Introduction
Abhitech will discuss the Employer of Record (EOR) in Indonesia service. If you don’t understand what an Employer of Record (EOR) is. This is a service for the people below:
- Do you want to expand your business to Indonesia?
- Do you want to recruit employees in Indonesia?
- Do you need help in handling legal compliance and labor administration in Indonesia?
Employer of Record (EOR) is a service for the people who answer yes to one of these questions.
This service is suitable for those of you who want to expand quickly because Employer of Record (EOR) allows you to expand, hire, and handle compliance and administration before you have a PT or Local Entity in Indonesia.
Learn More: Reliable Employer of Record (EOR) service
What is an Employer of Record (EOR)?
Employer of Record (EOR) is a service that allows third parties to legally recruit employees, and The employee will work for your company.
First thing first, Abhitech quoted an explanation from a credible source regarding Employer of Record (EOR) in a global context:
According to ADP, an Employer of Record (EOR) is a third-party provider legally responsible for another organization’s employees. The Employer of Record (EOR) can be located in the same country as the business that employs the employees or in another country with different employment laws.
According to Velocity Global, an Employer of Record (EOR) is a third-party organization that becomes the full legal employer of your workforce and takes over all employment-related responsibilities and duties on your company’s behalf.
According to Forbes A global employer of record (global EOR) can hire and pay employees nearly anywhere in the world, in full compliance with tax and labor laws.
So, based on all descriptions of the Employer of Record (EOR) Abhitech concludes “Employer of Record (EOR), businesses may grow their staff in foreign nations like Indonesia without having to set up a local legal company.”
Study Case Employer of Record (EOR) di Indonesia
Abhitech will describe in a very simple way for you to understand how Employer of Record (EOR) works.
- You want to expand your business to Indonesia, and you don’t have a business entity or PT.
- Then you contact an Employer of Record (EOR) service provider such as Abhitech to recruit employees who suit your business.
- Once you find employees or talent that are suitable for your business, they will work for you.
- You can run this business even if you don’t have a PT or local entity. Because all your employees will be under Abhitech
In essence, using an Employer of Record (EOR) service will make it faster, easier, and cheaper than setting up your own company.
Once you understand the basic concept of Employer of Record (EOR), now Abhitech will discuss further the Role of Employer of Record (EOR) in Indonesia.
Role of an Employer of Record (EOR) in Indonesia
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If the Employer of Record (EOR) were a person and worked for you. What would they be like?
Employer of Record (EOR) in Indonesia acts as the person who ensures the availability of talent in your company and ensures that your company continues to receive rights according to regulations.
So, the Employer of Record (EOR) service will be responsible for many aspects, such as
- Employment Recruiting
- Employment administration is all things that apply according to UU Ketenagakerjaan (Local Workforce in Indonesia).
- Employment Onboarding
- Etc
In Indonesia, there is Law Number 13 of 2003 (UU 13/2003) concerning Employment, which is the primary employment law.
Additionally, there are specific provisions outlined in Law Number 6 of 2023 regarding the Determination of Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation.
So there are various changes to employment regulations, for example in terms of job training, Termination of Employment Relations (PHK), Agreements for contract employees or (PKWT), to hiring foreign workers (TKA).
Ensuring that everything goes well is the obligation of the Employer of Record (EOR) provider in Indonesia.
Before discussing this further, Abhitech will try to give you an idea of why many companies choose to use Employer of Record (EOR) rather than direct hiring.
Differences between Employer of Record (EOR) and traditional hiring methods
The problem with traditional hiring is its complexity.
If you use the traditional hiring method, the company must set up a local entity first and manage all these legal requirements things independently.
Learn More Legal requirements for establishing a business in Indonesia
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Many companies that want to expand choose to use Employer of Record (EOR) to avoid legal complexities which are also very time and energy-consuming.
Especially if you enter a new market, you have a priority like developing products or services that adapt to the market in Indonesia. Right?
By using an Employer of Record (EOR), the process is simpler, and legal risks can be minimized, so your time and energy can be focused on priorities.
Now Abhitech will discuss more about What are the responsibilities of the Employer of Record (EOR) Service in Indonesia and What can an Employer of Record (EOR) Provider in Indonesia do for you.
Hubungi Kami untuk Dukungan Profesional
Key Responsibilities of an Employer of Record (EOR)
Employer of Record (EOR) is responsible for handling legal aspects of employment, payroll, benefits, and others related to managing the workforce in Indonesia.
Want an elaboration?
Okay, Abhitech will explain more about the duties of an Employer of Record (EOR) in Indonesia.
A. Legal compliance managed by an Employer of Record (EOR) in Indonesia
As Abhitech mentioned previously, Employer of Record (EOR) in Indonesia ensures that all aspects of employment comply with local laws and regulations. These include:
Law Number 13 of 2003 concerning Employment: Regulates the rights and obligations of employees and employers, including working conditions, leave rights, and national holidays.
Law Number 11 of 2020 concerning Job Creation: Amend several provisions in the Employment Law, including employment agreements, working hours, and termination of employment.
The Regulation of the Minister of Manpower and Transmigration provides detailed guidance on the implementation of labor laws. It covers various aspects such as minimum wages, labor insurance, and working conditions.
However, this law is not limited to these aspects, as there may be other legal considerations related to employment, such as:
Company regulations: Ensure that all your company policies comply with the Employment Law.
Occupational Safety and Health System (K3): Ensure the implementation of K3 standards in accordance with Minister of Manpower and Transmigration Regulation Number PER-08/MEN/VII/2010 regarding K3.
B. Tax and benefits management by an Employer of Record (EOR) in Indonesia
The Employer of Record (EOR) provider is also responsible for ensuring all taxes and employees receive the benefits provided, examples of these aspects are:
Income tax in Indonesia is called PPh 21: Employer of Record (EOR) service will be assigned to calculate, withhold, and pay employee income tax in accordance with provisions of the Directorate General of Taxes.
BPJS Ketenagakerjaan: BPJS Ketenagakerjaan (Employment Social Security Administering Agency) is Indonesia’s Social Security Administration for Employment.
The Employer of Record (EOR) service provider will help you to process registration, payment of contributions, and claims for BPJS Employment benefits, by Law Number 24 of 2011 concerning the Employment Social Security Administering Body (BPJS).
BPJS Kesehatan: BPJS Kesehatan also known as the Health Social Security Administering Agency, is Indonesia’s national health insurance agency. It is responsible for providing universal health coverage to all Indonesian citizens. Employer of Record (EOR) will help you arrange registration and payment of BPJS Health contributions, ensuring that employees receive health insurance benefits following Presidential Regulation Number 12 of 2013.
Learn More: BPJS Ketenagakerjaan and BPJS Kesehatan
Right to Leave and National Holidays: Employees are entitled to at least 12 days of annual leave after working for 12 continuous months, as well as the right to national holidays in accordance with the Decree of the President of the Republic of Indonesia, through the Employer of Record (EOR) service.
Compliance with Other Employment Regulations: Ensure compliance with all relevant regulations, including regulations for wages, working hours, and the work environment.
C. Employment contracts and employee handbooks are handled by an Employer of Record (EOR) in Indonesia
When using Employer of Record (EOR) services, you no longer need to be confused when thinking about employment documents in Indonesia. Because the Employer of Record (EOR) service provider will be responsible for things such as:
Employment Agreement: Prepare a work agreement in accordance with the Employment Law, covering the rights and obligations of both parties.
Get a Free Template for the employment agreement letter from Abhitech
Employee Handbook: The Employer of Record (EOR) will also create guidelines for employees which will be adjusted to your company policies, this includes work procedures, employee rights, and work conditions. This employee handbook has also been adapted to local regulations.
Once you understand what will be the responsibility of the Employer of Record (EOR) service provider in Indonesia.
Now, Abhitech will discuss the benefits you will get if you use the Employer of Record (EOR) service.
Benefits of Using Employer of Record (EOR)
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In summary, there are advantages to using an Employer of Record (EOR) for hiring high-quality talent in Indonesia to join their company.
1. Simplify the recruitment process in Indonesia with Employer of Record (EOR).
By using an Employer of Record (EOR), you can simplify the recruitment process. It’s so simple that you can manage the hiring process before establishing a local entity in Indonesia.
2. Risk Mitigation through Employer of Record (EOR)
Legal compliance can be very confusing and time-consuming, especially in a new environment. By working with an Employer of Record (EOR) service provider that is specifically focused on Indonesia, you can ensure that all legal requirements, including payroll, taxes, and employee benefits, are properly managed.
3. Cost Efficiency Using Employer of Record (EOR)
Using an Employer of Record (EOR) is more cost-effective than setting up a local entity. The EOR handles all administrative tasks, reducing operational expenses and allowing companies to allocate resources to core business areas.
4. Improve Efficiency by Leveraging Employer of Record (EOR) Services
Engaging an Employer of Record (EOR) to handle administrative and compliance duties enables organizations to focus on essential business activities such as strategic planning, innovation, and market expansion.
“I know what Employer of Record (EOR) in Indonesia can do, and I know what benefits I can get, like fast, cheap, and efficient. How I can start a Recruitment Process in Indonesia with an Employer of Record?”
Step by Step Recruitment in Indonesia with Employer of Record (EOR)
I am pleased with your enthusiasm for using Employer of Record (EOR) and it seems like you are starting to understand the benefits that you will get.
If you want to recruit high-quality talent in Indonesia using an Employer of Record (EOR) then there are several things that you should pay attention to.
This is not to bother you, it will actually make your recruitment process more efficient.
Below are the steps to recruit using an Employer of Record (EOR):
1. Knowing your Business Needs First:
You should start analyzing what your company needs when expanding to Indonesia.
Why is this important?
This will relate to the talent you need, the number of people you need, to specific needs such as needing talent in a particular city, and others.
2. Find an Employer of Record (EOR) Service Provider:
If you are looking for an Employer of Record (EOR) service in Indonesia, you will find many providers that provide such services, even many Employer of Record (EOR) services claim to be able to help hundreds of countries globally.
However, if you want to enter the Indonesian market, choose a provider that has been established in Indonesia for a long time because each region has different laws. Choosing to work with those who have been in the HR field for decades, will greatly help your process.
You can consider Abhitech as your Employer of Record (EOR) provider. Because Abhitech has proven experience in mastering the Indonesian market compared to other competitors.
Learn More -> Abhitech Service here.
3. Contract with Employer of Record (EOR):
Once you have decided to use an Employer of Record (EOR) service like Abhitech, the next step is to create an employment contract signed by both parties. As a guarantee that they will work well with you.
If you choose Abhitech, you can Contact Abhitech here.
4. Abhitech will start recruiting
After you contact Abhitech and reach a contract agreement, Abhitech the Employer of Record service provider will start the recruitment process for new employees. After that, they will provide the most suitable candidates for you.
5. Employee Administrative Process
Abhitech as an Employer of Record (EOR) provider in Indonesia will take care of all the necessary administrative processes until the employee can work with you.
We understand you are a company looking for several Employer of Record (EOR) providers in Indonesia.
What are the things you should pay attention to in finding Employer of Record (EOR) service in Indonesia?
Best Practices for Selecting an Employer of Record (EOR) Provider in Indonesia
For those of you who are comparing Employer of Record (EOR) services in Indonesia, it would be a good idea to pay attention to the following things:
1. Complete Compliance
Ensure they are compliant and up to date with the latest developments in Indonesian workforce regulations. Can you see if they are from a reputable company? There are many brokers in Indonesia who promise cheaper prices but this does not guarantee that they can work well. There are also many who cheat foreigners. Apart from choosing those who really dominate the Indonesian market, also pay attention to whether they are legal in Indonesia.
2. Indonesia Experts
This should be repeated by Abhitech once again because you also understand that each country has its own regulations. Therefore, you choose to work with vendors because you feel they understand recruitment issues in Indonesia better, both in terms of regulations and culture.
3. Speedy Market Entry
Finding those who are located in Indonesia will make it easier for you to penetrate the market. Because they are very familiar with market conditions, they have even done recruitment for their own companies in Indonesia.
4. Round-the-Clock Assistance
Nowadays, many companies use chatbots, compared to using sales. Of course, your chatbot gets a response speed but is it a valid response? Every business that enters Indonesia has specific business needs that cannot be answered specifically by chatbots.
5. Simplified Payroll Management
The way they manage payroll is something you should pay attention to. Because if your employees are late in getting their salaries, this will impact their productivity or even your company’s reputation. Also, make sure they can handle payroll in Indonesian currency because if you use USD Currency this will cause problems in calculations considering the exchange rate can fluctuate.
Conclusion
If this article is made shorter, then we can conclude that Employer of Record (EOR) is the solution for companies looking to expand their business fast in Indonesia. You can start a business directly without having a local entity or PT in Indonesia.
With Employer of Record (EOR) services, you will also avoid complex regulatory issues, such as law, tax, and HR matters. You can focus on your business, expansion, market research, and other things. Because all administrative matters regarding employees have been completed by Employer of Record (EOR) services such as Abhitech.
Employer of Record (EOR) is an efficient and safe choice in Indonesia, which has strict labor regulations.
If you want to learn more about Service Employer of Record (EOR) Abhitech.
The main advantages of using Employer of Record (EOR) services in Indonesia include:
- Ease of Expansion: Employer of Record (EOR) allows companies to enter new markets without having to establish a local entity.
- Legal Compliance: Ensure all HR practices comply with local regulations, thereby reducing legal risks.
- Cost reduction: Reduces overhead and administrative costs typically required to manage employees directly.
- Flexibility: Enables companies to quickly adjust workforce numbers according to business needs.
If you need Employer of Record (EOR) services, you can contact Abhitech here
