4. Types of leave

There is no information about the types of leave for this country.
Learn more about 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

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

Parental leave

In the following situations, employees are entitled to paid child leave:

2 days paid leave for the employee's child's circumcision

2 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.

5. Employment termination

There is no information about employment information for this country.

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.

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.

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.

6. Working hours

There is no information about the working hours for this country.

General working schedule

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.

7. Minimum wage

There is no information about the working hours for this country.

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

8. Employee benefits

There is no information about the working hours for this country.

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.

9. Taxes

There is no information about the working hours for this country.

Corporate tax

If a company's domicile is in Indonesia, it is subject to the tax requirements imposed by the Indonesian government. Similarly, a foreign firm that has a (permanent) presence in Indonesia and does business via this local organization is subject to Indonesian taxation. If a foreign firm does not have a permanent presence in Indonesia but generates revenue via business operations in Indonesia, it must satisfy its tax obligations by withholding tax from the Indonesian party receiving the income.

In general, the corporate income tax rate in Indonesia is 25%. There are, however, a few exceptions.

Companies listed on the Indonesia Stock Exchange (IDX) who offer at least 40% of their entire share capital to the public benefit from a 5% tax reduction (hence a tax rate of 20 percent applies for these public companies).

Small and medium-sized businesses with yearly revenues less than IDR 50 billion (about USD $3.8 million) qualify for a 50% tax break (imposed proportionally on taxable income of the part of gross turnover up to IDR 4.8 billion). In 2013, Indonesia's Finance Ministry announced a rule imposing a 1% income tax on individual and institutional taxpayers with an annual gross turnover of less than IDR 4.8 billion (about USD $363,636).

Individual income tax

Income taxes is governed by provincial (Provinsi) government laws that are determined by the economic realities of the region.

Individuals with a yearly income of less than IDR 50 million are subject to a 5% tax rate.

Individuals having an annual income of IDR 50 million to IDR 250 million are subject to a 15% tax rate.

Individuals having an annual income of IDR 250 million to IDR 500 million are subject to a 25% tax rate.

Individuals having an annual income of more than IDR 500 million are subject to a corporate tax rate of 30%.

Employer withholding accounts for a significant portion of individual income tax collection. Employers deduct income tax from workers' wages and other remuneration on a monthly basis. The above-mentioned tax rates apply if the employee is a resident taxpayer (lives in Indonesia). The withholding tax is 20% of the gross amount if the person is a non-resident taxpayer (in case of a tax treaty the amount may vary).

VAT, GST and sales tax

In Indonesia, Value Added Tax (VAT) is levied on the transfer of taxable products or the supply of taxable services. Deliveries of taxable goods in by an enterprise; import of taxable goods; deliveries of taxable services by an enterprise; use or consumption of taxable intangible goods/services originating from abroad; and export of taxable goods (tangible and intangible) or services by a taxable enterprise are all taxable events/services.

In general, the VAT rate in Indonesia is 10%. However, depending on government regulations, the actual amount may be raised or reduced to 15% or 5%. VAT on the export of taxable physical and intangible products, as well as services, is set at 0%. Certain restrictions apply to zero-rated VAT on service exports.

10. VISA and work permits

There is no information about the working hours for this country.

Visa exemptions are granted by the Indonesian government to citizens of 169 countries, including the United States, Canada, Australia, and Singapore.

Previously, a foreign employee needed an individual work permission to enter Indonesia for employment (IMTA). This has since been superseded by a Ministry of Manpower Notification. After receiving notice, an employee or business may apply for an Indonesian visa. Foreigners will be given a Visa Telex (visa index 312), allowing them to work and travel in Indonesia.

For foreign nationals planning to live and work in Indonesia, there are two kinds of visas available.

Employers must apply for Izin Tinggal Terbatas (ITAS) or Electronic ITAS (e-ITAS) on behalf of prospective workers. The ITAS allows workers to remain in Indonesia and create a bank account. They may also remain in the nation for three years before applying for permanent residence. Before applying for ITAS, the employee must first get a Visa Izin Tinggal Terbatas (VITAS), which is an Indonesian limited-stay permission visa.

Employees may also apply for the Kartu Izin Tinggal Tetap (KITAP), which provides them a permanent residency permit (KITAP), although this is only accessible to those who have had an ITAS for three years or more.

11. Employer Of Record service terms

There is no information about the working hours for this country.

Employment contracts

Name and address of the employer;

Name, age, address, and gender of the employee;

Job title and job description;

Place of work;

Wages and how they will be paid;

Start date of employment;

Other terms and conditions of employment contract;

Date of contract execution; and

Signature of both parties.

Minimum assignment length

There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.

Payment currency

Indonesian Rupiah (IDR)

United States Dollar (USD)

13.Opening a subsidiary in Indonesia

There is no information about the working hours for this country.

How to set up a subsidiary

When establishing an Indonesia subsidiary, you should ask yourself a few questions regarding your business. Where do you want to grow in Indonesia? And what type of company do you want to run in the country? The answers to these questions may have an influence on the Indonesia subsidiary creation procedure, as well as where and what sort of organization you incorporate as.

Different areas in Indonesia have different regulations, pricing, and availability, which all have an influence on your incorporation procedure. Before establishing your Indonesia subsidiary, you should always do study on the physical area where you want to place your office. You must also consider if a limited liability company (LLC), a representative office, or a joint venture firm is the right subsidiary structure for your business objectives.

A limited liability corporation is the most typical subsidiary structure, and it allows the parent firm and the subsidiary to function fairly independently. The following actions are required to establish an Indonesia subsidiary:

1. Paying the expenses to get your company's name cleared at a bank

2. Making arrangements with a notary to get a standard form of the business deed

3. All corporate documentation must be notarized.

4. Applying to the Ministry of Law and Human Rights for approval of your establishment's deed

5. Obtaining a Certificate of Building Management Domicile Applying for a Certificate of Company Domicile

6. Legal services are paid for using non-taxed state funds.

7. Applying for a permanent business trading license Obtaining a certificate of incorporation

8. Registration with the Ministry of Labour

9. Applying for social security, health insurance, a taxpayer identification number, and other services.

Subsidiary laws

Subsidiary laws in Indonesia differ depending on the kind of organization you choose to incorporate as. At least one director, two local Indonesian shareholders, and one commissioner are required for your LLC. The commissioner is not need to be a resident, but they must monitor the business, review the yearly report, and approve the budget plan.

The amount of paid-up share capital required to comply with Indonesia's subsidiary rules is determined by the size of your firm. The three sizes, as well as the accompanying share capital amounts, are as follows:

(1) $3,745-$37,435 for a small business

(2) $37,435-$748,740 for a medium-sized business

(3) Above $748,740 for a large corporation

If you want to sponsor foreign personnel rather than hire Indonesians, you must incorporate as a medium-sized firm. All issued share capital for whatever size business must be put into your firm's Indonesian bank account immediately after incorporation.

13. Why choose Rivermate as your Employer of Record / PEO in Indonesia

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.

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