Understanding Employment Norms in Indonesia: A Comprehensive Guide
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Hiring in Indonesia? Read on to find out the employment norms (like taxes, payroll and benefits) and EOR (Employer on Record) norms in Indonesia.

Employment Norms in Indonesia

Indonesia is a southeast Asian country. It is a group of thousands of islands stretching in the Indian Ocean. It has about 17,000 islands, out of which 6,000 are inhabitable. The country holds 4th place in terms of population in the world. It is one of the most ethnically and ecologically diverse countries. Its rich biodiversity attracts tourists from all over the world.

General Information:

  • The Indonesian currency is Indonsian Rupiah (IDR).
  • Jakarta is the capital of Indonesia.
  • Bahasa Indonesia (Official), Javanese, and Sundanese are the official languages of Indonesia. Documentation can be in Bahasa Indonesia.
  • As of 2021, the GDP of Indonesia was reported to be 1186.09 billion US dollars.
The labor laws in Indonesia are governed according to the Union Labor laws, Manpower Laws, and Industrial Relations Dispute Settlements laws. These laws ensure social and work benefits to employees.
Indonesia map

Table of Contents

  • Agreements
  • Onboarding Process
  • Visa
  • Minimum Wage
  • Payroll Cycle
  • Annual Bonus
  • Health Benefits
  • Working Hours and Overtime
  • Leaves
  • Social Security
  • Taxes for Employers
  • Taxes for Employees
  • Probation
  • Termination
  • Severance Pay
  • Employees or Contractors
  • Final Words


The agreement language in Indonesia can be in Bahasa Indonesian. It can be translated into another language if requested. There are two types of employment agreements:
  • Perjanjian Kerja Waktu Tertentu: It is a fixed-term agreement for a term that must not exceed two years. The agreement can be renewed on a mutual agreement for another year. This type of agreement must be in writing format. It will be considered a permanent agreement if not written in the official language.
  • Perjanjian Kerja Waktu Tidak Tertentu: It is an indefinite or permanent agreement. There is no provision for this contract to be drafted in the official Indonesian language. It can be made verbally, but the appointment letter must be in writing.
Onboarding Process

Onboarding Process

The onboarding process in Indonesia is just like any other country:
  • The HR teams create a job description. They work together with the department that has an opening.
  • The description is then posted on the business's official website and other websites, such as LinkedIn.
  • Applicants submit applications by verifying their eligibility. After a few screenings and interviews, they are further narrowed down.
  • The final candidates on the shortlist then bargain terms and conditions with the company. The candidate is employed after reaching an agreement with the employer.


Indonesia has four types of Visas:
  • Tourist visa:This single entry visa is granted for a stay of up to 30 days. It can be extended for up to 60 days.
  • Multiple entry visa: This visa is valid for six months, 1 or 2 years. It is granted for government activities, commercial activities, or family visits.
  • Business visa: It is valid for up to 1 year. This visa is granted for up to 60 days stay on an entry. It is a multiple-entry visa.
  • Limited stay visa: It is a long-term stay visa. It is usually granted to students, workers, family reunions, or any other such long stay. This type of visa is issued only after a sponsor in Indonesia applies for the Letter of Visa Authorization in Jakarta. After the approval of the Directorate General of Immigration, the visa is granted.

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Minimum Wage

Minimum Wage

The minimum wage in Indonesia is regulated and fixed yearly. It varies from province to province. The capital city's minimum wage ranged from IDR 1,704,608 to IDR 4,276,349 per month.
Payroll Cycle

Payroll Cycle

The payroll cycle in Indonesia is monthly. However, it can be given bi-weekly and weekly, depending on the mutual agreement between the employee and employer.
Annual Bonus

Annual Bonus

There is a mandatory provision for giving the 13th salary in Indonesia. It may be given at the end of the financial year.
Health Benefits

Health Benefits

  • The health and safety of the employee are the responsibility of the employer. Employers have to maintain healthy working conditions.
  • Employees are also required to represent their health issues, if any.
Working Hours and Overtime

Working Hours and Overtime

  • Work hours: The standard work hours in Indonesia are 40 hours per week or 8 hours daily from Monday to Friday.
  • Break: An An employee is entitled to an unpaid 30-40 minutes between daily work hours.
  • Overtime: Overtime hours must not exceed 3 hours daily and 14 hours weekly. The employer has to pay 150-200% salary for overtime.


Sick Leaves

  • The number of sick leave in Indonesia is not defined for employees. The leave is paid differently by the employer, based on the duration:
    • 100% for the first 4 months
    • 75% for the next 4 months
    • 50% of the salary for 4 months after the first 8 months
    • 25% for each month after the initial 12 months

Maternity leaves

  • A paid maternity leave of 3 months is granted to the female employee. They can take 1.5 months of leaves before the child's birth and 1.5 after the child's birth. Employers pay 100% salary for this tenure.

Paternity Leave

  • A paid paternity leave of 2 days is given to the male employee. They receive 100% of their average salary, paid by the employer.

Annual leaves

  • Employees are entitled to 12 days of paid annual leaves.

Bereavement leaves

  • Employees are entitled to 2 days of paid leave for the death of a relative or household member.

Adoption leaves

  • Adoptive parents get the same leaves as given to female and male employees, in maternity and paternity leaves.

Marriage leaves

  • Three days of leaves are given to employees who are getting married and two days of leave are given for the marriage of a child.

Religious leaves

  • Two days of paid leave are given to the parents for the baptism or circumcision of their child.

Public Holidays (for the Calendar year 2023)

  • New Year's Day (1st January)
  • Lunar New Year's Day (22nd-23rd January)
  • Ascension of the Prophet Muhammad (18th February)
  • Bali's Day of Silence and Hindu New Year (Nyepi) - (22nd-23rd March)
  • Good Friday (7th April)
  • Idul Fitri (21st-26th Apr)
  • International Labor Day (1st May)
  • Ascension Day of Jesus Christ (18th May)
  • Pancasila Day National holiday (1st-2nd Jun)
  • Waisak Day (Buddha's Anniversary) (4th June)
  • Idul Adha (29th June)
  • Islamic New Year 1445 Hijri (19 Jul)
  • Independence day (17th August)
  • Birthday of Prophet Muhammad (28th September)
  • Christmas Day (25th December)
  • Christmas Day Holiday (26th December)

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Social Security

Social Security

  • Social security in Indonesia covers health and social benefits. Both employer and the employee contribute to it.
  • Employers have to pay 4% and employees contribute 1% towards social security.
Taxes for Employers

Taxes for Employers

  • Work accident insurance: 0.24%-1.74%
  • Life insurance: 0.30%
  • Old age benefits: 3.70%
  • Pension plan: 2.00%
  • Health Insurance: 4.00%

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Taxes for Employees

Taxes for Employees

  • Old age benefits: 2%
  • Pension plan: 1%
  • Health Insurance: 1%
Employees have to pay an income tax based on their annual income. It ranges from
  • Up to 60 million IDR: 5%
  • Above 60 million IDR: 15%
  • Above 250 million IDR: 25%
  • Above 500 million IDR: 30%
  • Above 5 billion IDR: 35%


The probationary period in Indonesia must not exceed three months.

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The termination process in Indonesia is complex. The employer has to get approval from the Industrial Relations Court. The mutual termination of the contract must be registered with the court. The contract can be terminated only:
  • By resignation
  • By a mutual agreement
  • Upon expiration of the contract
  • If the assignment is completed
Severance Pay

Severance Pay

The severance pay in Indonesia depends on the tenure of the employee.
  • Up to 1 year of employment: 1 month's wage
  • Less than two years of employment: 2 months' wage
  • Less than three years of employment: 3 months' wages
  • Less than four years of employment: 4 months' wages
  • Less than five years of employment: 5 months' wages
  • Less than six years of employment: 6 months' wages
  • Less than seven years of employment: 7 months' wages
  • Less than eight years of employment: 8 months' wages
  • More than eight years of employment: 9 months' wages
Employees or Contractors

Employees or Contractors

  • A person who works for a company and earns a wage or salary is called an employee.
  • An organization or person who hires people to work for them is called an employer or contractor.
  • Companies that are found guilty of misclassification have to pay the penalty.
  • An employer has to pay all the taxes and remuneration in advance.
  • The company pays a duty of payment of overhead surcharges if found guilty.
Final Words

Final Words

Indonesia is an island country with one of the fastest-growing economies. The liberal labor laws offer investors and companies a plethora of business outreach. Indonesia is one of the greatest options in Southeast Asia for a company looking to expand its business outreach.

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  • agreementsEmployment agreements as per local laws
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