Employer of Record Indonesia
Hire staff and expand your business in Indonesia with our fully-managed EOR Service
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Unrivalled Employer of Record Service in Indonesia designed to expand your business seamlessly
Agility EOR delivers services for business’s looking for an Employer of Record in Indonesia. We help clients hire new employees or transfer existing employees into a fully-managed EOR service.
Employer of Record in Indonesia
A Brief Guide to Indonesia
Indonesia, known for its stunning islands and rich cultural heritage, stands as a Southeast Asian powerhouse with promising opportunities for international businesses. Blessed with natural resources and a young and dynamic workforce, it invites enterprises from around the globe to explore its potential.
|Area||1,904,569 square kilometers|
|Population||Around 275 million|
|Currency||Indonesian Rupiah (IDR)|
|Major Cities||Jakarta, Surabaya, Bandung|
|GDP||$1.12 trillion (2022)|
|Major Industries||Textiles, automotive, electrical appliances, apparel, footwear, mining, cement|
Business Culture in Indonesia
With a business culture deeply rooted in respect and relationship building, navigating Indonesian corporate corridors may feel different. A handshake is common, albeit slightly softer than in western countries, and respect for elders and seniors is paramount. Patience is key, as decision making can often be a slow, collective process involving various levels of hierarchy. It’s not unusual for negotiations to continue even after an agreement has been made, so flexibility is highly valued.
Payroll and Taxes
Payroll and Taxes in Indonesia
In Malaysia it is Mandatory for employers to pay a 13th month salary, known as THR. The amount is equal to a months salary, and is paid annually, before an employee takes their longest religious holiday, usually either Eid al-Fitr or Christmas, depending on their faith.
In Indonesia, income tax rates are progressive, with higher income levels subject to higher tax rates.
Taxable Income (IDR)
Up to IDR 60 million
IDR 60 million to IDR 250 million
IDR 250 million to IDR 500 million
IDR 500 million to IDR 5 billion
IDR 5 billion and above
Employers in Indonesia are also responsible for various employer costs, which may include:
Old Age Savings
0.24% – 1.74%
Pension and Healthcare
In Indonesia, pension provision is part of the broader social security system known as BPJS Ketenagakerjaan. Both employers and employees contribute to this mandatory scheme, with businesses typically covering the larger portion. The scheme is state-administered, and the retirement age currently stands at 57, but is gradually rising. Informal sector workers can voluntarily participate in this scheme, but coverage is not universal.
Healthcare in Indonesia
Indonesia’s healthcare landscape is a combination of public and private provisions. The public healthcare system, also known as BPJS Kesehatan, is government-run and funded through a mix of employer, employee, and government contributions. The quality of public healthcare varies across regions, with urban centres generally offering better facilities than rural areas.
The private healthcare sector is expanding, often seen as a complement to the public system. It is favored for its better facilities, shorter waiting times, and more personalized care, but it’s also more costly. Medical insurance coverage is growing but isn’t as prevalent as in Western countries.
Access to healthcare services can be challenging in remote parts of the country due to geographical factors. However, the government’s recent efforts towards digital health services aim to bridge this gap. Despite these challenges, Indonesia continues to make significant strides in improving the quality of its healthcare, positioning it as an increasingly attractive destination for global businesses.
Employment Law in Indonesia
Relevant Legislation: The most prominent piece of legislation governing employment law in Indonesia is the Manpower Act No. 13 of 2003. Other important laws include Government Regulation No. 78 of 2015 on wages and the Social Security Administrators Law of 2011.
Employment Contracts: Employment contracts in Indonesia can be either for a definite or indefinite term. Definite term contracts can be used for work that is temporary in nature, while indefinite term contracts are generally used for permanent roles.
Working Hours: The standard working week in Indonesia is 40 hours, typically broken down into 5 days of 8 hours each. However, the working day can be shorter in certain industries like mining.
Leave: Employees in Indonesia are entitled to 12 days of annual leave after a year of continuous service. Additional leave entitlements include maternity leave, sick leave, and leave for religious ceremonies.
Overtime: Overtime work is limited to 3 hours per day or 14 hours per week. It is compensated at a higher rate than normal working hours, with different rates for weekdays, weekends, and public holidays.
Termination: An employee may be terminated due to misconduct, poor performance, economic reasons, or long-term illness. Prior approval from the Industrial Relations Court is often required before termination.
Notice: Employers are required to give at least 30 days’ notice before terminating an employee, or pay the employee in lieu of notice.
Severance Pay: Severance pay is generally required when terminating an employee. The amount varies depending on the length of service, ranging from one month’s salary for one year of service to nine months’ salary for nine years of service or more.
Work Permits in Indonesia
Immigration affairs in Indonesia are administered by the Directorate General of Immigration, which operates under the Ministry of Law and Human Rights. They oversee the implementation and enforcement of immigration laws and regulations, managing both the inflow and outflow of people across Indonesian borders.
To work in Indonesia, a foreign national is typically required to obtain a visa that permits them to engage in employment. There are several types of visas available depending on the nature of work and the duration of stay, and applicants must ensure that they meet all the necessary criteria before applying.
The most common work visas are the Temporary Stay Visa (VITAS) and the Limited Stay Visa (KITAS). The VITAS is issued to foreign nationals intending to stay in Indonesia for longer periods, often exceeding 60 days. This includes individuals who are planning to work, conduct research, join family, or retire in Indonesia.
The KITAS, on the other hand, is a residency permit that allows foreign nationals to stay in Indonesia for a limited period. To secure a KITAS for employment purposes, a foreign individual must first have an Indonesian company or organization as their sponsor. The sponsoring company applies for the work permit, known as an IMTA, on behalf of the foreign employee. Once the IMTA is approved, the employee can then apply for the KITAS.
Securing a work visa for Indonesia involves a relatively intricate process and requires careful attention to detail. It’s also important to note that the laws are strictly enforced and penalties for violations, such as working without a valid permit, can be severe, including fines, detention, and deportation.
Despite these complexities, Indonesia’s burgeoning economy and diverse cultural landscape continue to attract professionals from around the world, making the country a compelling destination for international business expansion.
Indonesia Public Holidays
New Year’s Day
Chinese New Year
Varies (January or February)
Varies (March or April)
Ascension of Jesus Christ
Varies (May or June)
Varies (May or June)
Indonesian Independence Day
Islamic New Year
Varies (August or September)
Birthday of Prophet Muhammad
Varies (October or November)
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Indonesia Employer of Record Benefits
When you choose Agility EOR to expand in Indonesia, we guarantee an Employer of Record Service tailored to the needs of your business