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Key Country Facts

Currency: Indonesian Rupiah (IDR)

Time zone: GMT +7

Capital city: Jakarta (Java Island)

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.

Employment Contracts

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 agreements can be made for a definite or indefinite period (Law No. 13 of 2003 on Manpower (Labor Law)). 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.

Indonesia Holidays

 

Occasion Date
New Year’s Day Jan 1
Chinese New Year Feb 12
Isra Mi’raj Mar 11
Isra Mi’raj Year Joint Holiday Mar 12
Balinese Day of Silence May 14
Good Friday Apr 2
Labor Day May 1
Hari Raya Eid Fitr Joint Holiday May 12
Ascension Day of Jesus Christ May 13
Hari Raya Eid Fitr Joint Holiday May 14
Hari Raya Idul Fitri May 15 to 16
Hari Raya Eid Fitr Joint Holiday May 17 to 19
Vesak Day May 26
Pancasila Day Jun 1
Idul Adha Jun 20
Islamic New Year Aug 11
Independence Day Aug 17
Prophet Muhammad’s Birthday Oct 19
Christmas Joint Holiday Dec 24
Christmas Day Dec 25
Christmas Day Dec 27

Vacation

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; any unutilized leave after March 31st 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/Paternity Leave

Women are entitled to three months paid maternity leave, 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.

Termination

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.

Bonus

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)

Indonesia Social Security

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)

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.

This information does not constitute legal advice.

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