Understanding how Payroll and BPJS systems work in Indonesia is essential for any business, especially foreign-owned companies (PT PMA) establishing operations locally. Indonesia’s employment landscape is unique—structured by labour laws, tax regulations, mandatory social security contributions, annual bonuses, and digital reporting obligations that continue to evolve every year.
While many countries treat payroll as a purely financial function, Indonesia integrates payroll deeply with compliance, BPJS administration, tax reporting, and HR processes. For employers, especially those unfamiliar with Indonesian regulations, managing payroll incorrectly can lead to penalties, blocked business licensing, and employee dissatisfaction.
This guide explains everything you need to know—from salary structure and PPh 21 tax to BPJS Kesehatan and BPJS Ketenagakerjaan contributions. It is written simply, clearly, and with real regulatory references so you can confidently navigate Indonesia’s payroll obligations.
Understanding Indonesia’s Payroll Framework
Payroll in Indonesia is governed by several layers of regulation. At the foundation is UU No. 13/2003 (Labour Law), amended by the Job Creation Law (UU Cipta Kerja) and its implementing regulations. These set rules for employment, wages, overtime, and benefits.
Supporting regulations include:
- PP 51/2023 on wage structures and minimum wage formats
- PP 35/2021 on employment agreements, severance, and benefits
- Tax regulations on PPh 21, e-Bupot reporting, NPWP/NIK integration
- BPJS laws governing social security coverage
A notable shift in 2024–2025 is the transition to the new 12-digit NIK-based NPWP, affecting payroll databases and tax reporting systems. Companies must ensure employee data is properly synchronized to avoid errors in e-Bupot filings.
Indonesia’s minimum wage also changes annually, typically around 3–6% depending on the province. For reference, the UMP in 2024 was:
- DKI Jakarta: Rp 5,067,381
- Bali: Rp 2,813,672
Although 2025 numbers may differ, companies must always ensure compliance with the applicable UMP/UMK where employees are based.
Payroll in Indonesia is therefore not “just salary processing”—it is a compliance-linked system that affects licensing, tax, employment law, and government reporting.
Salary Components in the Indonesian Payroll System
Salaries in Indonesia are usually structured into basic salary, fixed allowances, and variable income. The government recommends that basic salary should be at least 75% of the total monthly compensation to maintain fairness and transparency.
Most companies use the following structure:
- Basic Salary (Gaji Pokok)
This forms the foundation for calculations such as overtime, severance, and BPJS. Using a strong basic salary reduces disputes and misunderstanding during audits or when employees leave. - Fixed Allowances
Common fixed allowances include transportation, meals, position allowance, or communication allowance. While these are taxable, they help companies align salary structures with internal policies and industry standards. - Variable Allowances
This includes overtime, incentives, performance bonuses, sales commissions, and other payouts tied to performance metrics. - THR (Tunjangan Hari Raya)
THR is a mandatory religious holiday bonus that must be paid once per year—no later than 7 days before the holiday.
Employees who have worked for at least 12 months must receive one full month salary, while shorter tenures receive a prorated amount.
All THR payments are fully subject to PPh 21 tax.
When designing the salary structure, companies must also create a formal Wage Structure and Scale as required by PP 51/2023. Many foreign companies overlook this requirement, which can trigger manpower compliance issues.
PPh 21 (Employee Income Tax): How It Works
PPh 21 is the Indonesian income tax on salaries and benefits. It is deducted monthly and paid directly by the employer to the tax authority.
Tax Residency Matters
Employees become tax residents if they:
- Stay in Indonesia for ≥183 days, OR
- Show intention to stay long-term (including expatriates on work permits)
Tax residents follow progressive rates, while non-residents are taxed at a flat rate.
PTKP (Non-Taxable Income)
As of 2024–2025, PTKP remains:
- Single employee: Rp 54,000,000/year
- Married: +Rp 4,500,000
- Per dependent (max 3): +Rp 4,500,000
How BPJS Systems Work (BPJS Ketenagakerjaan & BPJS Kesehatan)
Indonesia uses two separate mandatory national social security programs under the BPJS umbrella:
BPJS Ketenagakerjaan (BPJSTK)
This covers employment-related social insurance:
- JKK (Work Accident Insurance): 0.24–1.74% employer-paid
- JKM (Death Insurance): 0.30% employer-paid
- JHT (Old Age Savings): 3.7% employer + 2% employee
- JP (Pension): 2% employer + 1% employee
- JKP (Job Loss Security): Government-funded
The maximum salary base for pension contributions (JP) is around Rp 10 million per month. This cap helps employers manage costs while still meeting regulatory obligations.
BPJS Kesehatan (Health Insurance)
This covers healthcare access for employees and their families.
- Employer: 4%
- Employee: 1%
- Salary cap: Rp 12 million
Coverage includes the employee, spouse, and up to three children. Additional dependents must be paid separately.
For companies, missing BPJS contributions can trigger serious sanctions. BPJS Health imposes 2% penalties on unpaid contributions, while BPJS Ketenagakerjaan may coordinate with OSS and the Ministry of Manpower to restrict business licensing or approvals if a company is flagged as non-compliant.
Step-by-Step Payroll Cycle in Indonesia
The payroll cycle in Indonesia typically involves 11 steps each month. This ensures compliance with all tax and social security requirements.
- Attendance and timekeeping
Data is collected from timesheets, HRIS systems, or biometric attendance. - Overtime calculation
Overtime is calculated using the formula based on 173 hours per month, with the first hour paid at 1.5x hourly wage and subsequent hours at 2x. - Leave balance management
Employers must track annual leave, sick leave, maternity leave, and other entitlements. - Salary calculation
This includes components such as fixed allowances, incentives, and prorated salary for new hires or employees who resign mid-month. - BPJS contribution calculation
Both BPJS Ketenagakerjaan and BPJS Kesehatan must be calculated accurately using salary caps. - PPh 21 tax calculation
Employers must compute monthly withholdings and prepare e-Bupot reports. - Payroll review and approval
Internal approvals are critical, especially for larger companies. - Salary disbursement
Payments are made via bank transfer or payroll system. - BPJS payments
BPJS contributions must be paid before the 10th of the following month. - Tax payments
PPh 21 must also be paid by the 10th. - Monthly e-Bupot reporting
Final submission is due before the 20th.
This cycle repeats monthly, with an additional annual workload for reconciliation, SPT 1721 reporting, and manpower reporting obligations.
Payroll for Expatriates in Indonesia
Foreign employees working in Indonesia have similar obligations as local employees, but with a few additional considerations.
- Expatriates must pay PPh 21 if they reside in Indonesia long enough to meet tax residency rules.
- BPJS Kesehatan is mandatory for expatriates with employment contracts or work permits valid for six months or more.
- BPJS Ketenagakerjaan is also generally required unless there is a rare bilateral agreement for social security exemption.
Many PT PMA employers misunderstand this and assume expatriates are exempt. Non-compliance can affect KITAS renewals and trigger BPJS audits.
Common Payroll Challenges for Companies in Indonesia
Payroll and BPJS management can be surprisingly difficult for companies new to Indonesia. Frequent challenges include:
- Misclassifying salary components, resulting in excessive tax
- Miscalculating overtime or using incorrect salary bases
- Late BPJS payments, leading to penalties
- Incorrect PPh 21 on bonuses and THR
- Failing to create mandatory wage structures
- Errors when registering NPWP/NIK for employees
- Misunderstanding expatriate BPJS obligations
- Failing to reconcile annual tax filings
Because every step is tied to compliance, even small errors can lead to larger consequences such as fines, employee disputes, or government investigation.
Why Outsourcing Payroll Helps
Many businesses in Indonesia—especially PT PMA—choose to outsource payroll to specialized service providers to reduce risk and ensure accuracy. A professional payroll team can assist with:
- Accurate PPh 21 calculation for locals and expatriates
- Monthly and annual tax reporting
- BPJS registration and contribution management
- Salary structuring and compliance setup
- Digital payroll systems and payslip automation
- Handling confidential data securely
- Providing ongoing regulatory updates
Payroll outsourcing ensures that companies stay compliant without needing a large internal HR or finance team.
FAQ: Payroll and BPJS in Indonesia
- Is BPJS mandatory for all employees?
Yes. BPJS Kesehatan and BPJS Ketenagakerjaan are mandatory for all employees, including expatriates with contracts of six months or longer. - When is BPJS payment due each month?
Before the 10th of the following month for both BPJS Kesehatan and BPJS Ketenagakerjaan. - Do expatriates pay Indonesian income tax?
Yes, if they meet tax residency criteria or receive income sourced from Indonesia. - How is overtime calculated?
Using the basic salary + fixed allowances divided by 173 hours, following the 1.5x and 2x payment structure. - Is THR mandatory?
Yes. THR is required by law and must be paid once a year before major religious holidays.
Conclusion
Payroll and BPJS systems in Indonesia involve more than simply paying salaries; they form a complex compliance ecosystem built on labour laws, social security mandates, and tax reporting obligations. For businesses—especially foreign investors—understanding these interconnected systems is critical to operating smoothly and legally.
With accurate payroll processes, correct BPJS administration, and consistent tax reporting, companies can minimize risks and maintain strong relationships with employees and regulators. Whether you are a new company entering Indonesia or an established PT PMA expanding your team, ensuring payroll compliance should be a top priority.
If you want to ensure your payroll, BPJS, and tax compliance processes run smoothly and are fully aligned with Indonesian regulations, CPT Corporate is here to help.
Our team manages payroll operations, BPJS registration, tax reporting, and end-to-end compliance—so you can focus on growing your business without worrying about administrative risks.
Contact CPT Corporate today to streamline your payroll and protect your company’s compliance in Indonesia.
