Employer of Record Indonesia

Our Employer of Record Indonesia service enables clients to hire employees without the need to operate a local legal entity there.

About EOR Indonesia

It makes a big difference to develop a new market with your own personnel on the ground. Particularly for functions related to sales & marketing, business development, distributor management, and service & maintenance, our customers are very satisfied using our Indonesia Employer of Record Service.

Our customers and their local teams can be free of the distractions of administrative tasks and complex local requirements. So you can fully focus on the development of your core business.

If your local business grows large enough, you can easily transfer the employees to your own subsidiary. It also provides a quick exit strategy if necessary. In addition to Indonesia, we offer Employer of Record services in several other countries.

Get in Touch with Us

Stephan Dorn

Managing Partner

Employer of Record Indonesia - FMC Group's Approach

We offer:
Quick, flexible, and easy entry into Indonesia in compliance with local employment laws
Complete control over business development with your own team
Good option for building up, managing, and supporting your distributors and key accounts by directly observing local developments and adjusting the strategy whenever necessary
Using our comprehensive recruitment experience for international clients, we can form a local team that fits your corporate culture.
Focusing on your core business instead of dealing with the time-consuming and complex local administrative tasks
Allowing for easy market exit if necessary
Integrating your employees into our team through motivational events and special meetings

EOR Indonesia Management & Reporting Flow

Hiring an Employee

Indonesian labor and employment laws are typically seen as favoring employees. These laws offer a broad definition of employment and ensure that provisions such as social security are provided to all employees. While these laws apply to all Indonesian nationals working within the country, they do not extend to foreign nationals. Terminating employment in Indonesia is generally regarded as challenging, and there are various types of employment arrangements defined under Indonesian law.

Employment Contract – indefinite vs. fixed term

Probation Period

In Indonesia, a probationary period of up to three months is permissible for any employee.

When terminating employment, employers must obtain the necessary permission from the Industrial Relations Court (IRC). Without the approval of the IRC, termination of the employment contract cannot occur, even with mutual consent. Although there is no mandatory notice period required before ending a contract, employers typically provide a 30-day period.

According to law, employees must receive severance pay upon dismissal. This typically amounts to one month’s pay for each year of service, capped at a maximum of nine years. The law also specifies circumstances under which employees cannot be terminated, such as during pregnancy, short-term illness, or upon joining a union.

Work Week, Overtime & Maximum Working Hours

In Indonesia, the standard work week consists of 40 hours, typically divided into either eight hours per day for five days or seven hours per day for six days.

When employers require employees to work beyond these regular hours, overtime pay is mandated. Overtime compensation generally equates to 1.5 times the employee’s base rate for the first overtime hour and 2 times the base rate for subsequent hours. The maximum allowable overtime in Indonesia is three hours per day or 14 hours per week.

Written agreements concerning overtime requests are obligatory in Indonesia and must be mutually agreed upon by the employee.

It’s worth noting that senior-level positions in Indonesia typically do not receive overtime compensation.

Income Tax

Typical Benefits

In Indonesia, every company’s benefit management plan is required to encompass statutory benefits as mandated by law. This includes providing time off for the nation’s 14 public holidays. Additionally, employees may request additional time off to observe religious traditions.

Furthermore, after completing 30 days of employment, employees must be enrolled in the national social security program (BPJS). This program covers benefits such as workplace accident and death benefits, retirement pension, and healthcare.
Health Insurance: Indonesia operates a compulsory universal healthcare system, wherein both employers and employees contribute towards funding healthcare insurance. This contribution amounts to approximately 5% of earnings and applies to both locals and expatriates.

Visa for the Employees

Foreign nationals who wish to work in Indonesia typically require two primary documents: a work visa and a work permit.
Work Visa (Visa Izin Tinggal Terbatas/ITAS): This visa allows foreign nationals to enter Indonesia for the purpose of employment. It is typically issued for a limited duration and requires sponsorship from an Indonesian employer. The work visa is obtained from an Indonesian embassy or consulate abroad before entering the country.
Work Permit (Izin Mempekerjakan Tenaga Kerja Asing/IMTA): The work permit is an official authorization issued by the Indonesian Ministry of Manpower (Kementerian Ketenagakerjaan) that allows foreign nationals to work legally in Indonesia. It specifies the type of work, employer, and duration of employment. The work permit must be obtained by the employer on behalf of the foreign employee before they start working in Indonesia.
Both the work visa and work permit are essential documents for foreign nationals to legally work and reside in Indonesia. They must be obtained in compliance with Indonesian immigration and labor laws.

Time off Policies

Public Holidays

Indonesia provides time off for public holidays, with the country recognizing 12 to 15 national holidays. The specific dates for these holidays may vary from year to year.
New Year’s Day
Isra Mi’raj
Chinese New Year
Bali Hindu New Year
Good Friday
Easter
Hari Raya Idul Fitri
Labor Day
Ascension of Jesus Christ
Waisak Day
Pancasila Day
Hari Raya Idul Adha
Islamic New Year
Independence Day
Maulid Nabi
Christmas Day

Annual Leave

Employees in Indonesia are entitled to 12 days of annual leave per year. Additionally, there is a form of shared leave known as ‘Cuti Bersama’, where all employees take leave on the same day. This initiative is designed to promote domestic tourism.

Sick Leave

Under Indonesian law, employers are not obligated to offer a specific number of sick days to employees. Sick pay may be adjusted depending on the duration of the employee’s absence from work.

During the initial four months of sickness, employees are entitled to receive 100% of their pay. However, for periods of sickness exceeding four months, the employee’s pay may be reduced by 25%. If an employee remains sick for more than 12 months, the employer has the legal right to terminate their employment.

Other Leave Types

Maternity Leave: Expectant mothers in Indonesia are entitled to three months of paid maternity leave. Typically, half of this leave is utilized before the child’s birth, with the remaining half taken after the birth. Maternity leave is paid at the full amount of the mother’s wages. On the other hand, fathers in Indonesia are entitled to two days of paternity leave.
Family Leave: Employees in Indonesia are entitled to paid family leave in specific situations, including:
During this time off, employees receive their full salary. However, employers are not obliged to pay the usual allowances that employees are entitled to receive.

Terminating an Employee

For fixed-term contracts in Indonesia, the standard termination notice period is 14 days.

Severance pay is calculated at a rate of 1 month’s salary per year of service, with a maximum of 9 months’ salary.

Additionally, there is a provision for “Severance appreciation pay” as a reward for service rendered:
3 to 6 years of employment: 2 months’ salary
6 to 9 years of employment: 3 months’ salary
9 to 12 years of employment: 4 months’ salary
12 to 15 years of employment: 5 months’ salary
15 to 18 years of employment: 6 months’ salary
18 to 21 years of employment: 7 months’ salary
21 to 24 years of employment: 8 months’ salary
Above 24 years of employment: 10 months’ salary