How To Hire Employees in Indonesia

Are you a multinational looking to expand their business operations into Indonesia? Hiring newly in Indonesia can be quite stressful, from the labor laws to the cultural system that can affect your business operations if not managed properly.

There are several options available for international companies looking to build a team in Indonesia:

Set up a PT PMA (Foreign Investment Company)

This option is most suitable for larger companies planning long-term operations in Indonesia because the minimum investment required is about USD 640,000. To do this, you’ll need substantial investment, time, and ongoing administrative commitments. 

Working with an Employer of Record (EOR)

An EOR can assist you with hiring employees in Indonesia without establishing a local entity. They’ll become your legal employer on paper while you maintain the day-to-day management of your team. This option is very flexible and reduces compliance risk.

Hiring Independent Contractors

This approach is equally flexible but has significant compliance risks. Indonesian law has strict criteria for distinguishing between contractors and employees. Posing to be an independent contractor when you are in fact an employee can lead to Misclassification, and you can be fined heavily for this.

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This is where an Employer of Record (EOR) service comes in to transform your hiring process. Whether you’re looking to recruit from the local talent pool or planning to bring your team to Indonesia, an EOR solution like Remote People can help you establish a legal presence without the need for a local entity setup.

We’ll walk you through everything you need to know about hiring in Indonesia through an EOR service, employment laws, compliance requirements, benefits, payroll, and cultural considerations. Ours is a comprehensive guide that will set your business up for success in Indonesia! 

Indonesia Employer of Record vs Legal Entity in Indonesia

When deciding between engaging an Employer of Record provider or setting up a legal entity in Indonesia, businesses should evaluate their organizational goals and budget considerations.

An EOR handles employment-related administrative tasks, giving companies the flexibility to focus on core business priorities. This includes payroll management, local talent recruitment, and full compliance with Indonesian labor and employment laws. By leveraging legal expertise, EOR services help mitigate the risk of costly non-compliance penalties and reputational damage.

Contracting an EOR can also be a cost-effective solution, eliminating the need for long-term financial commitments associated with establishing a legal entity. Additionally, using an EOR provides immediate access to the Indonesian and broader Asian markets without the complexities of local incorporation.

Conversely, incorporating a business in Indonesia requires navigating a lengthy and complex registration process. Companies must select a legal structure, reserve their business name, and submit essential documents such as identification.

Additionally, they need to draft and notarize a deed of establishment, obtain a business license (SIUP), register with the Ministry of Trade, and open a foreign bank account.

Establishing a legal entity in Indonesia involves significant expenses, including staff salaries, licensing fees, operating costs, and facility investments. For businesses aiming to test the market or expand quickly, these upfront costs may create unnecessary financial burdens.

Ready to get started with an Indonesia EOR?

Let us handle the complexities of hiring, compliance, and payroll in Indonesia while you focus on growing your team.

  • Hire employees in Indonesia with an Indonesia EOR
  • No local entity is needed
  • Pricing starts at USD 199 per employee
  • Remote People can also help you find the best talent in Indonesia

👉 Get Your Customized Indonesia EOR Proposal Today!

Using an Employer of Record in Indonesia

An Employer of Record (EOR) acts as a third-party legal employer on behalf of your business. They’ll hire workers in Indonesia, handle the payroll, tax, compliance, and other administrative responsibilities that come with being an employer. The only thing you’ll be concerned with is the day-to-day running of your business.

Diagram illustrating the responsibilities of an Employer of Record (EOR) in Indonesia
Simplify global expansion with an Indonesia Employer of Record (EOR)

At Remote People, we’ll help you use our EOR service in Indonesia so you can benefit from the following:

  • Quick market entry: Start hiring within days instead of the months required to establish a legal entity in Indonesia.
  • Compliance expertise: No more complex Indonesia labor laws, as we’ll help you navigate every process with confidence
  • Reduced administrative burden: Focus on your major business activity while the EOR handles employment paperwork, tax filings, and payroll processing
  • Risk mitigation: Avoid costly mistakes in employee classification and compliance.
  • Flexibility: Scale your team up or down without long-term commitments to physical infrastructure

For businesses that need to hire contractors instead of full-time employees, a Contractor of Record service can also ensure proper compliance while remaining flexible.

REMOTE PEOPLE NOTE

  • Indonesia has the largest economy in Southeast Asia with a population exceeding 270 million. It is an international business hub that blends local talent with a substantial expatriate community.
  • Popular languages are Balinese, Indonesian, and English in the tourism and tech sectors.
  • The skills currently in demand in Indonesia are Information technology, tourism and hospitality management, creativity, customer service, and language skills
  • Remote work has become very popular in Indonesia, ever since 2020, with more freelance and project-based work in the creative and tech sectors.
  • The Indonesian government is working to move more workers from informal to formal employment, and there’s a growing emphasis on digital literacy and technology skills across industries

For more comprehensive information about doing business in this country, check out our guide on doing business in Indonesia.

How Much Does an Indonesia Employer of Record Cost?

The cost of using an Employer of Record (EOR) service in Indonesia depends on several factors, including the number of employees you plan to hire, the size of your business, the seniority of your workforce, and the complexity of the services you need.

Typically, Indonesia EOR providers charge a monthly fee ranging from $399 to $1,000 per employee, depending on the service package. Some providers also charge a one-time setup fee, which covers administrative costs for onboarding employees, registering them with Indonesian authorities, and setting up payroll and benefits systems.

Additional costs may apply if you require extra services, such as:

  • Payroll processing and HR management software access
  • Visa and work permit sponsorships (e.g., KITAS for expatriates)
  • Enhanced employee benefits packages (private health insurance, extra paid leave)
  • Customized reporting or HR consulting support

Even with these extra charges, partnering with an EOR is usually far more affordable and less risky than establishing your own PT PMA (foreign-owned company) in Indonesia, which involves licensing fees, minimum capital requirements, ongoing compliance costs, and longer setup times.

Employment and Labor Laws in Indonesia

Indonesia has comprehensive labor regulations that are designed to protect worker rights. Your business can only operate successfully if it complies with these laws to provide a framework for business operations. 

For compliance and to build positive employer-employee relationships, you’ll need a proper understanding of the labor laws below:

  • Law No. 13 of 2003 on Manpower: This covers employment relationships in Indonesia. It controls everything from employment contracts and working hours to termination and industrial relations.
  • Government Regulation No. 35 of 2021: This law is used to update every aspect of fixed-term employment contracts, outsourcing, working and rest hours, and termination of employment.
  • Law No. 24 of 2011 on the Social Security Agency: This law was used to establish BPJS (Badan Penyelenggara Jaminan Sosial), a mandatory social security program in Indonesia.
  • Law No. 40 of 2004 on the National Social Security System: This is the framework law for all social security programs in Indonesia.
  • Law No. 11 of 2020 (Omnibus Law): The Omnibus law is a recent reform that was designed to regulate the business climate affecting various aspects of labor regulations.

Employment Contracts

The Indonesian labor law uses two major types of employment contracts:

  • Permanent Employment Contracts (PKWTT – Perjanjian Kerja Waktu Tidak Tertentu): This type of employment contract has no specified end date but includes a probation period of up to 3 months. It provides greater job security and benefits for employees, and the termination requirements are more complex.
  • Fixed-Term Employment Contracts (PKWT – Perjanjian Kerja Waktu Tertentu): This type of employment contract only lasts for a particular duration. For example, it can be used for seasonal work, project-based work that will end within 3 years, new product development, and non-routine work. It only covers a maximum duration of 5 years, but probation periods are not allowed.

All employment contracts must be written in the Indonesian language because the Indonesian version is legally relevant if disputes ever happen in the future.

Onboarding Process 

The onboarding process for new hires in Indonesia is pretty fast and backed by continuous HR support. We can help you onboard new employees within 1-3 weeks, as soon as you choose us as your provider and submit the necessary documents. 

Working Hours

The standard working hourly rate in Indonesia is 40 hours per week, broken down into 8 hours per day, 5 times a week, or 7 hours per day, 6 times a week.

Overtime

An employee is only allowed a maximum overtime of 4 hours per day or 18 hours per week. The first hour of overtime must be compensated at 1.5x the regular hourly wage, while subsequent hours can be 2x the regular hourly wage.

For weekend/holiday overtime, 2x to 3x the regular hourly wage must be paid,  depending on the circumstances of the overtime.

Rest Periods

Employees in Indonesia are entitled to a mandatory rest of at least 30 minutes after 4 hours of continuous work.

How an Employer of Record Helps You Hire in Indonesia

Starting a business in Indonesia comes with exciting prospects, but you would have to approach the recruitment process effectively. From including the cultural elements that can attract the local talent to sourcing for the right candidates, reviewing applications, interviews, and final onboarding, an Employer of Record takes the stress off you so you can be fully committed to the smooth running of your business. 

It will help compile the required documentation for compliance and payroll, process work permits for foreign employees, and act as your legal representative, any day, any time!

Using an Employer of Record service like Remote People helps you avoid common pitfalls while ensuring a smooth experience for your new employees.

Payroll and Employment Taxes in Indonesia

Currency and Payment Methods

In Indonesia, salaries must legally be paid in Indonesian Rupiah (IDR), even for foreign employees working in Bali. This requirement is mandated by Law No. 7 of 2011 on Currency, which states that all transactions conducted within Indonesia must use the Rupiah.

Common payment methods include bank transfers, digital payment platforms, and cash payments, although the latter is less common in formal employment, but is still used in some sectors.

Most professional employees in Bali prefer monthly salary payments, which is also the standard practice under Indonesian employment regulations.

Payroll Process and Requirements ​

The Indonesian payroll process involves a lot of components that are mandatory and must be properly adhered to by employers in Indonesia. Failure to comply with any of the following requirements can attract heavy penalties and fines.

  • Tax withholding: Employers in Indonesia are required to calculate, withhold, and remit income tax (PPh 21) to the Indonesian tax authorities.
  • Social security contributions: Both the employer and the employee are responsible for making contributions to BPJS programs that must be calculated and remitted every month.
  • Religious holiday allowance (THR): THR is a mandatory annual bonus equivalent to one month’s salary for the job. This must be paid before the employee’s religious holiday.
  • Overtime calculation: Employers must accurately track and calculate all overtime hours spent by an employee, according to legal requirements in Indonesia.
  • Payslips: A detailed payslip must be provided to employees during the onboarding process. If you have an EOR service provider, they can help handle the paperwork. The payslip is expected to show the gross salary, deductions, and net payment.

Minimum Wage

Indonesia operates on a regional minimum wage system, where each province sets its own minimum wage based on local living costs and economic factors. The figure is updated every year in November, and a new one is created ahead of the new year.

For example, in Bali, the minimum wage is approximately IDR 3,170,000 per month (around $200 USD). 

It’s important to note that for professional roles and positions requiring specialized skills or experience, market rates are higher than the minimum wage.

Employer Tax Contributions

Annual Income Earned By An Employee (IDR)Tax Rates
Up to 60 million5%
60 million – 250 million15%
250 million – 500 million25%
500 million – 5 billion30%
Above 5 billion35%

Foreign employees working in Indonesia for more than 183 days within a 12-month period are equally considered tax residents and must pay the same progressive tax rates on their annual income. Those staying less than 183 days are taxed only on Indonesian-sourced income at a flat rate of 20%.

Additional tax considerations include annual tax filing requirements for employees (SPT reporting), tax identification number (NPWP) requirements, and tax treaties between Indonesia and other countries that may affect expatriate taxation.

Social Security Contributions

All employees in Indonesia, including foreign nationals, must be registered with the national social security programs administered by BPJS. Here’s a detailed breakdown for each of them:

  • BPJS Kesehatan (Healthcare): Employees are required to contribute 1% of their monthly salary, while Employers contribute 4% of their monthly salary.
  • BPJS Ketenagakerjaan (Employment): This includes four programs namely; work accident protection (0.24% – 1.74% paid by employer), death benefits (0.3% paid by employer), old-age benefits (3.7% paid by employer and 2% by employee), pension benefits (2% paid by employer and 1% by employee).

How an EOR Simplifies Payroll in Indonesia

Managing payroll in Indonesia can be overwhelming and requires patience, attention to detail, and ongoing awareness of regulatory changes. Using an EOR like Remote People can help you simplify this process.

They will help with accurate calculation of taxes and social security contributions, remit your contributions on time to the relevant authorities, and make sure you comply with local reporting requirements. 

As your EOR, we will handle every documentation for both local and foreign employees, and you won’t have to bother with the management of currency conversion risks. You get to focus on growing your business in Indonesia while ensuring your employees are paid correctly and compliantly.

Employee Benefits in Indonesia

Indonesian law mandates an annual leave with at least 12 working days to employees, after one year of continuous service. As an employee in Indonesia, you are entitled to a sick leave, 3 months maternity leave, and 2 days paternity leave, all to be fully paid for by your employer.

Public Holidays are equally granted 15-16 days per year, depending on the government’s announcement, and you also get to benefit from the numerous social security programs in Indonesia, such as healthcare insurance, work accident protection, old-age benefits, pension, and death benefits.

For a detailed breakdown of standard benefits in Indonesia, see our guide on employee benefits in Indonesia.

Terminations and Severance in Indonesia

The Indonesian labor law provides strong protections regarding the termination of workers. Employers who wish to terminate an employee must attempt negotiation before proceeding with termination, provide notice periods, pay severance packages calculated based on years of service, and obtain approval from the Industrial Relations Court for contested terminations.

Termination Process

  • Negotiation Phase: Employers must attempt to negotiate with the employee before proceeding with termination. For companies with labor unions, negotiations must involve union representatives
  • Termination Grounds: Indonesian law requires valid reasons for termination. Before you can be permitted to terminate employees, it means your company is either restructuring or having financial difficulties, employee misconduct after appropriate warnings, extended illness of an employee for more than 12 months, employee’s criminal conviction, employee reaching retirement, or voluntarily resigning.
  • Documentation Requirements: Employers must provide a formal termination letter stating the grounds for termination, records of any prior warnings or performance improvement plans, evidence supporting the termination reason, and negotiation attempts made until then.
  • Dispute Resolution: If the employee contests the termination, the case may then proceed to Bipartite negotiations, mediation through the Manpower Department or the Industrial Relations Court.

Notice Period 

Notice periods in Indonesia take an average of 30 days but may vary based on employment contract terms. There is also an option for payment in lieu of notice.

Severance Pay

In Indonesia, a severance pay (pesangon) worth 1-9 months’ salary must be paid, depending on the tenure of the job. Service appreciation pay worth 2-10 months’ salary for 3+ years of service and other compensation rights like unused leave, relocation expenses, etc, are also included.

Working with an EOR like Remote People ensures compliance with these labor regulations while protecting both your business interests and employee rights.

How an EOR Helps Indonesian Employers to Navigate Termination

Using an Employer of Record service like Remote People can help you simplify the termination process by:

  • Providing legal support in Indonesian termination requirements
  • Managing all necessary documentation and compliance requirements
  • Calculating accurate severance packages
  • Handling negotiations and communications
  • Representing the company in any disputes or legal proceedings
  • Ensuring proper final tax calculations and reporting

If you are an international company and unfamiliar with Indonesian employment regulations, our EOR service will help ensure that terminations are handled legally, respectfully, and with minimal disruption to business operations.

Hire Employees With the Best Indonesia EOR

Remote People

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At Remote People, we provide tailored EOR services in Indonesia with a focus on hands-on support and full compliance. We’re one of the few providers that include recruitment as part of our offering, along with visa assistance and customized onboarding. Our dedicated account managers handle payroll, benefits, locally compliant contracts, tax withholding, and social security contributions—ensuring your team stays fully aligned with Indonesian labor laws.

Deel

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Deel delivers EOR services in Indonesia through a unified platform that combines global payroll, contractor management, and automated compliance tools. Known for fast onboarding and strong tech infrastructure, Deel streamlines employment contracts, payroll, taxes, and benefits administration. It manages the entire employment lifecycle in full compliance with Indonesian regulations, offering consistent, multi-country support for companies expanding across borders.

💡 Read our in-depth review: Deel Review

Remote

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Remote.com provides full-scope EOR services in Indonesia, covering payroll, statutory benefits, equity management, and compliance through local legal expertise. Its platform is designed for ease of use, offering intuitive tools for onboarding, team management, and ongoing regulatory monitoring. With features like HR system integration and mobile accessibility, Remote helps companies manage international teams while ensuring compliance with Indonesian employment laws and practices.

💡 Read our in-depth review: Remote Review

Expand into Indonesia Easily with Remote People’s Employer of Record in Indonesia

Indonesia offers a lot of prospects to international businesses that are looking to expand into the growing economy. You get to access the country’s diverse talent locally and establish a presence in one of Southeast Asia’s most vibrant business environments. 

With the right EOR service, you will be able to successfully launch your business in Indonesia, comply with legal laws, cultural considerations, and other administrative details.