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Employee Leasing in Indonesia

As one of the most densely-populated countries in the world, Indonesia offers immense opportunities to businesses wishing to expand their activity into the country’s local market of over 270 million consumers. Indonesia’s rapidly-growing economy, its membership in the G20, and its favorable trade agreements with the majority of Southeast Asian countries make it a great destination for investors interested in what the Asian markets have to offer.

The employee leasing services we offer at FMC Group help companies discover their business potential in Indonesia and Southeast Asia with no need for a long-term commitment. This facilitates market entry for businesses and significantly reduces investment costs. Furthermore, FMC Group handles all the administrative and legal procedures related to recruitment, allowing businesses to focus on their growth strategies instead of the local regulations.

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Stephan Dorn FMC Group

Content:

  • Advantages of Employee Leasing in Indonesia
  • Employee Leasing Services Offered by FMC Group
  • Advantages of the Indonesian Market
  • Recruitment in Indonesia
    • Minimum Wage and Payroll
    • Social Contributions and Taxes
    • Working Hours and Overtime
    • Vacation Days
    • Parental Leave and Sick Leave
    • Notice Period

Advantages of Employee Leasing in Indonesia

  • Expanding business activity into Indonesia through employee leasing significantly reduces the expansion’s costs.
  • Hiring a local team in Indonesia allows companies to quickly launch their activity as the employees are already very familiar with the local business environment and culture.
  • Employee leasing services provides clients with a recruitment process that adapts to their specific needs and requirements and that guarantees they hire the best talent available.
  • Expansion through employee leasing allows businesses to skip all legal and administrative challenges related to opening a local subsidiary and to gain immediate access to the Indonesian market.

Employee Leasing Services Offered by FMC Group

  • We choose the best candidates that fit your requirements;
  • We negotiate and conclude employment contracts;
  • We manage the payroll according to international standards;
  • We pay all expenses after your approval;
  • We monitor paid holidays of your employees;
  • We negotiate and implement private health insurance if needed;
  • We maintain continuous communication with you regarding your employees.

Management and Reporting Flow of Employee Leasing Services

Management and Reporting Flow Chart

Advantages of the Indonesian Market

  • Indonesia is an emerging global economic powerhouse. With a GDP of over one trillion US dollars, it is the largest economy in Southeast Asia and a member of the G20. The country also enjoys good macroeconomic stability and has been witnessing GDP growth rates averaging 5% since 2000, except in 2020 due to the COVID-19 pandemic.
  • As a member of the Association of Southeast Asian Nations (ASEAN), Indonesia can trade with minimal taxes with nine other countries, namely Thailand, Malaysia, Singapore, the Philippines, Vietnam, Myanmar, Cambodia, Laos, and Brunei. Indonesia also has preferential trade agreements with India, China, South Korea, Japan, and Australia, among other large markets.
  • Indonesia has the fourth-largest population in the entire world, giving businesses access to a consumer market of over 270 million people. The country also has one of the world’s fastest-growing middle classes, which means the Indonesian population has higher levels of disposable income every year, adding to the attractivity of the Indonesian consumer market.
  • The Indonesian government is making considerable efforts to make the business environment in Indonesia more welcoming and friendly. Between 2010 and 2020, Indonesia climbed from the 122nd rank worldwide to the 73rd in the World Bank’s Doing Business ranking.

Recruitment in Indonesia

Minimum Wage and Payroll

  • The minimum wage in Indonesia varies from one region to another. It ranges from IDR 1,798,979 (EUR 116) to IDR 4,416,186 (EUR 285) per month.
  • Salaries are paid monthly, usually on the last working day of each month.
  • Indonesian labor law stipulates a mandatory annual bonus called Tunjangan Hari Raya. It has to be made for all employees before the longest religious holiday, based on the employee’s religion. The bonus includes the base salary plus a fixed allowance.

Social Contributions and Taxes

Employer Contributions
Health Insurance 4.00%
Old Age Insurance 3.70%
Pension 2.00%
Work Accident Insurance 0.24% – 1.74%
Total 10.24% – 11.74%
Employee Contributions
Old Age Insurance 2.00%
Pension 1.00%
Health Insurance 1.00%
Total 4.00%
Employee Income Tax
Up to IDR 60 million per year (EUR 3,878) 5.00%
Between IDR 60 million and IDR 250 million (EUR 3,878 – EUR 16,158) 15.00%
Between IDR 500 million and IDR 5 billion (EUR 16,158 – EUR 323,154) 25.00%
From IDR 5 billion (EUR 323,154) 30.00%

 

Working Hours and Overtime

  • The legal working hours limit in Indonesia is set at 40 hours per week, divided into either five days or six days.
  • Employees can work up to four extra hours per day and 18 extra hours per week.
  • Overtime work is paid at a rate of 150% of the regular salary on the first hour each day and increases to 200% for the rest of the duration.
  • If overtime work is done during a weekly rest day or a public holiday, its pay ranges from 200% to 400% of the regular salary, depending on its duration.

Vacation Days

  • Employees in Indonesia have the right to take at least 12 days of paid annual leave per year after they complete their first year of service.
  • Employees who have been working for six consecutive years for the same employer can take one full month of paid leave in their seventh and eighth years of service.
  • Indonesia celebrates 14 public holidays:
    • New Year’s Day: January 1st;
    • Chinese New Year: Between January and February;
    • Bali Hindu New Year: Celebrated in March;
    • Good Friday: Between March and April;
    • Waisak Day: Between April and May;
    • Ascension of Jesus: Between May and June;
    • Pancasila Day: June 1st;
    • Independence Day: August 17th;
    • Christmas Day: December 25th;
    • Isra Mi’raj: Varies according to the Islamic calendar;
    • Lebaran Holiday: Varies according to the Islamic calendar (two days);
    • Idul Adha: Varies according to the Islamic calendar (three days);
    • Islamic New Year: Varies according to the Islamic calendar;
    • Prophet Muhammad’s Birthday: Varies according to the Islamic calendar.

Parental Leave and Sick Leave

  • Female employees in Indonesia are entitled to three months of fully paid maternity leave before birth and one and a half months afterward. The salary is covered by the employer during maternity leave.
  • New fathers can take two days of paid leave for the birth of their children.
  • Employees are entitled to two days of paid leave for the circumcision of their child, their baptism, their marriage, or their death.
  • Employees can take two days of paid leave due to the death of their spouse and one day for the death of other immediate family members.
  • Employees in Indonesia are entitled to 14 days of paid sick leave per year, covered by the employer. They can also request a prolonged sick leave covered by Social Security at a rate of 100% in the first four months, 75% in the second four months, 50% in the third four months, and 25% afterward.

Notice Period

  • The minimum notice period in Indonesia is typically 30 days, but it can be set to a longer duration in the employment contract.

Disclaimer: Although we carefully researched and compiled the above information, we do not give any guarantee with respect to the actuality, correctness, and completeness.