Employer of Record in Indonesia

For your business to succeed in Indonesia, you must streamline the growth process. Indonesia’s economy, which is among the fastest-growing in the world, has a lot of promise for companies looking for expansion prospects. For your business, entering the Indonesian market might be a game-changer due to the country’s supply of trained labour and highly employable workforce.

The local rules and regulations, however, can be difficult to understand and time-consuming to navigate. Our Employer Of Record solutions can help with that. By working with us, you may expand into Indonesia quickly and easily without having to deal with the headache of doing everything yourself.

Our complete and automated global HR platform automates payroll administration, guarantees compliance with local labour rules and regulations, and makes it easier to integrate your remote employees. We take care of all the necessary HR tasks, from handling benefits to making sure that correct employment contracts are in place, so you can concentrate on your main company operations.

By utilising our Employer Of Record solutions, you may securely develop your company activities in Indonesia knowing that you have a dependable and knowledgeable partner to help you negotiate the complexities of the regional commercial environment. Utilise Indonesia’s enormous development potential to your advantage and use our simplified and effective expansion strategies to take your business to new heights.

Overview of Indonesia

• Estimated Population: 274 million
• Currency: IDR Indonesian Rupiah
• Capital: Jakarta
• Languages spoken: Indonesian, Javanese
• GDP: USD 1.12 trillion

Employment Landscape in Indonesia

In general, it is believed that Indonesian labour and employment rules benefit employees. These rules guarantee that benefits like social security are available to all employees by defining employment in a fairly wide sense. Foreign nationals are exempt from Indonesia’s employment regulations, although all Indonesian citizens employed there must abide by them. Indonesian law defines a number of different categories of employment, and it is typically thought to be difficult to terminate work there.

Some provisions of the Employment Laws to note before hiring in Indonesia are as follows.

Title	Explanation
Law No. 13 of 2003 on Manpower as amended by Law No. 11 of 2020 on Job Creation (‘Manpower Law’)	The primary component of legislation governing employment and labour rights in Indonesia is the Manpower Law of the Constitution. It outlines the laws that must be adhered to while employed in Indonesia. There are 17 sections in all, and they cover a wide range of subjects, including hiring foreign labour, terminating employees, developing human resources, and discrimination in the workplace.
Law No. 2 of 2004 on Industrial Relations Dispute Settlement (‘IRDS Law’)	This legislation covers conflicts between an employer and an individual employee, a group of employees, or a labour organisation. It also addresses disagreements between unions working for the same employer. It states that before going to the government, such conflicts must first be tried to be resolved via dialogue.
Law No. 21 of 2000 on Employee/Labor Union (‘Labour Union Law’)	This legislation deals with the establishment and legality of labour unions and trade unions in Indonesia. It guarantees everyone’s right to join a union and outlaws discrimination in union membership. Additionally, it tackles the finances, assets, and dispute-resolution capabilities of labour and trade unions while establishing their rights.

Timings, holidays, and leave policies in Indonesia

Entitlements	Explanation
Statutory Working Hours	8 hours for 5 days of work, 7 hours for 6 days of work
Job Specific Working Hours	40 hours is the most that may be worked in a week.
Rest Period	The required relaxation break is at least 30 minutes after each four hours of work in a day and at least one day every week.
Paid Public Holidays	The public holidays in Indonesia are as follows: New Year’s Day Chinese New Year Isra Mi’raj Bali Hindu New Year Good Friday Labour Day Ascension Day of Jesus Christ Hari Raya Eid Ul Fitri Waisak Day Pancasila Day Eid Ul Adha Islamic New Year Independence Day Prophet Muhammad’s Birthday Christmas Day
Maternity Leave	Indonesia offers three months of paid maternity leave, at least half of which must be used following childbirth.
Annual Leave Accrual Entitlement	The legislation requires at least 12 working days of paid leave. There is no clause that allows for the payment of unused leave.

Contractors vs. Full-time Employees

Indonesian businesses have begun to adopt a remote work culture in line with the rest of the globe. Working outside of offices is a common practice among Indonesian businesses. The necessary infrastructure is in place and is unrestricted to support the remote working environment.

Types of work are widely defined under Indonesian law. It accepts all forms of employment, even those that are temporary, part-time, or just for a set length of time. If a job has a set term, it cannot last more than three years.

Employment must be governed by a written contract between the employer and the employee. Various employee groups and the employer could be involved in this. The contract must include the whole scope of the task, the number of hours, the compensation, and all other pertinent information.

Scope of Negotiating Terms

The ability to negotiate employment terms for specific employees is typically constrained. Employers often have a fixed job description and salary for each job title that they assign. Employees are rarely given much room to bargain, especially at lower levels in the corporate structure, because perks and salaries are typically standardised. Contrast this with the employment procedure in western nations, where negotiating is a crucial component of the hiring process.

Recruiting in Indonesia

The hiring procedure is now uniformly followed all over the world as businesses grow and the internet continues to link people from different parts of the world. Online job boards are becoming the most popular way to hire specific people, even in Indonesia. The nation is home to a number of well-known job portals, including Indeed, Jobindo, Jobstreet, and Monster. LinkedIn also offers a useful tool for applicant search and background checks.

Your HR staff works with the appropriate departments to create a job description based on the recognized need within your organisation to start the process of locating qualified applicants. The completed job description is then marketed, uploaded to various job sites, and made available on the careers part of your website.

Your HR staff evaluates all submitted applications and chooses those that best meet the job specifications after a sufficient number have been received or the application deadline has passed. This selection procedure could entail applying filters or a points-based system to reduce the number of candidates. The picked applicants then go through interviews tailored to your particular needs. Before making a job offer, it is crucial to run extensive background checks on the shortlisted individuals.

Leveraging internet job boards and marketing for recruiting has several benefits. You are likely to receive a sizable number of applications given Indonesia’s enormous talent pool, allowing you to choose competent individuals. Your staff won’t need to actively recruit applicants because the procedure may be carried out remotely. Moreover, you may avoid the necessity for a third-party employment agency thanks to the existence of several web portals.

However, hiring people online has disadvantages just like any other approach. The number of applications received, even for entry-level employment, might be difficult. Additionally, the majority of Indonesian employment portals do not have a wide audience, making it difficult to hire a significant number of applicants simply through online platforms, particularly if you have a small HR team.

It might be quite helpful to collaborate with a reputed Employer Of Record (EOR) in Indonesia to handle these issues and save time throughout the recruiting process. Our business specialises in dependable outsourcing services that let you identify the ideal personnel while maintaining adherence to rules and procedures. By giving us the responsibility for recruiting, you can concentrate on promoting the development and growth of your company’s operations while knowing that your recruitment requirements are in good hands.

Probation & Termination

Indonesia has specific employment laws that outline regulations regarding probation periods and termination procedures. Probationary periods are limited to a maximum of three months for any employee, as per Indonesian employment laws.

When it comes to terminating employment, employers must obtain permission from the Industrial Relation Court (IRC). Even with mutual consent, an employment contract cannot be terminated without the IRC’s approval. While there is no mandatory notice period required before ending a contract, employers typically grant a 30-day period.

Termination of employees may also occur due to redundancies, but this is only justified if the company or a significant portion of it ceases operations. Additionally, employees may be terminated if they violate the company’s code of conduct or breach the terms specified in their employment contract.

According to Indonesian law, employees are entitled to receive severance pay upon dismissal. Typically, this amounts to one month’s salary for each year of service, up to a maximum of nine years. The law also stipulates grounds on which employees cannot be terminated, such as pregnancy, short-term illness, and participation in a union.

It is important for employers in Indonesia to adhere to these legal requirements to ensure compliance and fair treatment of employees. Understanding the specific regulations surrounding probation periods, termination procedures, and severance pay is essential for maintaining a legally sound and respectful work environment.

EOR Solution

Indonesia is one of the nations where having an EOR partner is frequently necessary. Given the complexity of Indonesian employment laws, having a partner who is knowledgeable about the regulations and can offer advice and experience in maintaining your business operations within the bounds of the law is crucial.

You may avoid the trouble of having to learn the law, interpret it according to your company’s needs, and handle personnel, payroll administration, and employee record keeping yourself by working with an EOR partner. Indonesia EOR solutions can manage these duties. Order a demo right away!

Types Of Visas In Indonesia

Visa Category	Explanation	Duration
Social/Cultural Visa	This visa is granted to anyone who wishes to go to Indonesia for social or cultural events.	60 days
Business Visa	This visa is granted to those who wish to go to Indonesia for professional reasons, such as attending conferences, meetings, or other events. These pursuits cannot include employment.	60 days for a single visit or multiple visits within 12 months
Temporary Stay Permit	This is the closest an Indonesian visa gets to allowing visitors entering the country to work. In conjunction with an IMTA work permit, it is obtained.	6 months, 1 year, 5 years

Work Permit

The work visa and the work permit are the two main papers that foreign people need in order to work in Indonesia. A second work permit is also required in order to be allowed to work here, and the application price for the work visa is USD 500.

Payroll & Taxes In Indonesia

It’s critical to comprehend Indonesia’s tax and contractual framework and create contracts that adhere to these regulations. When it comes to the creation of a contract, working with an Employer Of Record may be quite beneficial. EOR partners typically have excellent insight into the legal ramifications of recruiting, which helps shorten the process’s duration.

Payroll Details

Process	Explanation
Applying for a Tax Identification Number	Applying for a Tax Identification Number (TIN) as a newly formed company or subsidiary is required in Indonesia. You can do actions linked to taxes using this special identity.
Choosing a Payroll System	Before selecting a payroll, one must take into account a number of factors. Legal considerations must be addressed first, and only then should the typical industrial payroll system for the appropriate area be examined. The final payroll system must take into account a number of regulatory obligations, including minimum wage, taxes, and leave policies.
Acquisition of employee information	All personnel information must be kept on file at all times. Internal audits and governmental entities may both need this data at various times. Additionally, the administration of taxes and payroll is made easier due to the digital storage of employee information. both domestic and international workers.

Taxation in Indonesia

In Indonesia, employers are required to deduct income taxes from their workers’ paychecks and report the amounts deducted by the 10th of the following month.

Employer Taxation 

Tax	Explanation
Corporate tax	The annual corporate tax in Indonesia is as follows. General 25% Public company with more than 40% shares traded on IDX 25% Companies with gross turnover less than IDR 50,000,000,000 20% Companies with gross turnover less than IDR 4,800,000,000 1%
Employer Contribution Towards Social Security	5.74%

Employee Taxation

Tax	Explanation
Income Tax	The annual personal income tax in Indonesia is as follows. Up to IDR 50,000,000 5% Between IDR 50,000,000 and IDR 250,000,000 15% Between IDR 250,000,000 and IDR 500,000,000 25% More than IDR 500,000,000 30%
Financial Year End date	31st Dec
Sales Tax	10%
Social Security Contributions	2%

Establishing a subsidiary in Indonesia involves several crucial steps that must be followed in accordance with Indonesian law. The initial step is selecting a company name and registering it at a bank by paying the necessary fees. Subsequently, all company documents and forms must be notarized by a notary.

Afterwards, you need to apply to the Ministry of Law and Human Rights for the approval of your company’s deed. To set up an office, you will require a building management domicile certificate, which will then enable you to apply for the company domicile certificate.

Additionally, non-tax state revenue fees must be paid to access legal services. This will allow you to apply for a permanent business trading licence and obtain a company registration certification. Finally, registration with the Ministry of Manpower is necessary to ensure compliance with labour regulations.

Once your subsidiary is established, you will need to apply for a taxation identification number, social security registration, insurance coverage, and fulfil other minor formalities.

Navigating these procedures and complying with local laws can be complex and time-consuming. However, we can significantly simplify the process of establishing a subsidiary in Indonesia. With our in-depth understanding of local laws and processes, we can provide valuable assistance throughout the entire process, ensuring a streamlined and efficient establishment of your subsidiary. Partner with us to open a subsidiary in a considerably shorter timeframe, allowing you to focus on the growth and success of your business.