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Compliantly hire and expand your business in Indonesia
When it comes to employing and managing employees in Indonesia, there are specific procedures and regulations that must be followed.
Indonesia is a country in Southeast Asia and Oceania between the Indian and Pacific oceans. It consists of over 17,000 islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Guinea. Indonesia is the world’s largest archipelagic state and the 14th-largest country by area. Indonesia is the world’s fourth-most-populous country and the most populous Muslim-majority country. Java, the world’s most populous island, is home to more than half of the country’s population.
Jakarta
Capital
$5,509
GDP per Capita
$1.542 trillion
Total GDP
279,118,866
Total Population
0.713
Human Development Index
UTC+7 to +9
Time Zone
Indonesian
Official Language
Indonesian Rupiah (IDR)
Currency
1,904,569 km2 (735,358 mi2)
Land Area
Here's what you need to know
Overall, employing workers in Indonesia requires careful attention to the specific requirements and regulations. Working with a local expert in employment and payroll can help ensure that you’re meeting all the legal requirements and providing a positive employment experience for your staff.
While not mandatory, employment contracts are strongly recommended in Indonesia. They should be written in Bahasa Indonesia and clearly outline:
Job title, duties, and responsibilities
Salary and benefits (including bonuses like THR - Religious Holiday Allowance)
Working hours and overtime pay
Leave entitlements (annual leave, sick leave, etc.)
Termination terms (notice period, severance pay)
Confidentiality clauses (if applicable)
Minimum Wage
Indonesia has a provincial minimum wage system. Rates are set annually by each province and can vary significantly. You can find the latest minimum wage figures on the Ministry of Manpower website.
Payroll Terms
Salaries are typically paid monthly by bank transfer on the last working day of the month or within the first few days of the following month. Payslips with details of gross pay, deductions, and net pay are mandatory.
Taxes
Income Tax (PPh 21):
Indonesia uses a progressive income tax system. Employees pay income tax based on their annual earnings, with rates ranging from 5% to 35%. Employers withhold income tax at source and remit it to the tax office along with social security contributions.
Corporate Income Tax (PPh 25):
Companies are subject to corporate income tax on their profits. The current rate is 25%.
Social Security
Indonesia has a social security system (BPJS) that covers health insurance (JKN), pension (Jaminan Pensiun), and employment benefits (JKM). Employers and employees contribute a set percentage of the employee's salary towards these programs.
Indonesia has a standardized leave policy:
Annual Leave
Minimum of 12 days per year, increasing with service duration (up to 16 days).
Sick Leave
Up to 2 days of paid sick leave per month, with doctor's certification required for extended absences.
Maternity Leave
Up to 3 months of paid maternity leave for female employees, followed by an optional unpaid parental leave (up to 2 years).
Paternity Leave
2 days of paid paternity leave for male employees.
Public Holidays
14-16 paid public holidays per year, depending on religion and national observances.
Probationary Period
The maximum probationary period in Indonesia is 3 months.
Termination of Employment
Termination of employment should follow the terms outlined in the contract or the Manpower Law. Notice periods and potential severance pay vary depending on the reason for termination and the employee's length of service.
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