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Indonesia

How to Hire Workers in Indonesia | Employer of Record (EOR) in Indonesia

Entering the Indonesian market? Our EOR services make it easy to establish your business in Indonesia. We handle all aspects of local employment, including payroll, benefits, and compliance with Indonesian labor laws. With our expertise in the Indonesian market, you can confidently expand your business, knowing that you have a trusted partner managing your international employment requirements.

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Indonesia, known for its stunning landscapes, diverse culture, and growing economy, offers great opportunities for businesses looking to expand internationally. TCWGlobal simplifies the process of hiring in Indonesia, offering comprehensive solutions for building your contingent workforce.

With a population of over 270 million people, Indonesia boasts a large and diverse workforce. From the bustling streets of Jakarta to the pristine beaches of Bali, the country offers a unique blend of culture and natural beauty.

When expanding your business into Indonesia, compliance with local regulations is essential. TCWGlobal, as your employer of record, ensures that your contingent workforce is fully compliant, minimizing risks for your organization.

In addition to compliance, TCWGlobal provides personalized services and benefits for your contingent workforce. Whether you require assistance with payrolling management, benefits administration, or any other aspect of HR, our team is committed to meeting your needs.

Partnering with TCWGlobal guarantees a seamless and successful expansion into Indonesia. Our expertise and local knowledge make us the ideal partner for businesses looking to establish a contingent workforce in this dynamic market.
Worker Classifications

Indonesian law makes a distinction between (1) permanent employees which are either workers (pekerja) or laborers (buruh), and (2) non-permanent/contracted employees. Both are entitled to the same employment rights, but permanent employees have more such as rights for severance and service pay in the event of termination.

Fixed-Term Contracts

Fixed-term contracts are permitted in Indonesia. There is no minimum duration, but fixed-term arrangements cannot exceed five years. The period of five years includes the entire fixed-term arrangement and its extension, otherwise they will be deemed permanent. Fixed-term contracts may be terminated before the set end date by following the termination procedure outlined below.

Probationary Periods

There is no probationary period for a fixed term contract. Probationary periods are allowed for permanent employees only and are limited to three months. During the probationary period, the employment agreement can be terminated by way of serving prior termination notice no later than seven business days before the proposed termination date to the Worker.

Holidays

Indonesia observes between 14 and 18 National holidays depending on the year. They are considered paid days off. If a Worker works on a public holiday will be entitled to overtime, and wages, the formula of which is set out under Government Regulations No. 35 of 2021 on Fixed-Term Employment Agreement, Outsourcing, Work and Rest Hours, and Employment Termination. Indonesia also has eight to nine days of optional "collective" or "common" leave set by the government which could be counted as part of the Worker's vacation entitlement if used by the Worker. This arrangement will be based on an agreement between the Worker and the employer. The Worker may choose whether or not to observe the collective/common leave days.

Vacation

After 12 consecutive months of service, Workers are entitled to a minimum of 12 days of annual vacation. It is customary for employers to offer annual vacation from the Worker's start date. There is no statutory requirement for unused leave to carry over from year to year. However, if there is accrued but unused leave at the termination of the contract, it is payable to the Worker.

Sick Leave

Workers are entitled to paid sick leave with a medical certificate. Workers who are seriously ill are entitled to their wages based on their length of absence as follows: 0 - 4 months: 100% of wages; 4 - 8 months: 75% of wages; 8 - 12 months: 50% of wages; 12 - 16 months: 25% of wages. Employers are responsible for sick pay, not the government.

Working Hours

A standard workweek is 40 hours per week. Those working six days per week work 7 hours per day. Those working five days per week work 8 hours per day. Indonesian law provides flexibility for the Worker and employer to determine other working hour arrangements.

Overtime

Overtime is considered any hours over and above the standard workweek. Workers must agree to work overtime. If they do agree, it is limited to 4 hours per day or 18 hours per week. Workers carried out overtime will be entitled to (a) overtime pay, and (b) meal (i.e. food and drinks) of at least 1,400 kilo calories if the overtime exceeds 3 hours. The calculation of overtime wages is varied, to which it is set out under prevailing regulations. Overtime performed on weekly rest days or public holidays is payable at an increasing premium for each hour of overtime work. The overtime rules could be exempted in the employment agreement for certain positions including executives and managers.

Mandatory Bonuses

In Indonesia, Workers who have been working for 12 months continuously are entitled to one month of wages (referred to as a 13th-month salary) before the relevant Workers’ religious holiday. Workers who work for one month but less than 12 months will be entitled to wages calculated proportionally to their service period.  The religious holiday allowance must be paid seven days before the predetermined religious holiday.

Termination

In Indonesia, termination requires either mutual agreement or an order from the Industrial Relations Court. Indonesian laws require 14 business days prior written notice to be delivered to the Worker before the proposed termination date.  In all cases, terminations must follow a specific procedure otherwise they will be deemed null and void. First, a discussion must take place with the Worker regarding the reasons for termination. Mutual, severance pay, service pay, compensation, and/or separation pay may be negotiated before a mutual agreement is executed. The mutual agreement must be registered with the Industrial Relations Court and notified to the relevant manpower office. If mutual agreement is not possible, termination requires an order from the Industrial Relations Court. 

Resignation

Workers must give at least 30 days' notice to resign.

Unique Country Nuances

Indonesian law restricts non-Indonesian citizens from performing certain jobs such as those in human resources. Workers are entitled to a religious holiday allowance.

Mandatory Employer Costs

JKK (Work Accident Security) & JKM (Death Security), JHT (Old Age Security), BPJS (Social Insurance) and Pension

How an EOR Can Help You Win Fast

TCWGlobal stands unmatched as the leading employer of record service provider. Our global reach, expertise in diverse industries, and commitment to client satisfaction makes us the best choice. Looking for a global employer of record or international payrolling partner that will work with you and not for you? Trust TCWGlobal. We are here for you.

Common Pitfalls in Choosing an EOR

When choosing an Employer of Record (EOR) service, people often make mistakes such as overlooking compliance, global reach, technology integration, company experience, and fee transparency. Watch this video to see what to consider when picking an EOR.