Payroll and Benefits Guide Indonesia
Last updated: Feb 28, 2022
Employer Payroll Contributions
|10.24% – 11.74%||Total Employment Cost|
|0.24% – 1.74%||Work Accident|
|4.00%||Health Insurance (maximum of 480,000 IDR)|
Employee Payroll Contributions
|4.00%||Total Employee Cost|
|1.00%||Health Insurance (maximum of 120,000 IDR)|
Employee Income Tax
|5.00%||Up to 60 M IDR|
|15.00%||60M IDR – 250M IDR|
|25.00%||500M – 5 billion IDR|
|30.00%||5 billion IDR and over|
The minimum wage requirement varies based on the local government regulations ranging from 1,798,979 IDR in Central Java to 4,416,186 IDR in DKI Jakarta.
Hourly wages for part-time workers
Indonesia has sought to reform its labor laws through the Omnibus Law and has since abolished the sectorial minimum wage through Government Regulation 36 of 2021 and introduced an hourly wage for part-time workers.
The formula for determining the hourly wage: Hourly wage = monthly wage/126
To calculate the daily wage:
Six working days/week: Daily wage = monthly wage/25
Five working days/week: Daily wage = monthly wage/21
The employer and employee are allowed to set their agreement, but the final salary should not be lower than the calculation using the aforementioned formulas.
MINIMUM WAGE (PER MONTH)
The payroll cycle in Indonesia is generally monthly and is usually paid on the last working day as agreed within the employment contract.
In Indonesia, there is a mandatory religious holiday bonus called Tunjangan Hari Raya (THR), an additional one month’s salary payment made prior to the longest religious holiday (Hari Raya Idul Fitri for Muslim workers and Christmas for other faith workers). THR includes a base salary and fixed monthly allowance, but does not have to cover other payments such as bonuses. THR is prorated for employees who have not completed a full year of service.
The working hours are arranged as follows:
- Employees with 6 work days a week- 7 hours a day, 40 hours a week.
- Employees with 5 work days a week – 8 hours per day, 40 hours a week.
These working hours rules do not apply to certain businesses and are usually regulated with a ministerial decision.
On working days, an employer shall arrange a rest period during work for its employees of not less than half an hour after the employee has been working for no more than four consecutive hours.
The general guidelines for overtime in Indonesia are as follows:
All work above the standard working week is to be paid as overtime and is regulated by the employment contract/collective agreements. The maximum number of overtime hours is 4 per day and 18 per week. Overtime worked during weekdays is paid at 150.00% of the regular hourly wage for the first overtime hour, increasing to 200.00% for every subsequent overtime hour.
Suppose employees work overtime on a weekly rest day or any public holiday scheduled for a weekly rest day while working a six-day workweek. In that case, the overtime pay is calculated as follows:
- For the first to the 7th hour of overtime, the employee is entitled to 200.00% of the regular hourly wage
- For the 8th hour of overtime, the employee is entitled to 300.00% of the regular hourly wage
- For the 9th to 10th hour of overtime, the employee is entitled to 400.00% of the regular hourly wage
If employees work overtime on a weekly rest day when working a six-day work week, the overtime pay is calculated as follows:
- For the first to the 5th hour of overtime, the employee is entitled to 200.00% of the regular hourly wage
- For the 6th hour of overtime, the employee is entitled to 300.00% of the regular hourly wage
- For the 7th to the 8th hour of overtime, the employee is entitled to 400.00% of the regular hourly wage
If employees work overtime on a weekly rest day or a public holiday working a five-day workweek, the overtime pay is calculated as follows:
- For the first to the 8th hour of overtime, the employee is entitled to 200.00% of the regular hourly wage
- For the 9th hour of overtime, the employee is entitled to 300.00% of the regular hourly wage
- For the 10th to the 11th hour of overtime, the employee is entitled to 400.00% of the regular hourly wage
Paid Time Off
Paid leave in Indonesia is set in the employment contract as at least 12 days of paid annual leave per year after completing one full year of employment. Employees who have been working for six consecutive years for the same employer are entitled to one month of leave in the seventh year of service and one month of leave in the eighth year of service.
There are 21 public holidays. Each year the government may decide if public holidays falling on weekends will be moved to a weekday or will be lost.
When employees are sick or injured, they are entitled to paid sick leave provided they show a medical confirmation of their ill health. Employees can also have long-term sick leave lasting for longer than one year. A doctor should recommend such leave in writing.
Payment to employees on prolonged sick leave is as follows:
- 100.00% in the first four months paid by the employer
- 75.00% in the fourth to eighth months paid by the employer
- 50.00% in the eighth to twelfth months paid by the employer
- 25.00% of wages from one year until termination, paid by the employer
Employees are entitled to three months of fully paid maternity leave prior to the estimated due date and one and a half months of leave following the birth. The maternity leave is paid at 100.00% of the regular salary rate of pay.
PAID MATERNITY LEAVE (DAYS)
New fathers are entitled to two days’ leave for the birth of their child or a miscarriage.
Employees are entitled to paid child leave in the following circumstances:
- 2 days paid leave for the circumcision of the employee’s child
- 2 days paid leave for the baptism of the employee’s child
- 2 days paid leave for the marriage of the employee’s child
- 2 days paid leave for the death of the employee’s child
Employees are entitled to up to two days of paid leave due to the death of their spouse, one day of paid leave for the death of their parents or parent-in-law, the death of their children, or the death of their children-in-law. If a member of the employee’s household dies, they shall be entitled to one day of paid leave.
Before an employee can be terminated, the employer must make a genuine effort to avoid the termination by negotiating with the employee and/or the employee’s labor union to find an accommodation such as a change in working hours, improved working methods, or coaching.
If termination cannot be avoided, the employer must explain the reasons for termination clearly in writing to the employee and/or the employee’s labor union.
If the employee believes the termination is unjust, the decision can be challenged in the Labor Court, which will give the final ruling.
The reasons for which employees can be discharged from work are as follows:
- The employee violates the employment agreement
- The employee is imprisoned
- The employee is ill for more than 12 months
- The employee is absent from work for more than five days without a valid reason, provided he or she has been notified twice
- The employee has reached retirement age
Not all reasons for employees’ dismissal should be related to their misbehavior. The employer can discharge employees for several business-related reasons:
- There can be a change in the company’s status, its merger with another business, or the acquisition of its ownership
- The employer becomes insolvent
- The employer has suffered continuous losses for two years consecutively as proven by financial reports
- The employer is closing the business permanently.
Notice periods within Indonesia are generally 30 days, although employers can specify longer notice periods within the employment contract.
In Indonesia, severance pay is mandatory if applicable and is determined by the employee’s length of service:
- Less than 1 year of employment – 1-month wage
- 1 year or more, but fewer than two years – 2 months’ wage
- 2 years or more but fewer than 3 years – 3 months wage
- 3 years of more, but fewer than four years – 4 months’ wage
- 4 years or more, but fewer than 5 – 5 months’ wage
- 5 years or more, but fewer than 6 – 6 months’ wage
- 6 years or more, but fewer than 7 – 7 months’ wage
- 7 years or more, but fewer than 8 – 8 months’ wage
- 8 years or more – 9 months’ wage
The probation period in Indonesia for permanent employees is generally set at three months.
Meals allowance, commuting expenses (from and to the office e.g train tickets/bus, average petrol), gym membership allowance, and internet allowance.
The government of Indonesia provides visa exemptions to nationals of 169 countries, including the United States, Canada, Australia, and Singapore.
Previously, for a foreign employee to enter Indonesia for work, they would need an individual work permit (IMTA). This has now been replaced with a notification from the Ministry of Manpower. Once an employee or business has obtained a notification, they can apply for an Indonesian visa. Foreigners will be issued a Visa Telex (visa index 312), which allows them to work and travel to Indonesia.
There are two types of visas for foreign nationals who intend to live and work in Indonesia.
Izin Tinggal Terbatas or Electronic ITAS (e-ITAS) where employers need to apply for an ITAS on behalf of future employees. The ITAS grants employees the right to stay in Indonesia as well as open a bank account. They can also stay in the country and after three years, apply for a permanent residency.
Before applying for the ITAS, the employee must also get a Visa Izin Tinggal Terbatas (VITAS) – an Indonesian limited-stay permit visa. The Kartu Izin Tinggal Tetap (KITAP) is a visa an employee can also apply for which grants the employee a permanent residence permit (KITAP), but this is only available to people who have held an ITAS for three or more years.
The standard rate of VAT in Indonesia is 11.00% and the VAT will increase to 12% by 1 January 2025.
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Questions & Answers
Payroll and Benefits Guide
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
Public Holidays Calendar
|Sunday||Jan-1||New Year’s Day|
|Sunday||Jan-22||Chinese New Year|
|Wednesday||Mar-22||Bali Hindu New Year|
|Wednesday||Apr-19||Hari Raya Idul Fitri|
|Thursday||Apr-20||Hari Raya Idul Fitri|
|Friday||Apr-21||Hari Raya Idul Fitri|
|Saturday||Apr-22||Hari Raya Idul Fitri|
|Sunday||Apr-23||Hari Raya Idul Fitri|
|Monday||Apr-24||Hari Raya Idul Fitri|
|Tuesday||Apr-25||Hari Raya Idul Fitri|
|Thursday||May-18||Ascension Day of Jesus|
|Thursday||Jun-29||Idul Adha||Some companies may choose to give 28th June and 30th June in addition.|
|Wednesday||Jul-19||Islamic New Year|
|Thursday||Sep-28||Prophet Muhammad’s Birthday|