Miss the THR deadline and you’re paying a 5% penalty per day of delay. The Tunjangan Hari Raya — Indonesia’s mandatory religious holiday bonus — equals one month’s salary and must be paid at least 7 days before Eid al-Fitr for Muslim employees. Most first-time Indonesia employers learn about it late. Your EOR should flag this months in advance, not the week before.
Indonesia Employment at a Glance
| Detail | Value |
|---|---|
| Currency | Indonesian Rupiah (IDR) |
| Official language | Bahasa Indonesia |
| Employment law | Manpower Law No. 13/2003 (amended by Law No. 11/2020) |
| Payroll frequency | Monthly |
| Social security | BPJS Kesehatan (health), BPJS Ketenagakerjaan (manpower) |
| Tax authority | Directorate General of Taxes (DGT) |
| Minimum wage | Varies by province (e.g., DKI Jakarta: IDR 5,067,381/month in 2024) |
| Standard working hours | 40 hours/week (5 days × 8 hours or 6 days × 7 hours) |
| Annual leave (minimum) | 12 days per year |
| Public holidays | 16–18 days per year |
BPJS: Indonesia’s Social Insurance System
All employees must be enrolled in both BPJS bodies. There is no opt-out.
BPJS Kesehatan (National Health Insurance)
- Employer contribution: 4% of monthly salary
- Employee contribution: 1% of monthly salary
- Caps at IDR 12,000,000/month base salary
BPJS Ketenagakerjaan (Manpower/Employment Insurance)
BPJS Ketenagakerjaan covers four programmes:
| Programme | Employer | Employee |
|---|---|---|
| Work Accident Insurance (JKK) | 0.24–1.74% | — |
| Death Insurance (JKM) | 0.3% | — |
| Old Age Savings (JHT) | 3.7% | 2% |
| Pension Insurance (JP) | 2% | 1% |
Your EOR registers employees with both BPJS bodies and remits all contributions monthly.
Religious Holiday Allowance (THR)
THR is the single most common compliance failure for foreign employers in Indonesia.
- Amount: 1 month’s salary for employees with 12+ months of service; prorated for those with less
- Deadline: Must be paid at least 7 days before the employee’s principal religious holiday
- Penalty for late payment: 5% of THR value per day of delay
For Muslim employees — the majority of Indonesia’s workforce — the relevant holiday is Eid al-Fitr, which shifts by 10–11 days each year on the Gregorian calendar. Your EOR tracks the holiday calendar and disburses on time.
The Omnibus Law (Job Creation Law)
Law No. 11/2020 amended Indonesia’s Manpower Law in ways that directly affect employment structure:
- Simplified fixed-term contract (PKWT) rules with clearer maximum durations
- Revised severance pay formula (lowered slightly from the prior law but still substantial)
- More flexible working hour arrangements
- Streamlined foreign worker permit (RPTKA/KITAS) processes
A good EOR stays current with implementing regulations and updates contracts accordingly.
Severance Pay in Indonesia
Indonesia has one of the highest mandatory severance obligations in Asia. Upon termination, employees may be entitled to three components:
- Severance Pay (Uang Pesangon): 1–9 months’ salary based on tenure
- Long Service Pay (Uang Penghargaan Masa Kerja): 2–10 months based on tenure
- Compensation Pay (Uang Penggantian Hak): Covers unused leave, transport, and housing allowances
For terminations without cause, the multiplier can reach 2× the standard severance formula. Budget for this before you hire. Attempting to exit an employee without proper severance calculation results in labour court exposure.
How Long Does EOR Onboarding Take in Indonesia?
- Standard employee onboarding: 4–7 business days
- BPJS registration: 2–3 business days
- Foreign worker permit (if applicable): 3–6 weeks via KEMNAKER
Indonesia’s onboarding takes longer than Singapore or the Philippines due to BPJS registration requirements and bilingual contract documentation.
Employment Contracts Must Be in Bahasa Indonesia
Indonesian law requires employment contracts in Bahasa Indonesia. Bilingual contracts (Indonesian + English) are common and legally acceptable, but Indonesian is the controlling language in any dispute. An EOR provides compliant bilingual contracts as standard — any EOR issuing English-only contracts in Indonesia is cutting a dangerous corner.
Top EOR Providers for Indonesia
- Deel — Owned Indonesia entity, full BPJS coverage, bilingual contracts
- Multiplier — Competitive pricing, good Southeast Asia expertise
- Remote — Solid Indonesia coverage, strong compliance tooling
- Rippling — Available but slower onboarding
- Papaya Global — Enterprise option
Frequently Asked Questions About EOR in Indonesia
What happens if THR is paid late? The penalty is 5% of the total THR value for each day of delay. On a monthly salary of IDR 15,000,000, that’s IDR 750,000 per day. After two weeks, that’s more than IDR 10,000,000 in penalties alone. The Ministry of Manpower takes THR compliance seriously and publishes enforcement data annually.
How does Indonesia severance work if I need to make someone redundant? Redundancy is an authorized termination requiring bipartite negotiation or industrial relations dispute procedures. The formula depends on tenure, but total separation costs (severance + long service + compensation) can reach the equivalent of 25–32 months’ salary for a long-tenured employee. Get your EOR to model the cost before you proceed.
Can employment contracts be in English only? No. Indonesian law requires Bahasa Indonesia. An English-only contract is unenforceable in Indonesian courts and exposes the employer to liability. Bilingual contracts are the correct approach.
What is the minimum wage in Indonesia? Minimum wages are set at the provincial level and adjusted annually in November or December. Jakarta (DKI) has one of the highest at IDR 5,067,381/month (2024). Your EOR applies the correct provincial rate for each employee’s work location — failing to do so exposes you to back-pay claims.
Do foreign workers need a separate permit? Yes. Foreign nationals require a RPTKA (manpower utilisation plan) and KITAS (limited stay permit) to work legally in Indonesia. Processing takes 3–6 weeks through KEMNAKER. Confirm your EOR handles this end-to-end, including renewals.
