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Outsourcing to Indonesia

Indonesia is home to one of the largest and youngest workforces in the world. With its very dynamic labor market that grows at a rate of 2.5 million professionals per year, including 250,000 university graduates, Indonesia offers businesses wishing to outsource some of their services a wide range of options.

The outsourcing services provided by FMC Group allow companies to become more competitive, reduce their labor costs, and access the entire Indonesian talent pool without setting up a local subsidiary. Outsourcing to Indonesia with FMC Group is the easiest and quickest way to hire a local team that can hit the ground running without an adaptation period.

Content:

  • Advantages of Outsourcing to Indonesia
  • FMC Group’s Outsourcing Approach
  • Advantages of Outsourcing with FMC Group
  • Labor Laws in Indonesia
    • Working Hours
    • Annual Paid Leave
    • Other Types of Paid Leave
    • Minimum Wage
    • Social Contributions and Taxes
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Stephan Dorn FMC Group

Advantages of Outsourcing to Indonesia

  • The Indonesian workforce is young and dynamic, with a median age of only 29.7 years. This offers a dynamic labor market that is constantly growing, at a rate of around 2.5 million new workers every year.
  • The Indonesian population has a high literacy rate of around 96%, mainly because access to education in public schools is free and it is compulsory for 12 years, including six years of primary school, three years of middle school, and three years of high school.
  • While a large number of young Indonesians opt for direct employment after high school, universities in Indonesia are attracting more students every year. The country has one of the fastest growth rates in the world for enrollment in higher education, only outranked by India and China. Indonesia’s higher education system currently produces over 250,000 graduates every year, but the number is expected to further grow in the future.
  • Labor costs in Indonesia are very low. The country’s median monthly salary stands at around IDR 12 million (EUR 775), but the salaries of young workers, notably fresh graduates, can start from only IDR 4 million (EUR 258).
  • The Indonesian workforce has high digital capabilities and software development skills. According to a report published by American consulting firm A.T. Kearney in 2019, Indonesia ranked as the fourth outsourcing destination worldwide in terms of digital resonance – the familiarity of the local workforce with digital transformation, notably automation and cybersecurity.

FMC Group’s Outsourcing Approach

Selection

  • We choose the best candidates based on your needs;
  • We prepare detailed reports on candidates;
  • We conduct job interviews;
  • We conduct personality tests if requested.

Recruitment

  • We present video recordings of the interviews so you can make the final recruitment decision;
  • We invite the successful candidates to work at our local office.

Operation

  • We handle the administrative and legal sides of employee management;
  • We let you directly dictate the tasks and missions of your employees;
  • We provide your employees with all the necessary tools and infrastructures for their job.
Approach for Nearshoring

Advantages of Outsourcing with FMC Group

  • We adapt our search methods for candidates to your requirements;
  • We post job advertisements on different online platforms;
  • We search for potential candidates on our growing talent database;
  • We help you reduce financial and time costs related to recruitment;
  • We give you access to the entire local talent pool without the need for setting up a local subsidiary;
  • We take care of all the administrative and legal procedures related to employee management.

Labor Laws in Indonesia

Working Hours

  • Employees in Indonesia can work up to 40 hours per week and either seven or eight hours per day, depending on whether they work six or five days per week.
  • Overtime work cannot exceed four hours per day and 18 hours per week.
  • Overtime work is normally paid at a rate of 150% of the regular pay on the first hour of each extra shift and then 200% for the consecutive hours.
  • Overtime work during rest days and public holidays is paid at 200% to 400% of the regular pay, depending on its duration.

Annual Paid Leave

  • Employees in Indonesia are entitled to 12 days of annual paid leave after they finish their first year of service.
  • After six years with the same employer, employees are entitled to a full month of paid leave in years seven and eight of service.
  • Indonesians celebrate 14 public holidays:
    • January 1st: New Year’s Day;
    • Between January and February: Chinese New Year;
    • March: Bali Hindu New Year;
    • Between March and April: Good Friday;
    • Between April and May: Waisak Day;
    • Between May and June: Ascension of Jesus;
    • June 1st: Pancasila Day;
    • August 17th: Independence Day;
    • December 25th: Christmas Day;
    • Holidays that vary according to the Islamic calendar:
    • Isra Mi’raj;
    • Lebaran Holiday (two days);
    • Idul Adha (three days);
    • Islamic New Year;
    • Prophet Muhammad’s Birthday.

Other Types of Paid Leave

  • Maternity Leave: New mothers can take three months of paid maternity leave before delivery and one and a half months after it. Employers have to cover 100% of the employee’s salary during maternity leave.
  • Paternity Leave: Male employees can take two days of paid leave after their new child is born.
  • Paternal Leave: Employees can take two days of paid leave for certain events involving their children, including circumcision, baptism, marriage, and death.
  • Sick Leave: Employees can take 14 days of sick leave each year, paid for fully by the employer. If they need an extended sick leave, it has to be recommended by a doctor and it becomes covered by Social Security at rates of 100% between the first and fourth months, 75% between the fifth and eighth months, 50% between the ninth and 12th months, and 25% after one year.
  • Bereavement Leave: Employees are entitled to two days of bereavement leave after the death of their spouse and one day after the death of other family members.

Minimum Wage

  • The minimum wage in Indonesia is set in each region individually and varies between IDR 1,798,979 (EUR 116) and IDR 4,416,186 (EUR 285) per month.
  • The payroll in Indonesia is managed on a monthly basis.
  • Employers have to pay a compulsory annual bonus called Tunjangan Hari Raya before the employee’s most important religious holiday. The bonus equals the base salary in addition to a fixed allowance.

Social Contributions and Taxes

  • Employers in Indonesia have to pay between 10.24% and 11.74% of their employees’ gross salaries as social contributions.
  • Employees have to pay a social contribution of 4.00% of their gross salary.
  • The income tax in Indonesia starts from 5.00% for employees with a revenue of less than IDR 60 million per year (EUR 3,878) and scales up to 30.00% for employees with yearly revenue of more than IDR 5 billion (EUR 323,154).