Understanding market competitive salaries in Indonesia is crucial for both employers and employees. A competitive salary attracts and retains top talent, while an under-market offer can lead to recruitment difficulties and high turnover.

Factors Affecting Market Competitive Salaries

• Industry: Salaries vary significantly across industries. Finance, technology, and oil & gas typically offer higher salaries than education, hospitality, and retail.
• Location: Jakarta, Indonesia's capital, boasts higher salaries compared to other regions. Cost of living also plays a role; areas with higher living expenses often have higher salaries.
• Experience: Employees with more experience generally command higher salaries. Those with 2-5 years of experience can expect a 32% increase compared to entry-level roles.
• Education: Higher educational qualifications often lead to higher salaries.
• Company Size: Multinational corporations and larger companies tend to offer higher salaries compared to smaller businesses.

Determining Market Competitive Salaries

• Salary Surveys: Reputable recruitment agencies publish annual Indonesia Salary Reports with industry-specific benchmarks and insights.
• Job Boards: Many job boards allow filtering by location, experience, and industry, providing a general idea of salary ranges for specific positions.
• Salary Calculators: Online tools allow for a more granular look at salaries based on specific criteria.

Indonesia's minimum wage is determined at both the provincial and regency/city level, reflecting the varying living costs across the country.

Minimum Wage Setting Authority

According to the Minister of Manpower Regulation No. 18 Year 2022, the minimum wage is the lowest monthly wage established by governors for workers in their respective provinces.

Provincial vs. Regency/City Minimum Wage

The minimum wage is set at both the provincial level and the regency/city level. Provincial minimum wages are determined by the governor and announced by November 21st of the current year. On the other hand, regency/city minimum wages are determined by gubernatorial decree and announced by November 30th of the current year.

Minimum Wage Calculation

Although there's no official regulation outlining the calculation method, a common formula used is dividing the monthly minimum wage by 21 to get a daily minimum wage.

Micro and Small Enterprises Exemption

Micro and small enterprises are exempt from following the provincial or regency/city minimum wage. However, workers in these enterprises must be paid at least 50% of the average provincial consumption or 25% above the provincial poverty line.

Payment Regulations

Wages must be paid in Indonesian Rupiah (IDR) or its equivalent in foreign currency. Any non-cash portion of the payment cannot exceed 25% of the total wage.

Employee compensation in Indonesia is not limited to a base salary. To attract and retain top talent, companies offer a variety of bonuses and allowances. These can be either mandated by law or provided as additional benefits.

Mandatory Bonuses and Allowances

Indonesian law mandates several bonuses and allowances for employees. These ensure a minimum level of financial security and address specific needs. Here's a breakdown of the mandatory offerings:

• Religious Holiday Bonus: This annual bonus is equal to one month's salary and must be paid before major religious holidays like Idul Fitri for Muslims and Christmas for Christians. The bonus is prorated for employees who haven't completed a year of service.

• Overtime Pay: Overtime work is strictly regulated in Indonesia. Overtime exceeding regular working hours is compensated at a higher rate. The first hour receives a 150% pay increase, with subsequent hours going up to 200%. Working on rest days or public holidays attracts an even higher pay rate, ranging from 200% to 400%.

• Social Security Contributions: Employers contribute to various social security programs on behalf of their employees. These include health insurance, pension plans, and workplace accident insurance. The contributions are usually split between the employer and employee.

Additional Allowances Offered by Companies

Many companies in Indonesia provide additional benefits beyond the legal requirements. These can be a great way to attract and retain talent, boost employee morale, and improve overall well-being. Here are some common additional allowances:

• Transportation Allowances: Companies may offer transportation allowances to help employees cover commuting costs. This can be a fixed monthly amount or a reimbursement for public transportation expenses.

• Food Allowances: Food allowances help employees with meal expenses during work hours. This can be a daily or monthly allowance, or some companies may provide meals directly.

• Housing Allowances: In some cases, companies might offer housing allowances to help employees with rent or mortgage payments, particularly in expensive cities.

• Other Allowances: Depending on the industry and company culture, additional allowances may be offered, such as allowances for communication (phone bills), uniforms, or professional development.

In Indonesia, the standard payroll cycle for most employees is monthly, aligning with many other countries. Employers typically disburse salaries on the last working day of the month, although the specific date can be defined within the employment contract.

Overtime Regulations

Indonesian law mandates additional compensation for overtime work. The typical work week is 40 hours, translating to roughly 8 hours per day. Employees are entitled to overtime pay for exceeding these standard hours. The maximum allowed overtime is 4 hours per day and 18 hours per week.

Overtime Pay Calculation

Overtime pay rates vary depending on the day and duration of the extra hours worked. On weekdays, the first overtime hour receives a 1.5x multiplier on the regular hourly wage. Subsequent overtime hours on weekdays are compensated at a 2x rate. Overtime pay on weekly holidays and national holidays follows a different calculation.