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.

Hiring in Indonesia with an EOR can help companies hire swiftly by removing the need to establish a legal entity in the country.  An EOR handles all administrative tasks related to employment, including payroll, tax, and benefits management, as well as regulatory compliance. 

As EORs take up the role of a primary employer, companies can focus on their core business functions, and rapidly scale their workforce in new markets. They handle the employee benefits adhering to the local labor laws. By using an EOR in Indonesia, companies can optimize their hiring process, and manage risks associated with international labor laws.

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Unlock growth in Indonesia with Gloroots as your trusted Employer of Record (EOR). We handle payroll, tax, benefits, and compliance, letting you focus on employees and company growth. Partner with Gloroots' Indonesia EOR for streamlined operations and compliance with employment laws. We manage cross-border complexities, ensuring a smooth expansion. Focus on talent and team growth while we handle compliance and payroll. Trust Gloroots to navigate Indonesia's labor market and unlock your business potential.

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Proper employee classification is crucial in Indonesia to avoid legal issues. Opt for a reliable PEO/EOR to safeguard your business. They ensure compliance, accurate classification, and smooth payroll. These experts also manage benefits for your workforce's protection. Trust them for employment tasks in Indonesia while you focus on your business.

Three major laws govern employment laws in Indonesia are governed:

• Labor Law of 2003 on Manpower as recently amended by Law No. 11 of 2020 on Job Creation and recently revoked by Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation;
• Law No. 21 of 2000 on Labor Union; and
• Law No. 2 of 2004 on Industrial Relations Dispute Settlement.

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 vary by region. As of current figures, they range from IDR 2,169,348 per month in Central Java to IDR 5,396,760 per month in DKI Jakarta, based on regional government regulations.

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

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Employer Payroll Contributions

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Employee Payroll Contributions

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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.

Employees can be fired for different reasons, like breaking the work agreement, being imprisoned, being sick for more than a year, or not coming to work without a good reason. It's important to know that not all reasons are about the employee's behavior. Employers might also have valid business-related reasons, like company changes, merging with another company, financial issues, or closing down the business permanently.

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

In Indonesia, the entitlement to severance pay is determined based on the employee's length of service:

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Probation Periods

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