Indonesia
Indonesia is a great place to hire remote talent. But if you don’t already have a physical presence there, hiring and paying your talent in Indonesia can get complicated. In the next five minutes, we’ll teach you how you can hire remotely in Indonesia—without paying thousands in legal fees and getting caught up in legal red tape:
Country snapshot
CURRENCY
Indonesian Rupiah (IDR)
EMPLOYER TAXES
10.00% - 11.74%
PAYROLL FREQUENCY
Monthly
OFFICIAL LANGUAGE
Lingua Franca, Jawa
It’s the fastest way to hire globally
Hiring employees takes months, at the minimum. When you hire with Thera's locally-generated contracts, it’s a matter of days or weeks. This means you can hire the best talent, fast, without losing them to a hellish procession of paperwork.
It’s a lot cheaper
It costs just $0 to sign up for Thera, then $25 per month to hire your contractors with Thera. If you hired employees manually (or did contracting on your own), you’d likely be on the hook for thousands of dollars each month. Setting up an entity alone can cost tens of thousands of dollars.
It’s more flexible for you & your team
Can be less risky than hiring employees
Hiring employees is a bigger commitment, and can open you up to increased liabilities and regulations. When you hire contractors overseas, your biggest risk is misclassification—but laws surrounding contractor classification are often significantly more straightforward.
Some people want to be employees
The contractor life isn’t for everyone—some people want the security that being an employee often appears to provide. Though it’s rare, this does happen, and it’s one disadvantage of manage an all-contractor team.
You might not have as much control over your talent
Most countries’ contractor-employer relationship laws stipulate that the employer can’t set fixed working hours, among other things. These laws give contractors more freedom over how and when they do their work than an employee would have. In reality, however, most contractors are willing & able to work on the company’s schedule—it’s a matter of setting expectations beforehand.
Laws about hiring are complicated, and the same is true in Indonesia. But there are ways to sidestep the headaches—if your company hasn’t already established a physical presence in Indonesia, you have two real options when it comes to hiring. We’ll detail both below.
Hire talent as contractors
Hire talent as employees
If you’ve read up until this point, you’ll know that it’s easier, cheaper, and more flexible to hire contractors in Indonesia than employees. Still, there are valid reasons why you might want to hire employees instead. The content below is for you—we’ll cover employer taxes and obligations in Indonesia.
Employer tax
Employer Contributions
- 10.00% - 11.74%
Paid Time Off (PTO)
- Employees in Indonesia are entitled to receive 12 days of annual leave after they have worked for the same employer for 12 months consecutively. While they are on annual leave, employees receive full payment based on their regular daily payment.
- Employers must take at least 6 days of leave. If employees do not use their annual leave, it expires 6 months after the date they were supposed to take it. Employees and employers may agree upon monetary compensation for unused annual leave.
Public Holidays
16 public holidays.
Sick Days
When employees are sick or injured, they are entitled to paid sick leave, provided they show a medical confirmation of their ill-health. Employees can also have long-term sick leave lasting for longer than 1 year. A doctor should recommend such leave in writing.
Payment to employees on prolonged sick leave is as follows:
- 100% in the first four months
- 75% in the second four months
- 50% the third four months
- 25% of wages until termination
Maternity Leave
Pregnant employees are eligible to take 3 months of paid maternity leave. 1.5 months of this leave is taken in the prenatal period, the other 1.5 months are taken after childbirth. During their maternity leave, employees receive their full salary. Female employees who miscarry are entitled to a 1.5-month rest period if it is recommended by a doctor.
Employers also should provide conditions to breastfeeding mothers in their workplaces.
Paternity Leave
New fathers are entitled to 2 days’ leave for the birth of their child or a miscarriage.
Parental Leave
Employees are entitled to paid child leave in the following circumstances:
2 days paid leave for the circumcision of the employee’s child.
2 days paid leave for the Baptism of the employee’s child.
2 days paid leave for the marriage of the employee’s child.
2 days paid leave for the death of the employee’s child.
Other Leave
None.
Marriage Leave
None.
Bereavement Leave
2 days paid leave is given for the death of a worker’s spouse, child, child-in-law, parent, or parent-in-law.
Termination Process
Before an employee can be terminated, the employer must make a genuine effort to avoid the termination by negotiating with the employee and/or the employee’s labor union to find accommodation such as a change in working hours, improved working methods, or coaching.
If termination cannot be avoided, the employer must explain the reasons for termination clearly in writing to the employee and/or the employee’s labor union.
If the employee believes the termination is unjust, the decision can be challenged in the Labor Court, which will give the final ruling.
The reasons for which employees can be discharged from work are as follows:
The employee violates the employment agreement
The employee is imprisoned
The employee is ill for more than 12 months
The employee is absent from work for more than 5 days without a valid reason, provided he or she has been notified twice
The employee has reached retirement age.
Not all reasons for employees’ dismissal should be related to their misbehavior. The employer can discharge employees for several business-related reasons:
There can be a change of the company’s status, its merger with another business, or acquisition of its ownership.
The employer becomes insolvent
The employer has suffered continuous losses for two years consecutively as proven by financial reports
The employer is closing the business permanently.
Notice Period
There is no law that specifies notice periods for an employee’s dismissal from work. In practice, a 30-day notice is given to the employee to terminate his or her employment contract.
Severance Pay
Employees who are discharged from their job are entitled to receive a payment of:
- Less than 1 year of employment – 1-month wage
- 1 year or more, but less than two years – 2 months wage
- 2 Years or more but less than 3 years – 3 months wage
- 3 years of more, but less than four years – 4 months wage
- 4 years or more, but less than 5 – 5 months wage
- 5 years or more, but less than 6 – 6 months wage
- 6 years or more, but less than 7 – 7 months wage
- 7 years or more, but less than 8 – 8 months wage
- 8 years or more – 9 months wage
Probation Period
3-month probationary periods are permitted for employees on indefinite-term contracts if it has been agreed upon in writing between both parties. An employer cannot impose a probationary period on an employee on a fixed-term contract.
Working Hours
The working hours are arranged as follows:
Employees with 6 workdays a week work 7 hours a day and 40 hours a week.
Employees with 5 workdays a week work 8 hours per day and 40 hours a week.
These working hours rules do not apply to certain businesses and are usually regulated with a Ministerial decision.
Overtime
An employee cannot be forced to work overtime against his or her will and must agree to work longer hours. Employees are not permitted to work more than 4 extra hours a day and 18 extra hours per week. If employees work overtime during weekdays, they receive 150% of their hourly wage for the first overtime hour. For every subsequent overtime hour, they receive wages paid at 200% of the hourly wage.
If employees work overtime on a weekly rest day or any public holiday falling on a weekly rest day while working a six-day workweek, their overtime pay is calculated as follows:
1-7 hours – 200% their hourly wage
8th hour – 300% their hourly wage
9-10 hours – 400% their hourly wage
If employees work overtime on a weekly rest day landing on a weekday when working a six-day workweek, their overtime pay is calculated as follows:
1-5 hours – 200% their hourly wage
6th hour – 300% their hourly wage
7-8 hours – 400% their hourly wage
If employees perform overtime work on a weekly rest day or a public holiday working a five-day workweek, their overtime pay is calculated in this way:
1-8 hours – 200% their hourly wage
9th hour – 300% their hourly wage
10-11 hours – 400% their hourly wage
Employees who hold high-level positions and whose working time cannot be restricted by hours are not eligible to receive overtime pay.
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