Hire and build a team in Indonesia is difficult, especially if you enter the country with the fourth largest population in the world. There will be a lot of talent applying to your company, but if you don’t filter them well, then you will miss out on the potential to build the right team for your business.
To make a team in Indonesia, at least:
- You have to find the best candidate.
- You must set up a local entity to take care of employee needs. This includes benefits, taxes, payroll
- You must continue to understand the latest regulations, to keep your business compliant with local labor laws.
Because there are many regulations and considerations, the recruitment process can be very troublesome, to overcome this many foreign companies that enter Indonesia use HR Outsourcing services such as Abhitech.
You just leave it to its members who have decades of experience, so that the quality of Manpower you get is guaranteed. Learn more about experienced Recruitment Service provider.
If you are a foreign company, there is an easier solution called Employment of Record (EOR).
What’s that?
Employer of Service (EOR) is responsible for broader matters other than recruitment, payroll, or work permits. Employer of Service will legally manage your entire employment contract. However, you can still have full rights to hire and build your team in Indonesia while operating your business.
Understanding Employer of Record (EOR) in Indonesia
Utilizing Employer of Record (EOR) services in Indonesia offers several compelling advantages for companies looking to expand their operations or hire employees in the country
Benefits of using an EOR for businesses looking to expand into Indonesia
In simple terms, you work with a third party who takes care of all your employees’ needs. So you can just focus on your business operations.
The more adequate your employees’ needs are, the greater it will be high-quality talent that will go to your company.
➡ Learn more how to hire international talent without any effort
How Much Does It Cost to Use an Employer of Record (EOR) in Indonesia?
When you ask about price, our answer depends on the context you need.
If you look at the Employer of Record (EoR) service you will see that the costs are quite expensive, but this is different from Abhitech. We do not provide flat prices for all businesses.
So the cooperation will be fairer, because you don’t have to pay more for light work, unlike if the price is flat.
We will ask first what service you need and the price will adjust from there. For this reason, you can contact us here and tell us all your business needs.
Please ask us, and you will see clear evidence that Abhitech has dominated the Indonesian market for 30+ years to help you hire and building team in Indonesia.
Hiring in Indonesia
Previously Indonesian Employment Law of 2003 fully regulates the rights, benefits and protections of workers that must be followed by the company.
However, in 2020 DPR RI confirmed a Law named “Creating Jobs” to help create jobs and increase foreign and domestic investment by reducing regulatory requirements for business permits and land acquisition.
Which ultimately added several new articles and became Indonesian employment law. Before you hire and build a team in Indonesia you should know all about contracts.
Employment Contracts and Agreements in Indonesia
According to Glints.com In simple terms, the meaning of an employee work contract is a written and official agreement between the company and the employee that contains the terms of employment, rights, and obligations during the collaboration.
The issuance of this employment contract is mandatory before the collaboration or term of office begins.
In Indonesia itself there are at least 5 types of work contracts:
1. Specific Time Work Contract (PKWT Contract)
A Specific Time Work Contract is a type of work contract with a certain time limit.
Work contracts for a certain period of time are usually used to fill temporary projects or if your company suddenly needs a lot of new talent.
Previous Specific Time Work Contracts (PKWT) had a maximum of 2 years. You can only hire people after 2 years, however, Government Regulation (PP) Number 35 of 2021 A fixed term work contract can be up to 5 years. If the work has not been completed within 5 years, then you can extend the contract.
2. Indefinite Time Work Contract (PKWTT Contract)
This contract is often called a permanent employee and can work without time limits. Before becoming a permanent employee Article 60 paragraph (1) of the Employment Law It is stated that the company can provide a trial period, for 3 months of work.
An Indefinite Time Work Contract is a type of work contract without a specific time limit.
3. Freelance Work Contract
A freelance work contract is a type of contract used to hire freelancers or independent workers who work project by project. Freelance workers are not part of the company’s permanent employee structure but are hired for specific jobs only.
4. Part-Time Employment Contract
A part-time work contract is a type of contract used for work with fewer hours than permanent employees. For example, only working on weekends or maybe only 4 hours per day. Part-time employees’ working hours usually adjust to the company’s needs and must be mutually agreed upon.
5. Internship Contract
An internship contract is a work contract used for students or new graduates who do not have work experience and is used to gain experience working in a company. Usually after an internship, they can be appointed as permanent employees, but maybe not.
If you already understand the types of work contracts in Indonesia according to applicable law.
What you should read in Contacts to hire and build a team fast in Indonesia?
Elements of an Employment Contract
Usually employment contracts in Indonesia contain the following:
- Name, company address, and type of business
- The worker’s name, gender, age, and address
- Department or job type
- Workplace
- The amount of wages and method of payment
- Work conditions that contain the rights and obligations of both parties
However, in one case or another, there could be additions.
1. Working Hours in Indonesia
Based on Law (UU) Number 11 of 2020 Article 77, there are 2 working hour schemes in Indonesia:
- 6 work days a week: work 7 hours a day or 40 hours a week
- 5 day work week scheme: work 8 hours a day or 40 hours a week
If they have to work longer hours, then there are overtime rules. Which is arranged Law (UU) Number 11 of 2020 Article 78 is:
- Overtime work is a maximum of 4 hours a day and 18 hours a week.
- From the start, workers must agree they will work overtime
2. If You Hire International Employees
If you employ international employees then you must have a Plan for the Use of Foreign Workers (RPTKA) and a work permit (IMTA) this is regulated in UU no. 13 of 2003 concerning Employment article 42.
➡ Read more details about the Plan for the Use of Foreign Workers (RPTKA) here.
3. Payroll and payroll taxes in Indonesia
- Income Tax: Employers are required to withhold income tax (PPh 21) from employees’ salaries. The rates are progressive, ranging from 5% to 30%, depending on the income level.
- Social Security: Employers must contribute to several social security programs, including health insurance (BPJS Kesehatan) and employment insurance (BPJS Ketenagakerjaan). These contributions are shared between the employer and the employee.
4. Employment benefits and compensation in Indonesia
Benefits are more important if you want to hire and build a team in Indonesia. People work to get benefits, so give them nice benefits and you get their skills.
a. Maternity Leave
Previously, employers granted female employees three months of maternity leave with full pay. However, the Mother and Child Welfare Law (UU KIA) has changed this provision
The company may not fire the woman even though she has leave rights for 6 months.
In the first 3 months of leave: Mother gets 100% salary.
Second 3 months: Mother gets 75% salary.
b. Vacations and Public Holidays
UU no. 13 of 2003 concerning Employment
- Article 79: States that every worker/laborer is entitled to annual leave of at least 12 days after working for 12 months continuously.
Government Regulation No. 35 of 2021
- Article 26: Explains that annual leave is a minimum of 12 working days, which is given after workers/laborers have worked for 12 months continuously.
c. National Holiday
UU no. 13 of 2003 concerning Employment
- Article 85: States that workers/laborers have the right to get a day off on official holidays determined by the government.
List of Holidays in Indonesia
- AD New Year – January 1
- Lunar New Year – 1 Day in January or February (date changes every year)
- Nyepi Saka New Year) – 1 Day in March or April (date changes every year)
- Vesak – 1 Day in May (date changes every year)
- Ascension Day of Jesus Christ – 1 Day in May or June (date changes every year)
- Pancasila’s Birthday – 1 June
- Eid al-Fitr holiday – 1 Shawwal (2 holidays) – The date changes every year according to the Hijri calendar
- Indonesian Independence Day – August 17
- Eid Al-Fitr Mubarak – 10 Dhu al-Hijjah (the date changes every year according to the Hijri calendar)
- Islamic New Year (1 Muharram) – 1 Day in the Hijri month (date changes every year)
- Birthday of Prophet Muhammad – 12 Rabiul Awal (date changes every year according to the Hijri calendar)
- Christmas Day – December 25
d. Healthcare and Sick Leave
Healthcare and sick leave are regulated in Government Regulation (PP) no. 35 of 2021
Article 40: Regulates that sick workers are entitled to full wages for the first 4 months, 75% of wages for the second 4 months, 50% of wages for the third 4 months, and 25% of wages for the following months until before termination of employment (PHK). ).
Article 41: States that sick workers/laborers must show a doctor’s certificate stating that the worker/laborer cannot work due to illness.
e. Other benefits can help you roll out
- Health Insurance
- Dental and vision insurance
- 401k retirement accounts, and
- Life insurance
5. Severance Pay and Layoffs
In Indonesia, there are laws that regulate work termination. The law regulates how to carry out legal layoffs, procedures that must be followed, and obligations that must be carried out by both companies and employees.
One thing the company has to do is pay severance pay. Of course, the figures given for severance pay are not arbitrary, there are regulations that regulate it so that it can be determined if the severance pay calculation formula is like this:
Calculation of severance pay for the Job Creation Perppu:
| Working time | Severance Pay Received |
| less than 1 year | 1 month’s wages |
| 1 year or more but less than 2 years | 2 months wages |
| 2 years or more but less than 3 years | 3 months wages |
| 3 years or more but less than 4 years | 4 months wages |
| 4 years or more but less than 5 years | 5 months wages |
| 5 years or more but less than 6 years | 6 months wages |
| 6 years or more but less than 7 years | 7 months wages |
| 7 years or more but less than 8 years | 8 months wages |
| 8 years or more | >9 months wages |
Choose the Right Employer of Record (EOR) Provider
To hire and build team in Indonesia with an Employer of Record (EOR), it is very crucial to choose the right partner. At least you should consider the things below:
- Reputation and Track Record
See how long the company has been running and how their work is. Track Records will give you an idea of how they have performed so far. - Compliance and Legal Expertise
See whether they understand the applicable legal conditions and can help you. - Local Expertise
Many Employer of Service (EOR) services claim to be able to work globally. However, each country’s regulations are different. Should you check whether they have expertise in a particular area? - Service Range and Customization
An Employer of Record (EOR) offers a comprehensive range of services. Inquire if they can tailor a smaller selection of services to fit your business needs.
Learn more about: Employer of Record (EOR) in Indonesia
Abhitech owns all of these assets. With over 30 years of experience, we have built a solid reputation. We focus on helping both foreign and local companies enter the Indonesian market
Our services are very diverse, not only Employer of Record, there is Payroll, even Abhitrans, which is a transportation rental service for your office needs.
If you need all of that or just one of our services. Please contact us here
