Employing in Indonesia
Indonesia’s labor law is centered on the Manpower Law (Law No. 13 of 2003), which regulates employment contracts, working hours, wages, employee benefits, termination procedures, and occupational health and safety. This was revised by the Omnibus Law on Job Creation (Law No. 11 of 2020), subsequently amended by Government Regulations in 2022 and 2023, to introduce greater flexibility in employment contracts, wage determination, and severance payments, aiming to foster investment and improve the business environment.
Onboarding time
Minimum Wage
Employer costs
Employee costs
Onboarding time
Team APAC can onboard your talents within an average of 336 hours.
Minimum Wage
The monthly minimum wage in Jakarta is IDR 5,396,760. Minimum wages may differ in other provinces.
Employer costs
- Provident Fund – 3.7%
- Death Security – 0.3%
- Work-related Accident Benefit – 0.24%
- Outside Work-related Accident Benefit – 0.24%
- Healthcare and Social Security- 4% (capped at IDR 210,948/month)
- Pension Fund – 2% (capped at IDR 480,000/month)
Employee costs
- Old Age – 2%
- Pension – 1%
- Health Insurance – 1%
Payroll
The payroll process in Indonesia starts with a pre-payroll phase where employee data, attendance, overtime, bonuses, and mandatory deductions like income tax (PPh 21) and social security contributions (BPJS Ketenagakerjaan and BPJS Kesehatan) are collected and validated, ensuring adherence to regional minimum wage standards and company policies.
Payroll cycle
Employers must pay salaries at least once a month, usually on the last working day of the month.
Payroll calculations
Salaries are calculated, integrating salary components, progressive tax rates ranging from 5% to 35%, mandatory benefits, and employer-employee contribution splits. After deductions, payments are typically made to employees via direct deposit.
Compliance requirements
The post-payroll phase includes salary disbursement and statutory reporting to government agencies.
Additional payments
13th Salary
Employers must provide a 13th-month bonus called Tunjangan Hari Raya (THR), paid before religious holidays and prorated for employees with less than one year of service.
Bonuses
There is no legal requirement that employers provide employee bonuses (apart from THR).
Commissions
Commissions are commonly given in Indonesia, particularly within sales-oriented positions and industries. This commission pay is usually offered alongside a base salary, acting as a bonus or motivation for employees who meet sales targets or contribute to revenue generation.
Other allowances
In Indonesia, common supplemental allowances include transportation allowances or shuttle services to ease commuting challenges, and meal allowances or food benefits.
Taxes
Indonesia’s tax system is based on a self-assessment framework, where taxpayers are responsible for calculating, paying, and reporting their own taxes. The employer is required to withhold income tax from salaries and remit it monthly to the tax authorities on the employee’s behalf. The Directorate General of Taxes (DGT) primarily functions as an auditor and controller.
Employee Income Tax
Personal income tax in Indonesia is progressive, with rates ranging from 5% to 35% depending on income levels. Residents are generally taxed on their worldwide income, whereas non-residents are subject to a flat withholding tax of 20% on income sourced within Indonesia.
Income Tax
- 5% – Up to IDR 50 million
- 15% – From 1DR 60 million to IDR 250 million
- 25% – From 1DR 250 million to IDR 500 million
- 30% – From 1DR 500 million to IDR 5 billion
- 35% – Above IDR 5 billion
Employment eligibility
Foreign employees in Indonesia must secure approval of a Foreign Worker Employment Plan (RPTKA) from the Ministry of Manpower, which justifies the need to hire foreign workers and specifies job titles, contract duration, and training plans for Indonesian staff. They are required to have appropriate academic credentials, usually a university degree, along with at least five years of relevant work experience.
Visa
Foreign employees need to obtain a valid work visa (VITAS C312) and a Limited Stay Permit (ITAS) to work legally in Indonesia. Essential documents include a passport valid for at least 18 months, educational certificates, proof of work experience, insurance, and employer sponsorship papers.
Employers are responsible for paying a monthly foreign worker utilization fee (around US$100 per month) and must register both foreign and local employees in Indonesia’s social security system (BPJS). Some roles, such as board members with share ownership or diplomatic officials, are exempt from work permit ratification.
Additionally, foreign workers must be paired with Indonesian employees to facilitate knowledge transfer, and employment contracts typically align with visa validity, often ranging from 6 to 12 months with possible extensions.
Visa types
Indonesia offers two types of work visas for foreign nationals seeking employment in the country, these are:
- Izin Tinggal Terbatas (ITAS): ITAS is a limited-stay permit that can be granted to foreign employees by the Indonesia Directorate General of Immigration through a local immigration office. To obtain an ITAS, applicants must first secure a Visa Izin Tinggal Terbatas (VITAS), which serves as an Indonesian limited-stay visa.
- Kartu Izin Tinggal Tetap (KITAP): KITAP is a permanent-stay permit available to international workers who have continuously held an ITAS for a minimum of three years.
Compliance documents
Employee provides the following documents:
- A copy of their passport, which must be valid for a minimum of 18 months
- Proof of health insurance
- Passport photos in color
- A copy of the employee’s highest degree of education, which must be stamped and signed by the employer
- A copy of the applicant’s CV, which should also be stamped and signed
- A work certificate that shows the applicant has at least 5 years of relevant experience
Employer provides the documents listed below:
- A completed visa application form
- A business license
- Their NPWP number for tax identification
- A business license issued by the Indonesia Investment Coordinating Board (BKPM)
- A copy of the sponsor’s ID card (KTP)
- A copy of a local employee’s KTP
- Mandatory Manpower (Wajib Lapor) report
- Business Identification Number (NIB)
- Certain documents within the application must have the letterhead of the company and a company stamp
- Certificate of Company Domicile (SKDP)
- The company’s deed establishment, authorized by the Ministry of Law and Human Rights
Background check
In Indonesia, obtaining a work visa for foreign employees involves a mandatory background check, with emphasis on criminal records. Employers are required to submit a Foreign Worker Employment Plan (RPTKA) to the Ministry of Manpower and Transmigration and upload the foreign worker’s personal information into the TKA Online system. Once approved, a background check is performed, which includes verifying criminal records through the Surat Keterangan Catatan Kepolisian (SKCK)—a police clearance certificate issued by the Indonesian National Police that confirms the individual is not currently under any criminal investigation in their local jurisdiction. The SKCK is valid for six months. Except for the final issuance of the ITAS, the entire procedure can be completed online, making the verification and approval process for foreign employment in Indonesia more efficient.
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Benefits
Mandatory employee benefits in Indonesia include contributions to social security programs administered by BPJS, covering health insurance (BPJS Kesehatan) and employment-related protections (BPJS Ketenagakerjaan), with both employers and employees sharing the costs. Other compulsory benefits include the religious holiday allowance (Tunjangan Hari Raya, THR), annual leave (minimum 12 days after 12 months of service), sick leave, maternity leave (three months total), and paternity leave (two days), as well as compliance with regionally mandated minimum wages and work accident insurance fully covered by employers.
The BPJS programs provide comprehensive coverage including healthcare, accident compensation, old age benefits, pensions, and life insurance components. Beyond these mandatory benefits, many employers in Indonesia offer supplemental benefits such as private health insurance, transportation and meal allowances, and life and disability insurance.
Private health insurance
Private health insurance in Indonesia is designed to supplement BPJS coverage, offering access to a wider range of healthcare providers and faster services.
Team APAC providers
We offers multiple health insurance options, allowing customers to choose between International Health Insurance, providing worldwide coverage on a pay-and-claim basis, or a Local Health Insurance, which offers a cashless access to treatment within the provider’s network. We offer the flexibility to cover either the employee only (single option) or the employee and their dependents (family option), tailored to meet the specific needs of your team.
- SafetyWing
- Allianz
Mandatory benefits
Mandated benefits in Indonesia are social security programs, which include health insurance and employment-related protections, annual leave, sick leave, maternity and paternity leave.
Mandatory benefits in Indonesia
- Social Insurance Programs (including Health Insurance and Employment-related Protections)
- Annual Leave
- Sick Leave
- Maternity Leave
- Paternity Leave
Working hours
Regular weekly working hours are limited to 40. Regular daily working hours are limited to seven hours a day, six days a week or eight hours a day, five days a week. For every four hours worked, a 30-minute break is required. The law also requires one day of rest every week for those who work a six-day workweek and two days of rest for those with five-day workweeks.
Working hours per day
The standard workday is 8 hours (7 hours a day on a six-day workweek).
Working hours per week
The standard workweek is 40 hours.
Overtime pay
Overtime worked on regular workdays is paid at 150% of the regular hourly rate. Pay for work on weekly rest days and/or national holidays is 200-400% of the regular hourly rate.
Overtime cannot exceed three hours per day, or 14 hours per week.
Leave
In Indonesia, Law No. 13 of 2003 on Employment mandates several statutory leaves. Employees are entitled to paid annual leave, sick leave. Female employees receive fully paid maternity leave. Male employees receive paternity leave for two days with full pay.
Paid public holidays and personal leave are granted for significant family events such as marriage, childbirth, and bereavement.
Annual leave
An employee is entitled to 12 days of annual leave with full pay after completing 12 months of continuous service.
Sick leave
Employers are required to compensate employees absent from work due to illness provided the employee submits medical certification. For the first four months, compensation must be at 100 percent of wages; for the second four, 75 percent; the third four, 50 percent; and subsequent months, 25 percent. After 12 months’ absence due to illness, the employer can dismiss the employee.
Parental leave
Currently, there is no law requiring employers to provide parental leave.
Maternity leave
Employees are entitled to three months of paid maternity leave after childbirth, fully funded by the employer. If health complications arise for the mother or child, an additional three months of leave may be granted with a doctor’s certificate.
During the leave period, employees receive 100% of their salary for the first four months and 75% of their salary for the fifth and sixth months, if extended.
Paternity leave
A male employee is entitled to two days’ employer-paid leave following the birth of a child or his wife’s miscarriage.
Long service leave
Currently, there is no law requiring additional leaves relative to long service leave.
Compassionate leave
Compassionate leave or bereavement leave of two days in the event of the death of a first-or second-degree relative, or one day for the death of a household member.
Family & domestic violence leave
Currently, there is no law requiring leave in relation to domestic violence. Parents, however, may request two days of paid leave for their children’s religious ceremonies such as circumcision or baptism.
In addition, marriage leave is given to allow employees three days off for their own marriage rites or two days if attending their child’s wedding. Adoptive parents receive the same leave benefits as natural parents, including three months of paid leave for adoptive mothers and two days of paid leave for adoptive fathers.
Termination
Employment termination in Indonesia is primarily governed by Labor Law No. 13 of 2003, as amended by the Job Creation Law (Law No. 11 of 2020) and subsequent regulations. The Manpower Act provides that employers, as well as trade unions and workers, must “make all efforts” to prevent the termination of employment.
Immediate termination is permitted only in cases of gross misconduct, with compensation required if notice is not provided. This legal framework is designed to ensure due process and protect employees from wrongful dismissal, thereby minimizing potential legal disputes and penalties for employers.
Termination process
Employers are obligated to adhere to a defined procedural process that involves issuing written notice and engaging in bipartite negotiations with the employee or labor union, and, if necessary, proceeding to mediation or litigation before the Industrial Relations Court. Unilateral termination without court approval is prohibited.
Termination reasons
Termination must be justified by lawful reasons, which may include employee-related causes such as breaches of employment contracts after warnings, extended absenteeism, misconduct, retirement, or criminal convictions, as well as company-related reasons like insolvency, mergers, restructuring, or bankruptcy.
Notice period
In Indonesia, there is no legally stipulated minimum notice period for termination. Generally, when an employer terminates an employee during the probation period, a notice of 7 days is customary. For termination outside the probation period, the minimum notice period typically observed is 30 days. Similarly, when an employee decides to resign, they are generally expected to provide a minimum notice period of 30 days.
Severance Pay
Severance and other termination benefits are mandated based on the employee’s tenure and the grounds for dismissal.
Length of employment and corresponding severance pay:
- Less than 1 year: 1 month wage
- Between 1 to 2 years: 2 months wage
- Between 2 to 3 years: 3 months wage
- Between 3 to 4 years: 4 months wage
- Between 4 to 5 years: 5 months wage
- Between 5 to 6 years: 6 months wage
- Between 6 to 7 years: 7 months wage
- Between 7 to 8 years: 8 months wage • Above 8 years: 9 months wage
Probation period
In Indonesia, probation periods last for a maximum of three months for indefinite contracts.
Probation Period days
- 3 months maximum probation period
