The major part in hiring an employee is to understand the payroll calculation. Specifically in Indonesia, the payroll calculation will depend on the variables to be considered by the employer. We will elaborate the variables for you to understand during hiring employee in Indonesia.
Understanding Local Labor Laws
It’s imperative to have a profound understanding of local labor laws. Indonesia’s regulation regulates employment practices, ensuring fairness and protection for both employers and employees.
It varies across provinces and sectors. Employers need to stay updated with the local regulations of their specific region every year. As a reference, below is the minimum wage in various province in Indonesia as per year of 2023:
Karawang Regency: Rp. 5,176,179
Bekasi City: Rp. 5,158,248
Bekasi Regency: IDR 5,137,574
DKI Jakarta: IDR 4,901,798
Depok City: Rp. 4,694,493
Cilegon City: Rp. 4,657,222
Bogor City: Rp. 4,639,429
Tangerang City: Rp. 4,584,519
South Tangerang City: Rp. 4,551,451
Tangerang Regency: IDR 4,527,688
Typically, a work week in Indonesia is as below:
6 working days: 7 hours a day or 40 hours; or
5 working days: 8 hours a day and 40 hours a week
- Overtime: Employees are entitled to overtime pay if they work more than working hours as set above. The government sets a regulation through Article 31 of Government Regulation No. 35/2021, which sets as below:
|During Weekdays||First hour||1.5 x hourly wage *|
|Second hour and so on||2 x hourly wage|
|Specifically for 6 Working Days and 40 Hours|
|Weekend and/or public holidays||First 7 hours||2 x hourly wage|
|8th hour||3 x hourly wage|
|9th – 11st hour||4 x hourly wage|
|If the public holidays happen on the shortest weekdays||First 5 hours||2x hourly wage|
|6th hours||3x hourly wage|
|7th – 9th hours||4x hourly wage|
|Specifically for 5 Working Days and 40 Hours|
|Weekend and/or public holidays||First 8 hours||2x hourly wage|
|9th hours||3x hourly wage|
|10th – 12nd hours||4x hourly wage|
*hourly wage is calculated by 1/173 x of monthly wages
- Leave Benefits: The statutory annual leave is 12 days, with additional leaves for important reasons (paternity, marriage, bereavement), marriage, maternity, sick, miscarriage, menstruation.
- Religious holiday leaves (THR – Tunjangan Hari Raya): the employee is entitled for 1x monthly wages which is paid before the employee’s religious holiday. The THR will be given based on the employee’s religion.
- Personal Income Tax (PIT): It’s levied on an individual’s income, with rates ranging from 5% to 30%. In calculating the personal income tax, certain criteria will apply to determine how much the tax is implied to a person. Therefore, it is important to note to have a professional person who understand in calculating the PIT.
- Deductions on BPJS Ketenagakerjaan (social security program) and BPJS Kesehatan (health insurance): The country’s social security agency oversees health insurance. Both employers and employees contribute to this fund.
Hiring Payroll ServicesNavigating payroll in Indonesia is undeniably complex, but with the right strategies and an in-depth understanding of local nuances, it’s manageable. Investing in continuous learning, leveraging technology, and understanding cultural dynamics are the cornerstones of stress-free HR management in Indonesia.
Our team in CPT Corporate can help you in ensuring the payroll system of your company. With the experiences and the up-to-date knowledge helps us to serve the payroll service in advanced manner. Contact CPT Corporate by filing out the form below and get consultation with our consultant.