia fast facts

Population, million: 273,523,615
Land area: 1.905 million km²
Capital: Jakarta
Local currency: The rupiah (Rp)

GDP per capita:$ 4200.00
GDP in currency:$ 970 billion

Indonesian labour laws and regulations do not expressly differentiate  between regulations imposed on foreigners and regulations imposed on  Indonesian citizens. The principal act of law governing employment  relations in Indonesia is the Labour Law.

Generally, foreign nationals can work in Indonesia, provided that the work  to be performed cannot be performed by Indonesian nationals, and the  work is not of the type that foreign nationals are prohibited from  performing under the prevailing laws and regulations. Normally, this  requirement is applied leniently and is further subject to additional regulations in a numberof industries. Where a company cannot hire an Indonesian  national with the appropriate skills, the company is allowed to employ  foreign employees provided that at least one Indonesian national is  simultaneously employed and trained by the company.

Hiring, Negotiating and Doing Business in Indonesia

Necessity of written employment contract

Any written employment agreement (fixed-term or indefinite) must state the following as a minimum:

Name, address and line of business of the employer.
Name, sex, age and address of the employee.
Position of the employee or type of work.
Place where the work is to be carried out.
Amount of wages and how they will be paid.
Terms and conditions of employment stating the rights and obligations of both the employer and the employee.
The effective date of the employment agreement and the period of the employment agreement.
Place and date of the execution of the employment agreement.

Different forms of engagement: employment, contracting, work with  private entrepreneur.
If a company has a registered trade union, the trade union can get into into a collective labour agreement (CLA) with the governance of the company. A trade union can be set by leastwise ten workers in any business enterprise. The CLA is acceptable for 2 years but can be prolonged.

Different forms of engagement: employment, contracting, work with private entrepreneur

If a company has a registered labour union, the labour union can enter into a collective labour agreement (CLA) with the management of the company. A labour union can be established by at least ten employees in any business industry. The CLA is valid for two years but can be extended. Only a duly registered trade union with a registration number 

has the right to negotiate a collective labour agreement with the employer’s management.

Indonesia Employment Contract

Types of employment agreements

Definite term worker (Pekerja Waktu Tertentu). A definite term workers is  occupied under a certain period employment agreement. This type of  worker is also known as a “contract worker”.

Indefinite term worker (Pekerja Waktu Tidak Tertentu). These are workers who do not fall into the type of definite term workers. This type of worker isalso known as a constant worker.

Indonesia working hours

A worker can work a maximum of 40 hours per week, allocated in one of  the following ways:
7 hours per day, 6 days per week.
8 hours per day, 5 days per week.

Overtime

If employers request extra hours, they must pay 1.5 times their regular  salarys for the first hour and 2 times their regular salarys for any hour afterthat. Wages should include and fixed quotas. Maximum overtime allowed  is 3 hours a day or 14 hours a week. 

Senior level positions are excluded from overtime. There must be a written order from the hirer and written permission for the worker for any overtime worked.

Vacation leave in Indonesia

Workers who work a 5 day week have Saturday and Sunday off. Workers who work 6 days per week are authorized to Sunday off. All workers are authorized to 12 working days of paid vacation per year after one year’s uninterrupted service.

Indonesia Maternity Leave

Pregnant workers are authorized to take 3 months’ paid maternity leave, of which 1.5 months are taken in the pre-natal period and 1.5 months are taken in the post-natal period. In this period, employees get their full wage. A pregnant worker is authorized to get her full wage during her pregnancy. A worker who has had a spontaneous abortion is authorized to a 1.5-month rest period, provided this is suggested in a medical statement published by an obstetrician or midwife.

Indonesian Severance Laws

The law does not set out notice periods for ordinary terminations and unfair terminations. Anyway, on practice a 30-day notice must be given to complete an employment contract.

The Law adjusts individual employment dismissal and provides for:

Dismissal without cause (not due to the employee’s fault). Where dismissal of employees cannot be avoided, such as in the case of a merger, a reorganisation of the company, or bankruptcy of the employer, it is prudent for the employer to explain the circumstances to the related Ministry of Manpower in advance if the employment termination is mass employment termination.
Dismissal with cause (due to the employee’s fault).

Indonesia Tax

A company is subject to the tax obligations set by the Indonesian government if the company’s domicile is in Indonesia. Similarly, a foreign company that has a (permanent) establishment in Indonesia – and carries out business activities through this local entity – falls under the Indonesian tax regime. If the foreign company does not have a permanent establishment in Indonesia but does generate income through business activities in Indonesia, then it needs to settle its tax liabilities through withholding of the tax by the Indonesian party paying the income.

Corporate income tax – 22 percent

Individual Income Tax

  • Residents are subject to a withholding progressive tax (their net taxable income is set at graduated rates, with current rates ranging from 5 percent up to a maximum of 30 percent, depending on an individual’s income);
  • Non-residents are subject to a final withholding flat tax of 20 percent on gross income.

Health Insurance Benefits in Indonesia

Indonesia has compulsory universal healthcare which is funded through payroll taxes and the general budget. Employers are required to enroll their workers in this system. Any employee hired through globalization partners will automatically have the employee enrolled in the universal healthcare. This is mandatory for all employees, including expats.

Additional Benefits in Indonesia

Employees are paid a mandatory 13th-month salary payment in Indonesia, often referred to as THR. This is considered a religious day allowance and is paid one week before the respective religious holiday. Since most of the country is Muslim, most employers provide this bonus one week before the Muslim holiday, Idul Fitri (the end of Ramadhan), regardless of the employee’s religion. Other employers will provide the bonus in December for any non- Muslim employees. If the employee has worked for less than 12 months, he or she is entitled to a prorated amount.

In all cases, bonus policies should be notified to employees in advance, to avoid possible labor law discrimination disputes.

Indonesia Holidays

  • New Year’s Day
  • Chinese New Year
  • “Nyepi” Bali Hindu New Year
  • Good Friday
  • Labor Day
  • Ascension Day of Jesus Christ
  • Ascension Day of the Prophet Muhammad
  • Buddhist Holy Day of Waisak
  • Ascension Day
  • Eid al-Fitr
  • Independence Day
  • Idul Adha
  • Islamic New Year
  • Birthday of the Prophet Muhammad
  • Christmas Day

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.

FAQ Indonesia

  • Working hours in Indonesia

    An employee can work a maximum of 40 hours per week, allocated in one of the following ways:

    • Seven hours per day, six days per week.
    • Eight hours per day, five days per week.
  • What are the main holidays in Indonesia?

    • New Year’s Day
    • Chinese New Year
    • “Nyepi” Bali Hindu New Year
    • Good Friday
    • Labor Day
    • Ascension Day of Jesus Christ
    • Ascension Day of the Prophet Muhammad
    • Buddhist Holy Day of Waisak
    • Ascension Day
    • Eid al-Fitr
    • Independence Day
    • Idul Adha
    • Islamic New Year
    • Birthday of the Prophet Muhammad
    • Christmas Day
  • What are payroll taxes in Indonesia?

    Corporate income tax – 22 percent

    Individual Income Tax

    • Residents are subject to a withholding progressive tax (their net taxable income is set at graduated rates, with current rates ranging from 5 percent up to a maximum of 30 percent, depending on an individual’s income);
    • Non-residents are subject to a final withholding flat tax of 20 percent on gross income.
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