Hire in Indonesia

EOR in Indonesia

If a lack of speed or local expertise are among your top concerns when expanding to or employing workers in Indonesia, an employer of record may be the best option for achieving your global growth objectives.

An employer of record, sometimes known as an international PEO, enables you to quickly hire and onboard workers in Indonesia ―often in as little as two weeks―without having to take on the cost and risk of establishing a local entity.

Learn about the hiring, employment, payroll and benefits requirements for workers in Indonesia and how our employer of record service, EOR, and local HR experts can help you manage your international employment needs.

Hiring in Indonesia

Labor standards are less comprehensive in Indonesia than in other, more centralized nations, and labor unrest is frequent. The central labor law is the Manpower Act of 2003. Other laws governing employment include the Trade Union Act of 2000 and the Industrial Relations Disputes Settlement Act of 2004.

Employment contracts in Indonesia

As you look to hire employees in Indonesia, here are some standard regulations you’ll need to know to create a compliant contract, as well as how an employer of record and PEO can provide support for your unique HR needs.

Working hours

Regular weekly working hours are limited to 40. The workday is limited to seven hours a day, six days a week, or eight hours a day, five days a week. A 30-minute break is required for every four hours worked, along with one day of rest each week for employees who work a six-day workweek, and two days of rest for those who work a five-day workweek.

Overtime is required for any time worked over eight hours per day in a five-day workweek, or over seven hours per day in a six-day workweek.

Effective November 2, 2022, employees may not work more than four hours of overtime in a day or 18 hours of overtime in a week.

Compensation

As you consider the appropriate salary to offer new employees, keep in mind:

• There is no national minimum wage; area wage councils set the minimum wage for their localities.
• An employee must consent to overtime and cannot work more than three overtime hours per day or 14 hours per week.
• Overtime pay is one and a half times the regular wage for the first hour and two times the normal rate for the subsequent two hours.
• Overtime work completed on a weekly rest day or statutory holidays of employees working six days a week must be compensated with:
• Overtime work performed on a weekly rest day statutory holidays of employees working five days a week must be compensated with:
• Late wage payments are assessed fines of 5% of wages outstanding per day for the first eight days, and 1% per day after that.

As your employer of record in Indonesia, we can provide you with resources and insights about employee compensation, so you are better equipped to make a competitive employment offer.

Bonuses

Employees who have worked for their employer for 12 months or more are entitled to a religious bonus of at least one month’s salary to be paid at least a week before their religious holiday. Workers with three to 12 months of employment receive a prorated bonus.

Probationary period

A probation period of up to three months may be included in an employment contract that lasts for an indefinite period.

A probationary period may not be imposed on a definite-period worker.

Termination and severance

Effective September 1, 2023, Job Creation Law No. 6 of 2023 amends the main Manpower Law No. 13 of 2003. Under the amendment, employers must give 14 working days’ notice of termination and notice is effective unless the employee objects in writing within seven working days.

It is difficult to terminate employees in Indonesia, and employers, trade unions, and workers must attempt to prevent the termination. Employers must consult the worker’s union or contact a worker directly if they are not a union member before terminating employment. If an agreement cannot be reached, the employer must seek the government’s permission to terminate the worker. During the termination process, the employer can suspend the worker but must continue to pay salary and provide benefits.

Employers do not need permission to dismiss a worker who is on probation, has offered a written resignation, or reached retirement age, or a worker whose fixed-term contract has expired.

Workers can end the employment relationship by giving at least 30 days’ notice. Unless they terminate the contract for cause, however, employees do not receive severance or reward pay.

Terminated employees are entitled to:

• Severance pay, which starts at one month’s salary for up to a year of service and increases by a month’s salary for each additional year, up to nine months wages
• A reward for service rendered, starting at two months’ salary for three to six years of service and increasing by a month’s salary for every additional three years of service, up to 10 months’ wages
• Payment for any benefits entitled, such as unused annual leave, housing, and health care allowances

Workers fired for cause do not receive severance or reward pay but are entitled to benefits payments.

As your employer of record in Indonesia, we can work with you to quickly handle the unforeseen event of an employee termination, providing legal guidance and a personalized process that ensures you stay out of labor court.

Employee benefits and paid leave in Indonesia

When negotiating terms of an employment contract with a candidate in Indonesia, here are some of the statutory benefits and paid leave requirements to keep in mind, as well as how an employer of record can support your company’s benefits strategy.

Maternity leave

Pregnant employees are entitled to employer-paid maternity leave for 45 days before and 45 days after giving birth. These periods of leave can be extended if a doctor or midwife approves or requests it.

If an employee is pregnant or breastfeeding, she cannot be required to perform work that endangers her health or that of her child, nor can she be terminated.

An employee who suffers a miscarriage is also entitled to 45 days of paid leave.

Vacation

Workers are entitled to 12 days of paid leave each year after they have worked for 12 consecutive months. At least six days of this leave must be taken consecutively. Annual leave must be taken within six months of its accrual.

In some companies, employees who have worked for the employer for six consecutive years get one month of paid leave in each of the following two years. This long break is available every six years when the worker is employed by the same company.

Holidays

The following public holidays are observed in Indonesia:

• New Year’s Day
• Chinese New Year
• Prophet Muhammad’s Birthday
• Hindu New Year
• Ascension of the Prophet Muhammad
• Nyepi Day
• Good Friday
• International Labor Day
• Eid Al-Fitr (multiple days)
• Waisak Day
• Ascension
• Pancasila Day
• Eid Al-Adha
• Independence Day
• Birthday of Prophet Muhammad
• Christmas Day

Employees cannot be required to work on holidays unless the job must be performed on these days, as determined by the minister of manpower. Employees required to work on a holiday must be paid twice their normal wage. Holidays that occur on a weekend are not moved to another date.

Sick leave

Employers must pay employees who take time off from work due to illness if the employee submits medical certification.

Compensation is calculated as follows:

• For the first four months: 100% of wages
• For the second four months: 75%
• For the third four months: 50%
• Any subsequent months: 25%

After 12 months’ absence due to illness, the employee can be terminated.

Female employees are entitled to two days of menstruation leave if they are unable to work.

Other leave

In Indonesia, paid leave is given for a variety of occasions:

• A wedding (three days)
• The birth of a child/paternity leave (two days)
• A child’s wedding (two days)
• A son’s circumcision (two days)
• A child’s baptism (two days)
• A wife’s miscarriage (two days)
• The death of a spouse, child, child-in-law, parent or parent-in-law (two days)
• The death of another member of an employee’s household (one day)
• Government obligations
• Religious obligations
• Trade union activities (with the employer’s permission)

Health coverage

All employees, including foreign workers, who have been employed for at least six months in Indonesia are obliged to become a member of the social security program.

Employers must provide medical coverage for workers, their spouses and up to five children. The policy premium is 5% of workers’ pay, borne partly by the employer (4% of basic salary plus fixed allowance) and partly by the worker (1% of basic salary plus fixed allowance).

Additional benefits

In addition to healthcare benefits, employees in Indonesia are entitled to pension, which is funded by government tax revenues, as well as workers compensation, which is covered through mandated employer insurance.

Employer social costs will cover a large portion of employee benefits in Indonesia, but we can consult with you about supplemental coverage options, such as additional pension contributions or life insurance if needed.

Updated: February 14, 2024

Employee onboarding with an employer of record in Indonesia

We write and validate all local employment contracts, streamlining the onboarding process for you and your Indonesian employees—all you have to do is provide relevant information and review and approve the employment agreement. As your employer of record in Indonesia, we will:

• Schedule a welcome call to discuss HR and employment information for Indonesia, as well as answer any questions
• Prepare a customized employment contract in English or other local language
• Share the employment contract and benefits information with the new employee for signature and review
• Gather tax and banking information from the employee to set up payroll
• Provide a local point of contact to the employee to answer any questions regarding their employment, local HR or payroll

The entire onboarding process for the employee is often completed in as little as two weeks.

Partner with Safeguard Global as your Indonesia employer of record and PEO

With over a decade of service, we are the longest-serving employer of record and PEO provider in the international market. Organizations around the world rely on EOR, our employer of record solution to expand and hire in 170+ countries around the world, quickly and compliantly.

We’ve seen just about every global employment circumstance imaginable—and with our extensive knowledge of local law and culture, we know what it takes to get employment right in Indonesia. We provide written contracts in the local language, salaries in the local currency and HR support in your employees’ time zone.

Additionally, as a global payroll provider, we support payroll administration—including payments, filings and other calculations— all around the world and can accommodate the payroll outsourcing needs of any size organization.

Whether you’re looking to hire as part of a strategic expansion or to meet specific talent needs, our global solutions advisors can walk you through your international hiring options so you can make the right choice for your organization. Contact us today.

Disclaimer

The information provided on or through this website is for informational purposes only and does not constitute legal advice. Safeguard Global expressly disclaims any liability with respect to warranty or representation concerning the information contained herein, including the lost essence, interpretation, accuracy and/or completeness of the information in transit and language translation.