Indonesia Employer of Record

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, Global Employment Outsourcing (GEO), and local HR experts can help you manage your international employment needs.

Hiring in Indonesia

Labor unrest and recent regulatory changes in Indonesia have made hiring and employment more complicated than ever. In November 2020, the passage of the Omnibus Bill for Job Creation reduced a number of worker protections, resulting in ongoing protests throughout the country. As of February 2021, the bill was still being challenged in the courts, and the effects it might have on labor regulations remains uncertain.

Because of the ongoing transition in Indonesia, it’s important to have local labor expertise to help navigate the changes. As your employer of record and PEO in Indonesia, we can ensure that every contract, for every worker, meets all requirements. We can also provide you with guidance about cultural norms and hiring best practices and keep you up-to-date with employment regulations as they change.

Employment contracts in Indonesia

As you look to hire employees in Indonesia, here are some common 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
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.

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.
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.
An employee must consent to overtime and cannot work more than three overtime hours per day or 14 hours per week.
Overtime of more than three hours per day requires the employer to provide food and drink of at least 1,400 calories.
Overtime pay is 1.5 times the regular wage for the first hour, and double time for the remaining hours.
Overtime pay for rest days or statutory holidays is calculated differently per hour depending on the total number of hours worked.

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 of time.

Termination and severance
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.

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
Good Friday
Vesak Day
Ascension
International Labor Day
Pancasila Day
Independence Day
Idul Fitri (five days)
Idul Adha
Islamic New Year
Christmas Day
Day after Christmas

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 who are 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
In 2014, Indonesia implemented compulsory universal health care called Jaminan Kesehata Nasional (JKN) with the goal of achieving 100% coverage by 2019. (The country has not yet reached that goal.) Formally employed people pay 1% of their salary toward coverage and employers pay 4% of each employee’s salary. Informally employed people pay a fixed monthly premium.

Private health insurance is also available and more midsize and large companies offer it as a benefit.

As your employer of record in Indonesia, we may be able to provide optional supplementary medical insurance coverage for professionals and their dependents at a more cost-effective rate.

Pension
All employees, including foreign employees, who have been employed for at least six months are required to pay into the social security program, which covers pension benefits.

The retirement age is 58 and will gradually increase by one year every three years until it reaches 65 in 2043.

Retirement benefits are available when an employee has been enrolled in the program for at least 15 years, or 180 months, and has also reached retirement age. Participants may claim benefits before they meet those requirements in order to prepare for retirement or buy a house. They must have participated in the program for at least 10 years and the benefits can be claimed up to 10% of total benefits if preparing for retirement, or 30% to buy a house.

Workers’ compensation
Employees who have an accident at work, on the way to or from work, or who contract a disease as a result of their occupation are entitled to compensation for transportation costs, the costs of medical care and rehabilitation and payments to cover their temporary inability to work. These costs are covered by the social security program.

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.

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 Indonesia 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 and in Indonesian (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 Global Employment Outsourcing (GEO) to expand and hire in over 179 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—in more than 150 countries 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.

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.

Learn more about Global Employment Outsourcing

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