Payroll and Benefits Guide Indonesia

Employer

Employer Payroll Contributions

Employee

Employee Payroll Contributions

Employee

Employee Income Tax

General

Payroll Cycle

General

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.

Overtime

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

Working Week

Monday-Friday/Monday-Saturday

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.

Public Holidays

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.

Sick Days

Termination Process

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 Period

Notice periods within Indonesia are generally 30 days, although employers can specify longer notice periods within the employment contract.

Severance Pay

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

Probation Period

The probation period in Indonesia for permanent employees is generally set at three months.

General

Meals allowance, commuting expenses (from and to the office e.g train tickets/bus, average petrol), gym membership allowance, and internet allowance.

VISA

General

The standard rate of VAT in Indonesia is 11.00% and the VAT will increase to 12% by 1 January 2025.