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Last updated at June 17, 2022
beautiful scenery in the country of indonesia


Indonesian Rupiah (IDR)



Time Zone


Key Country Facts

Official language

There are as many languages spoken as there are people of different ethnic backgrounds gathered in Indonesia. Bahasa Indonesia is the national language.

Laws and customs

The Constitution of Indonesia (Undang-Undang Dasar 1945) is the basis for the government of Indonesia and the common law system.

Culture Observations

Indonesia is the largest archipelago in the world, comprising of around 17,500 islands, situated between 2 continents, Asia and Australia and 2 oceans, the Pacific and Indian Ocean. With a population of 237 million (2010 census), Indonesia is the 4th largest population in the world after China, India, and the USA. There are over 300 ethnic groups in Indonesia; with 95% of them having native Indonesian ancestries. The largest ethnic group is Javanese who make up 41% of the total population. About 88% of the population of Indonesia is Muslim. Other religions with fewer followers are Christian, Hinduism, Buddhism, and Taoism.

Indonesia HR at a Glance

Employment Law

Law No. 13/2003, dated 25 March 2003, regarding labour (the Labour Law), as amended by Law No. 11/2020, dated 2 November 2020, regarding Job Creation (the Job Creation Law) creates the legal framework for employment in Indonesia and applies to both local Indonesians and foreigners employed in Indonesia. It is not possible to contract out any terms of the employment legislation, although many contracts do not comply.

Employment Contract

Employment agreements can be made for a definite or indefinite period. Specifically, a fixed-term employment agreement must be made in writing, in the Indonesian language using the Latin alphabet (some Indonesian dialects do not use the Latin alphabet) (Article 57, labor Law). If an employment agreement is in both Indonesian and a foreign language, the Indonesian version prevails if there are differences in interpretation. Employment agreements of an indefinite term can be made either orally or in writing (Article 51, Labor Law). However, in practice, employment agreements should be made in writing.

Contract Terms

Employees working under both definite and indefinite contracts have the same statutory employment rights. The Labor Law only stipulates the legal duration for a definite term employment agreement.

Per new Government Regulation: GR No. 35 2021, definite term employment agreement can only be performed for a maximum period of five years (including the extension).

Normal retirement age (NRA) has initially been set at age 56 but increased to age 57 in 2019, and then by an additional year every three years until NRA reaches 65 (in 2043).

Work Rules

Companies with ten or more employees need to renew and resubmit work rules every two years and get approval from the government. In practice, it’s common for companies with just one employee to have registered rules.

To establish company regulation, employer needs to make an application and obtain consent from two employee representatives who have read and agreed to the rules and regulations where they are required to sign off.

Severance Pay

Severance payments in Indonesia differ on whether an employee is considered a definite term employee or an indefinite term employee.

For indefinite term employees, mandatory severance payments consist of:

  • Severance pay
  • Service pay
  • Compensation (remaining annual leave, repatriation expenses, other compensation as determined in employment contract)
Severance Pay (Service Period) Severance Pay (Monthly Salary) Service Pay (Service Period) Service Pay (Monthly Salary)
<1 year 1 3-6 years 2
1-2 years 2 6-9 years 3
2-3 years 3 9-12 years 4
3-4 years 4 12-15 years 5
4-5 years 5 15-18 years 6
5-6 years 6 18-21 years 7
6-7 years 7 21-24 years 8
7-8 years 8 >24 years 10
>8 years 9    

There is a multiplier of 0.5x, 0.75x, 1.0x, 1.75x or 2x to the severance pay depending on the reason for termination, in addition to service pay according to service period, and compensation:

Grounds of Termination Severance Calculation
Company merger & acquistion activities, company changing / reducing business activities or closure / bankruptcy 0.5-1x severance pay, 1x service pay and compensation
Employees’ voluntary resignation Compensation & separation pay (voluntary reward to employee for their services)
Employees’ prolonged illness (>12 months) due to work accident, retirement, death 1.75-2x severance pay, 1x service pay and compensation


For definite term employees:

Definite term employees shall be entitled to receive a compensation pay upon the completion of its employment contract. If the employer terminates the employment agreement of a definite term employee before its expiry, the employer is obliged to pay the employees’ salary until the end of the employment agreement period.

Service Period Compensation
<1 month None
>1 month but <12 month (Service period/12) x (1 month salary + fixed allowance)
12 month 1 month salary + fixed allowance
> 12 month (Service period/12) x (1 month salary + fixed allowance)

Probation Period

Article 60 of the Labor Law states that indefinite contracts may require a probation period for no longer than 3 (three) months. A definite contract cannot include probation.

Paid Leave

All employees are entitled to 12 working days of paid vacation per year after one year of uninterrupted service.


The basic policy of Indonesian labour law is that the dismissal of an employee should be prevented or even, in some cases, prohibited. The general principle is that the Labour Court must approve every termination of employment unless the termination is agreed or otherwise not disputed by the employee.

The Labour Law (as amended by the Job Creation Law) and GR 35/2021 can be construed as permitting the employer to effectively terminate the employment relationship by written notice of termination with reasons, while ensuring that the employee has the right to object, negotiate and commence legal proceedings for wrongful dismissal in the Labour Court.

In instances where, following written notice, the employee agrees to a voluntary mutual termination agreement (MTA), the question of an employee’s acceptance or rejection of the termination should not be relevant. The execution of the MTA is the employee’s response.

The employer is obliged to report termination of employment to the local Manpower Office and Letter No. 4/2022 enforces the requirement for standard documentation to be submitted. This includes the termination notice, a non-rejection of termination letter from the employee, and a standard application form. The Manpower Office will issue a standard receipt upon submission of these documents.


Religious Holiday Allowance (THR) for Employees (MOM No. 6) requires all employers to provide THR to employees with at least one month of service, regardless of whether the worker is employed on a permanent or temporary basis.

Workers who have been working for a consecutive 12-month period are entitled to a minimum THR amount of one month’s salary. In practice, contractual or discretionary bonuses can be provided to employees.


Required, except for the employee’s position, function or job as a “thinker, planner, implementer or controller” whose working hours cannot be limited to normal working hours.

Other Standard Items

Limited. Common allowances are given for transportation, meal, communications, etc. and are taxable. Net arrangements are common for expats.

Statutory Costs

Employer portion of health insurance and social security: from 10.24% to 11.24%, covering public health insurance and social security.

Employers pay the monthly contribution to the designated banks, latest by the 10th of the following month.

Tax and Social Security


Resident and foreign employees are taxed on their salary earned in Indonesia and other remuneration earned during their stay in Indonesia, such as bonus and religious holiday allowance.

The Indonesian portion of the salary is taxed at source, and the employer must withhold the tax.

Non-resident employees (that is, an individual who does not reside in Indonesia and is present in Indonesia for less than 183 days in any 12-month period, or an entity that is not domiciled in Indonesia and is not conducting business or carrying out activities in Indonesia through a permanent establishment) are generally subject to a withholding tax of 20% of their gross income from Indonesia (Law No. 13 of 2003 on Manpower (Labor Law)).


As stated above, non-resident individuals are subject to a withholding tax of 20% on their gross income from Indonesia, unless the provisions of a double taxation treaty stated otherwise.

Tax resident individuals are subject to the following rates of income tax:

  • Up to IDR 50 million: 5%
  • From IDR 50 million up to IDR 250 million: 15%
  • From IDR 250 million up to IDR 500 million: 25%
  • Over IDR 500 million: 30%

Deductions can be made for dependents, spouses and children. In addition, foreign nationals may be able to claim some expenses that are paid for by the employer, such as accommodation or vehicles. However, this depends on how the employer has classified these payments. Items such as healthcare costs are classified as income.


Income tax is withheld on a monthly basis. Employer will provide an annual tax slip by year end (Form 1721 A1) to the employee. The employee has the obligation to file the annual individual tax return by March 31st of the following year, at the latest


There are two types of national insurance:

  • Public health insurance (BPJS Kesehatan), and
  • Social security program (BPJS Ketenagakerjaan), covering work-related injury insurance (JKK), non-work-related accidental death insurance (JKM), old age benefit (JHT) and pension plan (JP)
  Contribution Employer Employee
Workers Accident Benefit % of monthly salary 0.24% – depending on business classification 0%
Death/Life Insurance Benefit % of monthly salary 0.3% 0%
Old Age Benefit % of monthly salary 3.7% 2%
Pension Benefit % of monthly salary (salary cap IDR 9,077,600) 2%, max IDR 181,552 1%, max IDR 90,776
BPJS Health/BPJS Kesehatan % of monthly salary (salary cap IDR 12,000,000) 4% 1%

*The above table serves as a broad guideline. Actual rates charged will differ.

Individual participation is mandatory for all Indonesian residents, including expats on ITAS/P. Expat employees who are working at least 6 months (and their dependent family members) must be registered by their employer. In general, private insurance is needed.

There is no Unemployment Insurance Scheme that is mandatory for employers or employees to pay.


Salary Payment

Generally, payment is made monthly around 25th of the month via bank transfer. Salary must be paid in Indonesia Rupiah. International payments are also acceptable.


Hard copy or soft copy (PDF) by email. This is subject to company’s discretion. In practice, for blue-collar level, the common method is hard copy – carbonized paper. For white-collar level, the common method is soft copy (PDF file) via email, or employee can access to the company’s HRIS portal.

Holiday Allowance

  • Workers who work a five-day week have Saturdays and Sundays off. Workers who work six days a week are entitled to Sundays off.
  • Indonesian public holidays are set by Joint Ministerial Decree. Each year, the holiday dates are determined by various ministers, departments and decrees.
  • The concept of ‘cuti bersama’ (joint holiday) has been introduced by the Indonesian Government with the aim to promote domestic tourism. Joint holidays are provided to prolong holiday weekends (usually given on a Monday or Friday). Thus, if a public holiday falls on a Thursday, the ‘joint holiday’ program encourages employers to give employees Friday off so that they have a four-day weekend. Every year, the Minister of Manpower, together with the Minister for Religious Affairs and the Minister for the Utilization of State’s Apparatus, issue a Joint Ministerial Decree stipulating the specific date for each public/national holiday. Most public holidays are religious dates, and as most religions function under a different calendar (for example, the lunar cycle), the exact dates vary from year to year. Public holidays are included in the minimum holiday entitlement.
  • According to Article 85 of Act 13 of 2003 Indonesian Manpower/Labor Law, workers are not obliged to work on public holidays. However, if work is required to be done on public holidays, employers are subjected to pay overtime payments to the workers.
  • There are usually 16 public holidays in total together with several Cuti Bersama holidays.

Annual Leave

  • For 12 months of consecutive work, employee is entitled to at least 12 days of annual leave, which can accrue one day per month from start of employment. Employers have discretion to give more.
  • Staff may normally want to take a vacation leave over the Lebaran holiday period. In theory, the full holiday entitlement must be taken in a single block, but if the employer is agreeable, holiday may be taken separately, provided that at least six working days are taken in one chunk. In practice, during probation period, employees are not allowed to take annual leave; any absence shall be considered as unpaid leave.
  • Carry-over of leave is subject to company discretion. For example, leave balance can be carried forward up to March 31st of the following year; If the employee does not take his or her leave entitlement within six months of earning it, the annual leave will be forfeited.
  • An employee who has been working for the same employer for six consecutive years may also be entitled to a leave of at least two months in the seventh and eighth year of work.

Sick Leave

  • Employees are entitled to both paid sick leave as well as extended paid sick leave.
  • Employees are entitled to paid sick leave, in the case of illness or injury that is evidenced by a medical certificate or statement.
  • Employees are also entitled to long-term paid medical leave, provided that such leave is recommended in writing by a doctor and lasts for a period greater than one year.
  • If a permanent employee is absent from work due to a severe illness, he/she is entitled to a monthly salary (paid by the employer):
  • For the first four months of absence, they must receive 100% of wage,
  • For the second four months of absence, they must receive 75% of the wage,
  • For the third four months of absence, they must receive 50% of the wage, and
  • For subsequent months, they must receive 25% of the wage until a termination occurs.

Maternity & Parental Leave

  • Women are entitled to three months paid maternity leave (by employer), but half of this period must be taken before the expected date of childbirth and the other half after.
  • The maternity leave period may be extended on the advice of an obstetrician or midwife.
  • Male workers are entitled to two days’ paid paternity leave if their wife gives birth or miscarries.

Other Leaves

  • Employees can take short periods of other paid leave for a variety of personal reasons. For instance, they are allowed:
  1. three days’ leave for their marriage,
  2. two days’ leave for the marriage of their child,
  3. two days’ leave for the circumcision of their child,
  4. two days’ leave for the baptism of their child, and
  5. two days’ leave for the death of their child.
  • Indonesian labor laws are silent on carers’ rights. In practice, leave can be granted by an employer as unpaid leave. This also applies for emergency care for dependents, a spouse, or a close family member.
  • Female employees who suffer from pain during menstruation can take paid leave on the first and second day of their cycle.
  • Muslim employees have a statutory entitlement to take up to three months’ paid leave to perform the Haj pilgrimage to Mecca. An employee may take this leave only once during his/her lifetime.

THR Mandatory Allowance

Employers in Indonesia are required to pay a non-wage income or bonus (called ‘tunjangan hari raya’ or THR Mandatory Allowance) once a year to employees with one or more years of service, at least seven days in advance of their religious holiday. Religious holidays include Eid al-Fitr (for Muslims), Christmas Day (for Christians), Day of Silence (for Hindus), Waisak (for Buddhists), and Chinese New Year (for Confucianists). According to Indonesian law, the payment is compulsory and must be made based on employee’s religion.

The bonus is equivalent to a minimum of one month’s pay. Alternatively, employer can agree with employee to pay on a specific date.

  • For workers that have a minimum 12 month of service, THR amount is minimum one monthly salary/wages (= basic salary + other fixed allowance).
  • For workers that have > 1 month of service and < 12 months of service, THR amount is apportioned accordingly (= month of service/12 x 1 monthly salary)

Indonesians place a large emphasis on their religious diversity and collectivist societies. During these periods, they spend money on things that are important to their culture, traditions, family and communities. As a result, THR plays a vital role for Indonesian families to be able to afford these festivals. The ceremonies and celebrations will be hard for them to uphold without the THR.

According to Indonesian law Regulation 6/2016, employees hired on a permanent basis and temporary basis (freelance employees are included after the amendment of law) will be able to receive THR.

If an employee has only worked for one month, he/she is also entitled to receive the THR payment. It is also worth noting that the eligibility of THR is not based on an employee’s performance.

Benefits to the Employee in Indonesia


An employee can work a maximum of 40 hours per week, allocated in one of the following ways: Seven hours per day, six days per week, OR eight hours per day, five days per week.

In general, employers who require an employee to work outside the normal working hours must pay overtime wages to the employee, unless the employee’s position, function or job is that of a “thinker, planner, implementer or controller“ (equal to Executives or Managers level) whose working hours cannot be limited to normal working hours. These categories of employees are not entitled to overtime wages but are entitled to a higher salary than the ordinary employees. Overtime can only be performed for a maximum period of 4 hours per day and 18 hours per week. The overtime pay rate for one hour is 1/173 of the monthly wage plus fixed allowances, if any.


The followings set out the benefits to be received under the Old age benefit (JHT) and Pension plan (JP) components of the social security program (BPJS Ketenagakerjaan).

Event Old Age Insurance Benefit (JHT) Pension Benefit (JP)
Termination Full lump sum None
Still employed and has contributed for 10 years or more Can apply to receive 30% of total fund for home purchase or 10% of total fund for other necessities in preparation of retirement None
Retirement* and has contributed for less than 15 years full lump sum Full lump sum
Retirement* and has contributed for 15 years or more Full lump sum Monthly pension
Permanent disability Full lump sum Monthly pension
Death Full lump sum 50% of monthly pension for widow/widower, child (max. 2 until 23 yeras old) or parent (max.1)
Permanent departure from Indonesia Full lump sum Full lump sum**

* The retirement age is set at 57 years old, and it will continue to have a one year increase every three years until it reaches the maximum retirement age of 65 years.

***Although not stated in the regulation, expatriates should be able to claim both old age and pension benefits in lump sum upon permanent departure from Indonesia. *


Employer may provide additional benefit to employee, e.g. pension plan managed by private financial institution.

Employer may provide full supplemental coverage of health insurance for employee and family (spouse and up to 3 children), i.e. in-patient, out-patient, dental, vision care, and maternity.

Visas and Foreign Workers

General Information

Foreign workers and expatriates must possess valid working visas, work passes, and employment passes prior to commencing work.

Note: Ministry of Manpower & Transmigration Decree, No. 40 of 2012, covers job positions which are prohibited to be held by foreign workers.

Types of Visa

Limited stay visas:

A foreign national must obtain a limited stay visa (Visa Tinggal Terbatas) (VITAS) to be able to work in Indonesia. This visa has a minimum validity period of six months and a maximum validity period of one year.

The procedure for obtaining approval is the same as for obtaining approval of permits (see next page) and obtaining a VITAS takes about one month.

Application Process

Procedure for obtaining approval of a VITAS:

The employer must first apply to the Ministry of Manpower and Transmigration through its online system (www.tka-online.depnakertrans.go.id) for the Ministry’s approval of its Expatriate Manpower Utilization Plan (RPTKA), which is the master document for processing individual work permits for foreign employees. The RPTKA contains information on the number, functions and employment periods of the foreign employees.

Processing an RPTKA approval takes about 20 working days.

After obtaining the RPTKA, an employer must further obtain a permit to employ expatriate (IMTA) from the Minister of Manpower and Transmigration for its foreign employees. The application for IMTA must be submitted through the Ministry of Manpower and Transmigration online system (www.tka-online.depnakertrans.go.id). The IMTA is valid for one year.

In certain regions, foreign nationals who work in Indonesia must obtain a few other permits.

The employer must pay an annual contribution of US$1,200 to the Compensation Fund for the Utilization of Expatriate (Dana Kompensasi Penggunaan Tenaga Kerja Asing) (DKP-TKA).

After the issuance of both the RPTKA and IMTA, the employer can submit a VITAS application to the Immigration Office. If the VITAS application is accepted, the Immigration Office will send a telex confirming the approval to the Indonesian embassy in the foreign national’s country of domicile. The foreign national must then collect the approval at the Indonesian embassy and get the VITAS stamp on their passport.

The time frame for processing the required permits is about two to three months.

The foreign worker must submit the application for the limited stay permit to the Immigration Office no later than seven days after their arrival in Indonesia (verified by the entry permit). If the application is approved, the Immigration Office will issue a Limited Stay Permit Card (KITAS), following which the employee will receive a “control blue book” to record changes, if any, to his/her immigration status. The KITAS is valid for one year.

Filings when foreign nationals start work:

There are no official filings that need to be made when the foreign nationals start working in Indonesia, except for an extension of the work permit and stay permit and other related documents, as they are valid for 12 months.

Public Holidays in 2022

S.No Occasion Date
1. New Year’s Day January 1st
2. Chinese New Year February 1st
3. Isra Mi’raj February 28th
4. Bali Hindu New Year March 3rd
5. Good Friday April 15th
6. Labour Day May 1st
7. Hari Raya Idul Fitri May 2nd-3rd
8. Lebaran Holiday April 29th, May 4th-6th
9. Vesak Day May 16th
10. Ascension Day of Jesus Christ May 26th
11. Pancasila Day June 1st
12. Adul Adha July 9th
13. Islamic New Year July 30th
14. Independence Day August 17th
15. Prophet Muhammad’s Birthday October 8th
16. Christmas Holiday December 25th

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