Key Facts
| Employment Terms | |
| Timezone | Indonesia has three timezones: Western Indonesia Time (WIB) is (GMT+7), Central Indonesia Time (WITA) is (GMT+8) and Eastern Indonesia Time (WIT) is (GMT+9) |
| Currency | Indonesian Rupiah (IDR) |
| Capital city | Jakarta |
| Official language | Indonesian (Bahasa) |
| Ease of doing business | Friendly to business (#73 out of 190) |
| Minimum wage | 4.9M IDR, per month (as per January 2023) |
| Estimated employer cost | 10.24% – 11.74% (of employee’s salary) |
| Employer retirement contribution: Mandatory and Voluntary Pension scheme | The pension system has two major categories: mandatory and voluntary. The mandatory category includes three institutions: Taspen, Asabri, and BPJS Ketenagakerjaan. The voluntary category consists of two types of providers: Employer Pension Funds (DPPK) and Financial Institution Pension Funds (DPLK). |
About Indonesia
Indonesia is a country in Southeast Asia with a population of over 270 million people, making it the world’s fourth most populous country. Its economy is driven by industries such as agriculture, mining, and manufacturing, and the country has a diverse culture with over 300 ethnic groups. In terms of employment law, Indonesia has implemented a comprehensive set of regulations that cover various areas such as employment terms, working conditions, and minimum wage requirements that are specific to certain industries.
Employment in Indonesia
Working Hours
- The standard working hours per week is 40 hours, typically spread over 5 days a week. However, this can vary depending on the industry and the collective agreement between employers and employees.
Overtime
- Overtime is paid at 1.5 times the normal hourly rate for the first hour and two times the normal rate for subsequent hours, based on an employee’s monthly wage. The hourly wage is calculated as 1/173 of the monthly wage.
Probationary
- The maximum probation period for an employment contract is three months. During this time, the employer may terminate the contract without the need for severance pay or notice.
Payroll Cycle
- Payroll is monthly and paid on the last working day or as agreed in the employment contract. Employers are required to pay a 13th-month bonus and a mandatory religious holiday bonus known as Tunjangan Hari Raya (THR)
Main Types of Leave in Indonesia
Annual Leave
Employees receive 12 days of paid leave after working for 12 months. They must take off one six-day period per year, and unused days expire after six months. Full-time work is 40 hours per week in five or six days, but exceptions can be made for work that can be done in fewer than 35 hours a week.
Sick Leave
Employees are entitled to sick leave with a doctor’s note, and receive 100% of their pay for the first four months of illness. This decreases to 75% for the next four months, and then to 50% for the subsequent four months.
Parental Leave
Female employees are entitled to three months of fully paid maternity leave. Male employees are entitled to two days of fully paid paternity leave. Employers can also grant additional unpaid leave for both parents.
Other Leave
Bereavement Leave: This type of leave is granted to employees in the event of the death of an immediate family member. Normally employees get 2 days of paid leave.
Marriage Leave: Employees are entitled to up to three days of leave for their own wedding. They may also be granted up to two days of leave for the wedding of an immediate family member.
Religious Leave: Indonesia recognises six official religions, and employees are entitled to leave to observe religious holidays related to their faith. The number of days of leave varies depending on the religion and the specific holiday.
Unpaid Leave: In some cases, employees may be granted unpaid leave if they need time off work for personal reasons that don’t fall under any of the other types of leave. The duration of the leave and the terms of the agreement are usually decided between the employer and the employee.
Employment Termination
Notice Period
By law, the minimum notice period for terminating an employment contract in Indonesia is 30 days.
Termination
A valid reason is required to dismiss an employee. The most common reasons are below:
- Employee is absent from work due to illness for over 12 months
- Employee reaches the retirement age specified in their employment contract or applicable law
- Employee breaches the terms of their employment agreement after receiving three warnings
- Employee is absent from work for more than five days without a valid reason, and after receiving two notices
- Employee engages in severe misconduct such as drunkenness, property damage, intimidation, or other serious offenses
- Employee is incarcerated
Severance Pay
Severance payments are given by employers to terminated employees in Indonesia. The amount is based on the length of service and reason for termination, and is at least one month’s salary for each year of service. Severance pay is usually given in a lump sum and is required by law in certain situations, such as termination without a valid reason or notice period.
Disclaimer: The information on this webpage is current as at 19 September 2022, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed on this webpage are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. The information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising either directly or indirectly as a result of reliance on, use of or inability to use any information provided on this webpage. You should undertake your own research and to seek professional advice before making any decisions or relying on the information displayed here.
Hiring Process in Indonesia
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Hiring an employee in Indonesia is no easy task. Especially, if you are overseas, and lack the knowledge of employment law and regulations relating to international HR compliance, payroll, benefits and taxes.
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Indonesian Employment Law
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Indonesia has laws that help keep workplaces fair. You should be aware of the rules and what your employer's rights and responsibilities are. Under Indonesian employment law, employers and employees both have rights and responsibilities. Do you know your responsibilities?
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