TL;DR, Hiring in Indonesia
- Fully-loaded employer cost: ~10–11% (BPJS Kesehatan + Ketenagakerjaan)
- Mandatory THR (religious holiday allowance) of one month's salary, costed as statutory additional pay on top of base salary
- Severance under Omnibus Law (UU Cipta Kerja 2020) is substantial, up to 9 months at long tenures
- Setup via EOR: 7–14 business days; direct PT PMA entity: 3–6 months
Last reviewed:
Statutory employer costs in Indonesia
In Indonesia, employer contributions to BPJS Ketenagakerjaan (employment social security) total ~6.24–7.74% of capped salary: JHT 3.7% (old-age), JKK 0.24–1.74% (work-accident, industry-banded), JKM 0.3% (death), and JP 2% (pension, capped at IDR 10.6M/month wage). BPJS Kesehatan (health) adds 4% capped at IDR 12M/month wage. The mandatory THR religious holiday allowance equals one month's salary, paid before Eid al-Fitr. Total employer cost typically runs 17–22% above gross monthly base.
| Contribution | Employer rate | Notes |
|---|---|---|
| BPJS Kesehatan (health) | 4.0% | Capped at salary of IDR 12M/month; employee adds 1%. Above the cap no further contribution. |
| BPJS Ketenagakerjaan JHT (old age) | 3.7% | Employer share; employee adds 2%. Lump-sum payable on retirement or after 10 years. |
| BPJS Ketenagakerjaan JP (pension) | 2.0% | Capped at IDR 10.6M/month wage (2025). Employee adds 1%. |
| BPJS Ketenagakerjaan JKK (work injury) | 0.24–1.74% | Banded by industry risk class (I–V). Office work ~0.24%, mining/construction up to 1.74%. |
| BPJS Ketenagakerjaan JKM (death) | 0.3% | Employer-only; flat across industries. |
Mandatory employee benefits
Beyond statutory contributions, Indonesia law requires the following benefits the employer must fund.
- THR (Tunjangan Hari Raya)
- Mandatory religious holiday allowance equal to one month's salary, paid no later than 7 days before Eid al-Fitr (or relevant religious holiday). Pro-rated for employees with <12 months tenure. Outside the BPJS wage base (PP 44/2015, Perpres 64/2020 define "upah" as basic pay plus fixed allowances only), so it adds no further BPJS employer contribution.
- Annual leave
- 12 working days after 12 months of service. Cannot be paid out in lieu except on termination.
- Long-service leave
- After 6 years of continuous service, employee earns 1 month additional paid leave (cuti besar).
- Maternity / paternity
- Mother: 3 months paid maternity leave (1.5 before + 1.5 after birth), or 6 months under the 2024 Mother and Child Welfare Law for first two children. Father: up to 5 days.
Termination, notice and severance
Probation
Maximum 3 months. Can be ended without severance during probation with proper documentation.
Notice period
14 days written notice from either party for indefinite-term contracts. Fixed-term (PKWT) contracts cannot be terminated early without paying the remainder.
Severance
Substantial under UU Cipta Kerja (Omnibus Law) 2020: uang pesangon (severance) + uang penghargaan masa kerja (long-service pay) + uang penggantian hak (rights compensation). At 8+ years tenure, a 'efficient business' termination can total ~9 months' salary. Multipliers vary by reason (0.5× for resignation with cause to 1.75× for retirement). Severance must be paid even if the employee resigns in many scenarios.
Common compliance pitfalls
- THR is non-negotiable and non-deferrable. Late payment triggers a 5% penalty plus per-day interest, and Ministry of Manpower (Kemnaker) audits enforce it aggressively each Ramadan.
- PKWT (fixed-term) contracts are limited to 5 years total (including renewals) under the Omnibus Law. Going beyond auto-converts to PKWTT (indefinite) with full severance exposure backdated.
- Severance multipliers depend on the legal ground for termination. 'Efficiency' termination requires Ministry of Manpower mediation (perselisihan hubungan industrial) and pays 1.75× the base table; firing without process pays 2× as wrongful-dismissal damages.
- Foreign companies sometimes assume PKWT can be repeatedly extended like an at-will contract; it cannot. The 5-year cap is hard, and Disnaker audits trigger automatic conversion + arrears.
Frequently asked questions
EOR platform fees for Indonesia range from $199–$699 per employee per month across compared providers. On top, employer BPJS contributions add ~10–11% of capped salary, mandatory THR adds another ~8.3% (one month of 12), and severance accruals should be modelled at 1–2 months' salary per year of expected tenure. Total true cost typically runs 25–30% above gross monthly base.
Tunjangan Hari Raya is a 13th-month payment, equal to one full monthly salary, paid before the employee's relevant religious holiday (Eid al-Fitr for Muslims, Christmas for Christians, etc.). It is mandated by Ministry of Manpower Regulation 6/2016 and Government Regulation 36/2021. Skipping it triggers fines and is a top driver of Disnaker complaints.
Most EOR providers can onboard an Indonesian hire within 7–14 business days once the candidate's NPWP (tax ID), NIK (national ID), BPJS registration, and bank details are collected. Setting up a PT PMA (foreign-owned local entity) takes 3–6 months minimum and requires minimum capital of IDR 10B (~$650K).
Only partially. PKWT (fixed-term) contracts can run up to 5 years total under the Omnibus Law. Beyond that, or for indefinite-need roles, you must use PKWTT (indefinite) which carries full severance exposure. Disnaker audits will reclassify mis-used PKWT contracts retroactively, with arrears.
UU Cipta Kerja (Job Creation Law) 2020 simplified severance multipliers (modestly lowering long-tenure exposure), capped PKWT at 5 years, and introduced the JKP unemployment-protection program. Net effect: hiring is slightly cheaper to exit, but compliance is stricter, especially around contract type and Disnaker mediation requirements.
Sources
Statutory rates and rules verified against the following authorities. We update this page when rates change.