Employer of Record in Indonesia

Indonesia is a nation in the Indian and Pacific oceans, off the coast of Southeast Asia. It is an archipelago that lies across the equator and extends for one-eighth of the circumference of the planet.

Since the middle of the 20th century, Indonesia has had a low impact on global economic activity, despite its size, wealth, and location seeming to call for a more significant contribution. The nation produces large-scale exports of natural gas and crude oil. Along with producing a wide variety of other goods like sugar, tea, tobacco, copra, and spices, Indonesia is one of the world's major producers of rubber, coffee, cocoa, and palm oil.

Business activities are optimistic, with notable performance in the services sector, including business operation outsourcing, real estate, tourism, and finance and insurance industries.

Key Takeaways

• An Employer of Record (EOR) in Indonesia legally employs your team members on your behalf, removing the need to set up a local entity.
• Standard working hours are capped at 40 per week, with overtime paid at 1.5x for the first hour and 2x thereafter.
• Regional minimum wages vary widely, from around IDR 2,169,348 in Central Java to IDR 5,396,761 in DKI Jakarta (2025 UMP).
• Employees are entitled to a minimum of 12 days paid annual leave, 3 months paid maternity leave, and statutory severance based on tenure.
• Use an EOR when you need to hire quickly in Indonesia, manage compliance under Law No. 6 of 2023 on Job Creation, and avoid entity setup costs.

Hiring in Indonesia at a glance

An Employer of Record in Indonesia legally employs team members on your behalf, so you can hire full-time staff without setting up a local entity. The EOR runs employment contracts, payroll, tax, statutory benefits, and compliance with Indonesian labor law.

Companies use an EOR in Indonesia to hire in days rather than months, reduce entity setup and maintenance costs, and centralize governance across countries. The benefits of EOR include faster market entry, predictable per-employee pricing, and lower misclassification risk.

Proper employee classification is critical in Indonesia. A reliable EOR ensures accurate classification, locally compliant contracts, on-time payroll, and statutory benefits administration, while your team focuses on business operations.

Three major laws govern employment in Indonesia:

• Labor Law of 2003 on Manpower, as amended by Law No. 11 of 2020 on Job Creation and subsequently replaced by Law No. 6 of 2023 on Job Creation;
• Law No. 21 of 2000 on Labor Union; and
• Law No. 2 of 2004 on Industrial Relations Dispute Settlement.

Indonesia's services sector, including business process outsourcing, real estate, tourism, finance, and insurance, continues to expand, making it a strong market for global hiring.

Hire in Indonesia with Gloroots EOR. Run payroll, contracts, and compliance from one platform, without setting up a local entity. Book a demo.

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EMPLOYMENT CONTRACT

Employers provide two kinds of employment contracts: fixed-term and indefinite-term contracts.

Fixed-term contracts are for specific job roles and don't exceed 2 years. They require no probation period and must be in writing and in Indonesian.

Indefinite-term contracts are for full-time employees and often include a 3-month probation.

Contracts include:

•  Employee's name, age, address, gender
•  Company's name, address, business type
•  Job title or role
• Work location
• Salary and payment details
• Employment terms, rights, obligations
• Start date, agreement details

To ensure clarity, trust, and smooth employment, well-structured contracts are vital. Gloroots' Indonesian PEO and EOR solutions can handle contract creation for you.

This might sound overwhelming, but it doesn't have to be. Gloroots eliminates these barriers for you. With Gloroots' Employer of Record offering, hiring and managing employees globally is a piece of cake.

Get an overview of what you need to know when hiring in Indonesia. Contact us.

Working Hours

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The total working hours must not exceed 40 hours in a single week. Employers are required to provide a rest period of at least half an hour to employees on working days after they have worked for four consecutive hours.

Do note, that these working hour regulations may not be applicable to certain businesses. Work with a compliance expert or an EOR to get the best out of Indonesian talent and to stay compliant with local working hours regulations

Overtime

Employees are eligible for overtime compensation if they work over 7 hours daily. Employees must receive compensation for working on weekends and public holidays.

Overtime pay is calculated at 1.5 times the regular hourly wage for the initial hour and doubles for every two hours thereafter.

Minimum Wage

Minimum wage rates in Indonesia are set regionally and reviewed each year under provincial government regulations (UMP). Based on 2025 UMP rates, minimum wages range from approximately IDR 2,169,348 per month in Central Java to IDR 5,396,761 per month in DKI Jakarta. Employers should confirm the current UMP for each province where they employ staff.

Public holidays

Indonesia observes 14 days of public holidays every year.

Annual Leave

In Indonesia, paid leave entitlement is specified in the employment contract, typically granting employees a minimum of 12 days of paid annual leave per year once they have completed one full year of employment. Additionally, employees who have worked continuously for six years with the same employer are entitled to one month of leave in their seventh year of service and another month of leave in their eighth year of service.

Maternity Leave and Paternity Leave

Female employees in Indonesia receive three months of fully paid maternity leave before the estimated due date and an additional one and a half months of leave after giving birth.

The maternity leave is compensated at 100.00% of the regular salary rate.

Paid Sick Leaves

In the event of illness or injury, employees in Indonesia are eligible for paid sick leave upon presenting a medical certificate. Long-term sick leave, lasting for more than one year, may be recommended by a doctor in writing.

Income Tax

Indonesian personal income tax (PPh 21) is applied on a progressive basis to annual taxable income.

Employer Payroll Contributions

For a deeper view of running multi-country contributions and statutory filings, see our guide to payroll management.

Employee Payroll Contributions

Termination Process

Terminating an employee should be carried out meticulously in Indonesia.

Before letting go of an employee, employers must try to find solutions and agreements, like adjusting schedules or giving extra training. If firing the employee becomes necessary, the reasons for the decision should be clearly explained in writing. If the employee thinks the firing is unfair, they can challenge it in the Labor Court.

Employee-related grounds for termination include:

• Breach of the employment agreement
• Imprisonment
• Illness lasting more than one year
• Absence without valid reason

Employer-related (business) grounds for termination include:

• Company restructuring or organizational changes
• Mergers or acquisitions
• Financial difficulties
• Permanent business closure

Notice Period

Typically, notice periods in Indonesia are set at 30 days, although employers have the option to stipulate longer notice periods in the employment contract.

Severance Pay

Under Law No. 6 of 2023 on Job Creation, terminated employees in Indonesia may be entitled to three separate components:

• Severance pay (uang pesangon): Base entitlement tied to length of service, as shown in the table below. The actual amount paid is a multiplier of this base (for example, 0.5x, 1x, or higher) depending on the reason for termination.
• Service appreciation pay (uang penghargaan masa kerja / UPMK): Payable to employees with at least 3 years of service, calculated separately based on tenure.
• Compensation for entitlements (uang penggantian hak): Covers unused annual leave and other contractual entitlements.

The table below shows the base severance entitlement by tenure:

Probation Periods

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

Ready to hire in Indonesia? Run employment, payroll, and compliance from one platform with Gloroots EOR. Book a demo.