Effortless Hiring in Indonesia

Employment Contracts

• Employment relationships in Indonesia are primarily governed by the Labor Act No. 13 of 2003 and Government Regulation No. 35 of 2021. Key points include:
• Fixed-Term Contracts (PKWT):
• Engage employees for a specified duration, not exceeding five years.
• Must be in writing and are not subject to probationary periods.
• Can be renewed indefinitely if the maximum duration is not exceeded.
• Indefinite-Term Contracts (PKWTT):
• Provide ongoing employment without a predetermined end date.
• May include a probationary period of up to three months.
• Language Requirement: Employment contracts should be drafted in Indonesian using the Latin alphabet. In cases of bilingual contracts, the Indonesian version prevails.

Probationary Period

• A probationary period may last up to 30 days for most positions and can be extended to 180 days for managerial roles through collective labor agreements. During this period, either party can terminate the contract without cause.

Payroll Frequency

• Employees are typically paid on a monthly basis, with payments due by the end of each month.

Minimum Wage

• Minimum wages vary by province and are determined annually by regional governments. As of 2023, the minimum wage is approximately IDR 2,500,000 per month (varies by region).

Overtime

• The standard workweek is 40 hours, either seven hours per day for six days or eight hours per day for five days. Overtime is compensated as follows:
• For the first hour: 1.5 times the hourly wage.
• For subsequent hours: 2 times the hourly wage.
• Overtime work is limited to four hours per day and 18 hours per week.

Employee Contributions

1. Social Security (BPJS Ketenagakerjaan): Covers employment injury, death, old-age savings, and pensions.
2. Health Insurance (BPJS Kesehatan): Provides healthcare benefits.

Employer Contributions

1. Employers contribute to both BPJS Ketenagakerjaan and BPJS Kesehatan on behalf of employees.
2. The total employer contribution rate varies but generally includes:

• Approximately 20% to 28% of the employee's salary for social security.

Income Tax

• Indonesia employs a progressive income tax system with rates ranging from 5% to 30% based on income levels.

Type of Leave in Indonesia

1. Annual Leave

• Employees are entitled to a minimum of 12 days of paid leave after one year of continuous service.

2. Sick Leave

• Employees are entitled to paid sick leave with a medical certificate. Compensation during sick leave is as follows:
• First four months: 100% of wages.
• Fifth to eighth month: 75% of wages.
• Ninth to twelfth month: 50% of wages.
• Beyond twelve months: 25% of wages until termination.

3. Maternity Leave

• Female employees are entitled to three months of fully paid maternity leave, typically divided into 1.5 months before and 1.5 months after childbirth.

4. Paternity Leave

• Male employees are entitled to two days of paid leave for the birth of their child or in the event of a miscarriage.

5. Other Leave

• Employees are entitled to paid leave for family events such as marriages, circumcisions, baptisms, and deaths, with durations specified by law.

Mandatory Benefits

1. Social Security Programs:

• BPJS Ketenagakerjaan: Covers employment injury, death, old-age savings, and pensions.
• BPJS Kesehatan: Provides healthcare benefits.

2. Religious Holiday Allowance (THR): An annual bonus equivalent to one month's salary, paid prior to major religious holidays observed by the employee.

Notice Period

• Employers must provide a written termination notice at least 14 business days before the intended termination date. If the employee objects, they must respond in writing within seven business days.

Severance Pay

• Upon termination, employees may be entitled to severance pay based on their length of service and reason for termination. This includes long-service pay and compensation for rights accrued during employment.

Prohibited Grounds for Termination

• Employers cannot terminate employees based on certain conditions such as illness (up to 12 months), pregnancy, or union activities.