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Employment Guideline in Indonesia

Working Contract Types

Kontrak Kerja Waktu Tertentu (PKWT)

Fixed-Term Employment Agreement

This is a contract that has a specified time limit. It is usually used for temporary work, specific projects, or seasonal work. A probationary period does not exist in this contract.

Kontrak Kerja Waktu Tidak Tertentu (PKWTT)

Indefinite-Term Employment Agreement

A contract without a specified time limit. This means the worker is employed for an indefinite period, and the employment relationship ends only for specific reasons in accordance with labor laws.

Perjanjian Kerja Harian Lepas (PKHL)

Freelance Work

This contract is usually for daily or short projects. Payment is based on the number of days worked without full social security, such as BPJS Ketenagakerjaan and BPJS Kesehatan (social security insurance).

Kontrak Outsourcing

A company can hire another company that provides outsourcing services to help their work in Indonesia. The contract refers to PKWT or PKWTT depending on the agreement.

Salary and Tax

Minimum Wage in Indonesia

  • Jakarta: IDR 5,067,381
  • Surabaya: Rp5.343.430
  • Denpasar (Bali): IDR 3,096,823
  • Medan: IDR 3,769,082
  • Bandung: IDR 4,209,309

Minimum wage varies according to each province and city. Minimum wage is reviewed annually and released before year end.

Individual Tax

5 Persen
Penghasilan Pertahun (Aturan Baru) Rp60 juta
15 Persen
Penghasilan Pertahun (Aturan Baru) Rp60 – Rp250 juta
25 Persen
Penghasilan Pertahun (Aturan Baru) Rp250 – 500 juta
30 Persen
Penghasilan Pertahun (Aturan Baru) Rp500 juta – Rp5 miliar
35 Persen
Penghasilan Pertahun (Aturan Baru) > Rp5 miliar

Payroll Cost and Allowance

Below are mandatory payroll costs applicable for employees in Indonesia:

Component Description
Basic Salary (Gross) Salaries inclusive of income tax (PPh21)/td>
BPJS Kejehatan
  • National Health Care Security
  • Employer Rate = 4%; Employees Rate = 1%
  • Rate capped at Salary Rp 12,000,000 (2023)
BPJS Ketenagakerjaan
  • Social Security Administrator for Employment
  • Consist of JHT (old age protection), JKK (working accident protection), JK (death protection), JP (pension protection).
  • JHT, JKK and JK Formula – Employer Rate = 4.24%; Employee Rate = 2%
  • JP Formula – Employer Rate = 2%; Employee Rate 1%
THR / Religious Festival Allowance
  • Mandatory non-wage income or employee’s income outside of the basic wages that must be paid by the company to employees ahead of religious holiday
  • Formula = Basic Salary / 12 x Months Worked
End of Contract Compensation Define contact employees who have been working for 12 months continuously have the right to compensation money of 1 months salary. Employees who have a working period of more than 1 month but less than 12 months get proportional or proveraged compensation of less than 1 month’s salary.

Note: For better understanding and specific cost, please contact us.

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Working time and Overtime Rules

According to the regulations, overtime is allowed maximum 4 hours a day and 18 hours a week.

Working week is from Monday to Friday. The standard working hours are 8 hours a day for 5 days, and 7 hours a day for 6 days, with 40 hours total per week. The standard work week is from Monday to Friday.

Overtime payment is calculated according to how many hours the employee works.

  • For the first hour of overtime work at 1.5 times the hourly rate; and
  • For each subsequent hour of overtime work, at 2 times the hourly rate.
For overtime on the weekend or official holidays:

For 6-day workweek and 40 hours a week:

  • The first hour up to the seventh hour, paid at 2 times the hourly rate;
  • Eighth hour, paid at 3 times the hourly rate; and
  • Ninth hour, tenth hour, and eleventh hour, 4 times the hourly rate;

For a 5-day workweek and 40-hour week:

  • The first hour up to the eighth hour, 2 times the hourly rate;
  • Ninth hour, three times the hourly rate; and
  • Tenth hour, eleventh hour, and twelfth hour, 4 times the hourly rate.

Note: For better understanding and specific cost, please contact us.

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Leave Policies

Maternity Leave

Duration of maternity leave:
  • Female employees are entitled to at least 3 months leave after childbirth and able to extend another 3 months where there are medically certified special conditions (eg. childbirth complications).
  • Employees also entitled 1.5 months leave due to miscarriage.
Wages during maternity leave:
  • Employees are entitled to receive full pay for the first four months, and 75% of base salary for the fifth and sixth months.
  • Employees are also entitled to receive full pay due to miscarriage.

Paternity Leave

Duration of paternity leave:

Fathers/husbands are entitled to two days leave for live birth (may be extended by another three days or by agreement) or miscarriage.

Wages during paternity leave:

While the new regulation does not specify payment during paternity leave as the leave is not expressly stated to be unpaid, employers should consider the entirety of the paternity leave (including any extension) to be paid leave.

Sick Leave

Employers are prohibited from terminating the employment on the reason that a laborer is absent from work due to sickness according to a doctor’s statement for a period not exceeding 12 months continuously.

If employees are on leave due to illness based on a doctor’s statement, then they are entitled to receive their salary.

Wages paid to sick workers/laborers are as follows:

Period Pay (% of base salary)
First 4 months 100%
4-8 months 75%
8-12 months 50%
12-13 months 25% before the employer terminates the employment contract

Termination

Termination by the employee requires a 30 days minimum notice period or as per each company’s policy

In Indonesia there is no minimum notice period by the employer. However,  it is usually in this period:

  • For employee in probationary period: 7 days
  • For permanent employee: 30 days

Termination Requirements

There are various reasons of termination in Indonesia:

Voluntarily by the employee:
  • By mutual agreement
  • Death of worker
  • Completion of assignment
  • By expiration of the contract
By the employer:
  • Probationary period
  • Objective grounds
  • Disciplinary dismissal
  • Low performance due to unsuitability for the job
  • Company merger or acquisition
  • Bankruptcy
  • Inability to work due to medical conditions/illness

Severance

Employers are prohibited from terminating the employment on the reason that a laborer is absent from work due to sickness according to a doctor’s statement for a period not exceeding 12 months continuously.

If employees are on leave due to illness based on a doctor’s statement, then they are entitled to receive their salary.

Wages paid to sick workers/laborers are as follows:

Length of employment Pay (% of base salary)
Less than 1 year 1 month wage
Between 1 to 2 years 2 month wage
Between 2 to 3 years 3 month wage
Between 3 to 4 years 4 month wage
Between 4 to 5 years 5 months wage
Between 5 to 6 years 6 months wage
Between 6 to 7 years 7 months wage
Between 7 to 8 years 8 month wage
Above 8 years 9 month wage