Guide to employment, payroll and benefits in

Indonesia

Rivermate offers complete payroll, benefits and compliance services for

Indonesia

01. Overview

Last updated: 

August 19, 2021

Currency
Indonesian Rupiah
Capital
Jakarta
Ease of doing business
69.6
Language
Indonesian
Population
273523615
GDP growth
5.07%

02. Grow your team in

Indonesia

with Rivermate

Payroll, benefits, taxes, and compliance can be difficult to manage in

Indonesia

, particularly if you don't have established local relationships. You can hire employees in

Indonesia

effectively, conveniently, and in full compliance with all relevant labor laws using Rivermate's global employment solution. We handle the responsibilities and legal risks associated with foreign employment so you can concentrate on growing your company.

03. Summary

Indonesia, officially the Republic of Indonesia, is a nation located between the Indian and Pacific oceans in Southeast Asia and Oceania. It covers an area of 1,904,569 square kilometers and is made up of over seventeen thousand islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Guinea. At 1,904,569 square kilometers, Indonesia is the world's largest island nation and the 14th-largest country by land area. Indonesia is the world's fourth-most populous country and the world's most populous Muslim-majority country, with over 270 million inhabitants. More than half of the country's population lives on Java, the world's most populated island. Indonesia is a presidential republic with a democratically elected legislature. It is divided into 34 provinces, five of which have special status. Jakarta, the country's capital, is the world's second-most populous city. Papua New Guinea, East Timor, and the eastern part of Malaysia share land boundaries with the region. Singapore, Vietnam, the Philippines, Australia, Palau, and India are among the country's neighbors. Despite its large population and densely populated regions, Indonesia has vast swaths of wilderness that sustain some of the world's most diverse ecosystems. Since at least the 7th century, when Srivijaya and later Majapahit traded with entities from mainland China and the Indian subcontinent, the Indonesian archipelago has been a valuable trading area. From the early centuries, local rulers gradually absorbed foreign powers, and Hindu and Buddhist kingdoms flourished. Islam was brought by Sunni merchants and Sufi scholars, while Christianity was mainly brought by European explorers. The Dutch were the most powerful imperial force in the archipelago for much of their 350-year presence, despite interruptions from the Portuguese, French, and British. In the early twentieth century, the idea of "Indonesia" as a nation-state arose, resulting in the declaration of Indonesian independence in 1945. However, after an armed and political dispute, it was not until 1949 that the Dutch acknowledged Indonesia's sovereignty. Indonesia is home to hundreds of ethnic and linguistic communities, the most populous of which is the Javanese. With the slogan "Bhinneka Tunggal Ika," a common identity has emerged, characterized by a national language, ethnic diversity, religious pluralism within a Muslim-majority community, and a history of colonialism and resistance to it. Indonesia has the 16th largest nominal GDP and the 7th largest PPP economy in the world. It is a regional force and a middle power in international relations. The country is a founding member of the Non-Aligned Movement, Association of Southeast Asian Nations, East Asia Summit, and Organization of Islamic Cooperation, as well as a member of the United Nations, World Trade Organization, and G20.

04. Public holidays

05. Types of leave

Paid time off

Employees in Indonesia are entitled to 12 days of paid leave after working with the same company for a period of 12 months. Employees earn full salary depending on their normal daily payment while on annual leave. Employers are required to take at least 6 days off. Employees' paid leave ends six months from the day they were expected to take it if they do not have it. Employees and employers can consent to a cash reward for lost vacation time.

Public holidays

Indonesia recognizes 16 public holidays.

Sick days

Employees who are sick or wounded are entitled to compensated sick leave if they can provide medical proof of their illness. Long-term sick leave, which lasts more than a year, is also an option for employees. A doctor should issue a written recommendation for such leave.Employees on long-term maternity leave are paid as follows:In the first four months, 100 percent was achieved.In the second four months, 75% of the population grew.The third four months accounted for 50% of the total.25% of your pay before you're fired

Maternity leave

Employees who are pregnant are entitled to three months of paid maternity leave. The first 1.5 months of this leave was taken during pregnancy, and the remaining 1.5 months are taken following childbirth. Employees earn an entire pay after their maternity leave. If a doctor recommends it, female workers who miscarry are entitled to a 1.5-month leave of absence.Employers can also provide breastfeeding mothers with conducive working environments.

Paternity leave

New fathers are entitled to two days off after the birth or miscarriage of their infant.

Parental leave

In the following situations, employees are entitled to paid child leave:2 days paid leave for the employee's child's circumcision2 days paid leave for the employee's child's baptism.2 days paid leave for the employee's child's wedding.For the loss of an employee's child, the employee is entitled to two days of paid leave.

Other leave

Bereavement Leave: 2 days paid leave is given for the death of a worker’s spouse, child, child-in-law, parent, or parent-in-law.

06. Employment termination

Termination process

Prior to terminating an employee, the employer must make a sincere attempt to avoid termination by talking with the employee and/or the employee's labor union to find an accommodation such as a change in working hours, improved working practices, or coaching.


If termination is unavoidable, the employer must communicate the grounds for termination to the employee and/or the employee's labor union in writing.


If the employee believes the termination was unjust, he or she may appeal the decision to the Labor Court, which will render a final judgement. Employees may be fired for the following reasons: the employee violates the employment agreement; the employee is imprisoned; the employee is unwell for more than 12 months; the employee is absent from work for more than 5 days without a good cause after being told twice; and the employee has reached retirement age.


Not every reason for dismissing an employee should be related to their behaviour. Employers may discharge employees for a variety of business-related reasons: the company's status changes, it merges with another business, or it is acquired; the employer becomes insolvent; the employer has sustained continuous losses for two consecutive years as evidenced by financial reports; or the employer is permanently closing the business.

Notice period

There is no law that stipulates how long an employee must be given notice before being fired. In practice, the employee is given a 30-day notice before his or her employment contract is terminated.

Severance pay

Employees who are laid off are entitled to a severance payment based on the of service they rendered for the company. If an employee has worked for the company for less than a year, severance pay is equivalent to one month's pay. Severance pay is equivalent to two months' wages for a one- to two-year employment period. Severance pay is equivalent to three months' wages for a two- to three-year employment. Severance pay is equivalent to four months' wages for a three to four-year employment. Severance pay is equivalent to five months' wages for a four to five-year employment. Severance pay is equivalent to six months' wages for a five to six-year employment. Severance pay is equivalent to seven months' wages for a six to seven-year employment. Severance pay is equivalent to eight months' wages for a seven to eight-year employment. Severance pay is equivalent to nine months' wages for employment lasting more than eight years.

Probation period

Probationary periods of three months are permitted for employees on indefinite-term contracts if both parties agree in writing. A fixed-term contract employee cannot be subjected to a probationary period.

07. Working hours

General

Employees are permitted to work up to 40 hours per week over five or six days. Daily hours are limited to seven for a six-day work week and eight for a five-day work week.

Overtime

Overtime is permissible but is limited to three hours per day and fourteen hours per week. Employees must consent to working overtime in writing, and consent cannot be coerced or compelled.


Employers must pay 1.5 times their regular wage for the first hour and twice their regular wage for any subsequent hours. Wages should include a stipend and other fixed benefits. The maximum amount of overtime permitted per day is three hours or fourteen hours per week. Senior-level positions are exempt from overtime requirements. The employer must issue a written order and the employee must provide written consent for any overtime worked.

08. Minimum wage

General

The 34 regions have different minimum wages, ranging from IDR 1,798,979 in Central Java to IDR 4,416,186 in DKI Jakarta.

09. Employee benefits

General

Health insurance is provided in Indonesia through a government insurance company that is funded by employer and employee contributions. Employers must enroll their employees in this system.

10. Why Rivermate as your Employer of Record / PEO?

Establishing an entity in

Indonesia

to hire a team takes time, money, and effort. The labor law in

Indonesia

has strong worker employment protection, requiring great attention to details and a thorough awareness of local best practices. Rivermate makes expanding into

Indonesia

simple and effortless. We can assist you with hiring your preferred talent, managing HR and payroll, and ensuring compliance with local legislation without the hassle of establishing a foreign branch office or subsidiary. Our PEO and Global Employer of Record solutions in

Indonesia

give you peace of mind so you can focus on running your business.

Please contact us if you'd like to learn more about how Rivermate can help you hire employees in

Indonesia

via our Employer of Record / PEO solution.

Ready to get started? Our friendly staff is ready to assist you with all your questions, let's connect.