Indonesia, officially known as the Republic of Indonesia, is a country situated in Southeast Asia and Oceania between the Indian and Pacific Oceans. The workforce in Indonesia is made up of over 143 million people (2024), and Indonesia has a GDP of 1,371.17 billion US dollars (2023).

The economy of Indonesia is growing, with a heavy reliance on manufacturing, trade, and agriculture. Indonesia’s economy faces challenges such as its dependence on natural resource exports, infrastructure gaps, and a need for skilled labor.

Employee benefits in Indonesia are crucial for workers in terms of protection from exploitation in the workplace and ensuring rights to benefits such as annual leave, sick pay, and the right to earn a minimum wage.

This guide will provide a thorough overview of Indonesian labor laws, detailing all mandatory benefits that workers in Indonesia must receive, as well as guidance on supplementary employee benefits companies should consider offering.

We’ll also explain how Remote People can help simplify Indonesian labor law and hiring in Indonesia.

Indonesian Labor Law

Indonesian labor laws provide information on all employment regulations in Indonesia, such as minimum wage, overtime, and severance regulations.

The main acts/laws that contribute to the overall Indonesian labor law include:

  • Law No. 21 of 2000 on Labor Union
  • Law No. 2 of 2004 Industrial Relations Dispute Settlement
  • Labor Law of 2003 on Manpower

There are five key rights that employees must be provided by their employers. These are as  follows:

  • The right to a minimum wage (dependent on sector and province)
  • The right to social security, including pension, healthcare, life insurance, accident insurance, and old-age benefits
  • The right to a religious holiday allowance of 1 month’s salary (subject to employment period)
  • The right to statutory absence or payment if the employee does not take annual leave
  • The right to payment for overtime work

It’s strongly advised that companies seek legal advice from professionals before employing in Indonesia to make sure all mandatory benefits and labor laws are complied with.

Mandatory Employee Benefits in Indonesia

The mandatory employee benefits that workers are entitled to in Indonesia include the following:

Social Security Contributions

Employers must register their employees with the National Social Security System, otherwise known as the Sistem Jaminan Sosial Nasional or SJSN.

The Social Security System is run by two organizations: the Social Security Administrator for Health and the Workers Social Security for socio-economic protection.

Social Security covers employees for the following:

  • Accident compensation in the event of an accident occurring during or as a consequence of work
  • Old age benefits for workers that are laid off at retirement age
  • Pension benefits provide guaranteed income for workers when they reach retirement age
  • Life insurance to protect workers’ heirs financially upon the death of a worker

The rates of national insurance in Indonesia are as follows:

Areas CoveredEmployer ContributionsEmployee Contributions
Accident Insurance0.24% – 1.74%–
Old Age Benefits3.7%2%
Pension Plan2%1%
Life Insurance0.3%–

Employers must also ensure 5% of an employee’s monthly salary is paid towards healthcare premium, of which the employer must pay 4% if in the private sector. 

For civil servants, the government must contribute 3% for healthcare, and the employee must contribute the remaining 2%. Healthcare premiums cover the employee, their spouse, and up to 3 dependent children below the age of 21.

Annual Paid Leave

Employees in Indonesia are entitled to 12 days of paid leave once they have worked for a company for 12 consecutive months. They must take at least 6 days of annual leave per year. Any unused paid leave expires 6 months after the end of the accrual period.

Indonesian Employment Law indicates that employees with 6 years or more of continuous service may be entitled to extra paid leave.

Working Hours

The normal working hours in Indonesia is 40 hours per week, typically divided into 8 hours per week over 5 working days.

Companies with the following characteristics may have working hours of less than 40 hours per week:

  • Carries out work that may be completed in 35 hours per week or less
  • Offer flexible working hours to employees
  • Undertakes work to be completed outside of a particular area

Minimum Wage

The minimum wage in Indonesia is determined by the local government based on economic and employment conditions, determined by the following variables:

  • Purchasing power parity
  • Manpower absorption levels
  • Median wage variables

The minimum wage is set at a provincial/district level, with the following minimum wages currently applying in 2026:

Province2026 Monthly Minimum Wage (IDR)Approx (USD)
AcehRp 3,685,615 $224
North SumatraRp 3,228,949$201
West SumatraRp 3,182,955$198
RiauRp 3,780,495$235
Riau IslandsRp 3,879,520$245
JambiRp 3,471,497$216
South SumatraRp 3,942,963$239
Bangka BelitungRp 4,035,000$245
BengkuluRp 2,827,250$176
LampungRp 3,047,734$190
BantenRp 3,100,811$193
DKI JakartaRp 5,729,876$347
West JavaRp 2,317,601$140
Central JavaRp 2,327,386$141
Special Region of YogyakartaRp 2,417,495$147
East JavaRp 2,446,880$148
BaliRp 3,207,459$195
West Nusa TenggaraRp 2,673,861$162
East Nusa TenggaraRp 2,455,898$149
West KalimantanRp 3,054,552$185
South KalimantanRp 3,725,000$226
Central KalimantanRp 3,686,138$224
East KalimantanRp 3,762,431$228
North KalimantanRp 3,775,243$229
MalukuRp 3,334,490$202
North MalukuRp 3,510,240$213
GorontaloRp 3,405,144$207
North SulawesiRp 4,002,639$243
Southeast SulawesiRp 3,306,496$201
Central SulawesiRp 3,179,565$193
South SulawesiRp 3,921,088$238
West SulawesiRp 3,315,934$201
PapuaRp 4,436,283$269
West PapuaRp 3,841,000$233

The wage council also takes economic growth and provision rate inflation into account when assessing the minimum wage.

Overtime Pay

Overtime consists of any hours that are over an employee’s typical 40-hour working week. The maximum number of overtime hours that an employee can do is 4 hours per day or 18 hours per week.

Compensation for overtime hours is based on an employee’s monthly wage. For each overtime hour worked, the employee will receive 1/173 times their typical monthly wage. The calculation is categorized by the day of overtime worked, such as a working day, weekend, or public holiday.

Employees that are exempt from overtime pay include:

  • Workers in positions with responsibilities such as controllers, planners, executors, or thinkers, etc.
  • Workers with working hours that cannot be capped, such as those working in managerial roles.
  • Workers that are paid high salaries.

​​Public Holiday Leave

Public holidays in Indonesia are typically paid with employees receiving a paid day off if the holiday were to fall on a working day.

The public holidays in Indonesia are as follows:

  • January 1: New Year
  • January 27: Isra Mi’raj of the Prophet Muhammad SAW (movable date)
  • January 29: Chinese New Year 2576 Kongzili (movable date)
  • March 29: Silence Day (Saka New Year 1947) (movable date)
  • March 31 – April 1: Eid al-Fitr 1446 Hijri (movable date)
  • April 18: Good Friday (movable date)
  • April 20: Easter (movable date)
  • May 1: International Labor Day
  • May 12: Vesak Day 2569 BE (movable date)
  • May 29: Ascension Day of Jesus Christ (movable date)
  • June 1: Pancasila Day
  • June 6: Eid al-Adha 1446 Hijri (movable date)
  • June 27: Islamic New Year (1 Muharram 1447 Hijri) (movable date)
  • August 17: Proclamation Day
  • September 5: Mawlid of Prophet Muhammad SAW (movable date)
  • December 25: Christmas Day

Sick Leave

Employees are entitled to paid days off if they are absent from work due to sickness. There is no set number of days of sick leave, however, the employee’s salary would be reduced over time depending on how long they are absent from work.

Employers must pay their employees the following percentages when off sick based on the amount of sickness time taken:

Employment DurationSalary Payment Rate
0 – 4 months100% of salary paid
4 – 8 months75% of salary paid
8 – 12 months50% of salary paid
Over 12 months25% of salary paid

Maternity Leave

Workers in Indonesia are entitled to 3 months’ maternity pay when they have a baby, paid at their full rate of pay. Half of the 3 months allocated should be taken before birth, and half after birth.

Female employees are also entitled to 2 days of paid absence during the first and second days of their menstrual cycle. Employers must also provide employees with access to appropriate childcare, breastfeeding facilities, and maternal healthcare.

Paternity Leave

Male employees in Indonesia are entitled to 2 days of paternity leave at full pay if their wife/partner has a baby. This can be extended to 3 days upon agreement with their employer.

Pensions

Indonesia operates under the following pension schemes:

  • Pension and old-age savings programme for civil servants (PT Taspen)
  • Pension and old-age savings programme for military personnel (PT Asabri)
  • Jamsostek old-age programme (JHT) for formal private sector employees
  • Voluntary private pension schemes

These pension schemes cover economically active workers in Indonesia. There are also schemes targeted at vulnerable elderly without family support and those with severe disabilities.

Severance Pay

Employees who have been terminated are entitled to termination payments, with the amount payable depending on the length of service.

If an employee has worked for a company for less than 1 year, they’ll receive a payment equivalent to 1 month’s wages.

This amount will increase for every year the employee has worked, i.e., 2 months wages for 1 over 1 year worked but less than 2 years, 3 months wages for 2 years worked but less than 3 years, etc.

This continues up to 8 years of service, whereby employees would receive 9 months wages.

Supplementary Employee Benefits in Indonesia

It is recommended that employees pay workers supplementary employee benefits to attract potential candidates and improve staff retention rates.

Some supplementary employee benefits that companies should consider include:

  • Access to private healthcare schemes
  • Enhanced maternity/paternity packages
  • Performance bonuses
  • Private pension opportunities
  • Access to expenses for food, transport, and accommodation

Optimize Employee Benefits with Remote People

Remote People helps companies looking to hire in Indonesia through our Employer of Record (EOR) services. These services simplify the hiring process by ensuring full compliance with local labor laws and the proper administration of mandatory employee benefits.

Our EOR solution ensures your workforce in Indonesia is hired legally, with payroll, tax, and benefit obligations handled efficiently—so you can focus on growing your business with confidence.

We can also assist with hiring in Indonesia with our Indonesian recruitment services. Our team is highly experienced with the Indonesian recruitment space and can help find the best talent for your business.