Indonesia: A Guideline to Payroll and Employer of Record

Establish your presence globally with Neeyamo as we help you go beyond borders to manage your international payroll and hire new talent in Indonesia.

Contact Us


Indonesia is located in Asia, surrounded by Malaysia, Papua New Guinea, and Timor-Leste. Indonesia shares its maritime borders with India, Australia, Palau, Singapore, Philippines, Vietnam, and Thailand. The prominent industries are agriculture, oil and gas manufacturing, non-oil and gas manufacturing, mining, trade, hotels, and restaurants.

Do your organization’s expansion plans require you to hire employees in Indonesia? Do you lack a physical entity in the country – a key requisite to hiring local talent? Neeyamo assists organizations worldwide with onboarding and managing employees in Indonesia -processing payroll, managing local compliance requirements, benefits, and more.

Tools And Instances

SVG Icon
Global Payroll

Neeyamo’s global payroll solution covering 180+ countries

SVG Icon
Global Work

A tech-based EOR solution to manage your extended workforce

Facts And Stats




Indonesian Rupiah (IDR)

Official Language


Fiscal Year

1 January- 31 December

Date Format


Country Calling Code


Other Languages

Javanese, Sundanese

Time Zone

Western Indonesian Time (UTC+07:00)

Global Payroll


What is payroll? 

Payroll is the list of compensation to be paid to employees of a company or organization for a set period or date. 

Handling payroll for a widespread workforce can pose a significant challenge for any organization, and the added complication of compliance can make things worse. If companies spend more time processing payroll, it directly impacts day-to-day operations and their overall productivity.

Over the years, Neeyamo has observed these complexities and strived to provide a global payroll solution through a single technology platform - Neeyamo Payroll. 

Neeyamos global payroll system eases the process for companies looking to outsource their global payroll requirements and aids them in maneuvering the tricky payroll system in Indonesia. Neeyamos payroll software provides the perfect solution for all your global payroll needs – for employees working in primary geographies, the long-tail region, remote or internationally located. 


Payroll Taxes

Payroll tax is the percentage amount retained from an employee's salary and paid to the government to invest in the general population's welfare. These are statutory in nature and are levied from both the employer and employee. Additional statutory contributions are made by employers towards aiding both short-term and long-term benefits for their employees.

Employee Taxes

Employees have to make the following payroll contributions:

  • 2.00% - Old Age
  • 1.00% - Pension
  • 1.00% - Health Insurance (maximum of 120,000 IDR)
  • 4.00% - Total Employee Cost

With effect from March 1, 2023, the new taxable wage capping for Pension Contributions is 9,559,600 rupiah. 

Employer Taxes

Employees have the following payroll contributions:

  • 0.24% - 1.74%- Work Accident
  • 3.70% - Old Age
  • 0.30% - Death
  • 2.00% - Pension
  • 4.00% - Health Insurance (maximum of 480,000 IDR)
  • 10.24% - 11.74% - Total Employment Cost

Payroll Cycle


Undoubtedly, payroll is a critical process for any organization. The pay cycle refers to the period an organization pays its employees, which can vary depending on the pay frequency that the organization chooses to adopt.


Indonesia follows a monthly pay cycle.

13th Month Cycle

There is no policy pertaining to the 13th salaries in Indonesia.

Global Work


An Employer of Record (EOR) service provider helps you eliminate the hassle of handling complexities while onboarding a new employee in an international location. They help bridge the gap that otherwise mandates organizations to have a local registered entity and a local bank account, prior to making a job offer to an international hire.

An EOR service provider acts as a legal employer, facilitates salary payments, and manages other statutory requirements such as health insurance, payroll taxes, and employee benefits ensuring compliance with local tax laws and regulations.

This allows organizations to focus on collaborating with the employee in Indonesia for operational tasks, with the knowledge that they have a cost-effective solution support their global payroll & HR requirements, as they continue their global expansion.

Neeyamos Global Payroll Tech stack provides you with all the benefits of our Employer of record – payroll services in one solution. 

HR Mandates and Practices

Minimum Wage

The minimum wage requirement varies based on the local government regulations ranging from 1,958,169 IDR in Central Java to 5,067,381 IDR  in DKI Jakarta.


The maximum overtime hours are 4 per day and 18 per week. Overtime worked during weekdays is paid 150.00% of the regular hourly wage for the first overtime hour, increasing to 200.00% for every subsequent overtime hour.

Data Retention Policy

No law or regulation in Indonesia explicitly regulates the collection, use, or handling of an applicant’s personal data, including protecting the privacy of an employee’s particulars.

Hiring and Onboarding Requirements


There is no special legislation for hiring.


Aside from reviewing the employment contract and the usual formalities surrounding onboarding, there is no specific legislation pertaining to the onboarding process.


In Indonesia, probationary periods are usually three months.


Public Holiday

The following national holidays are recognized in Indonesia:

  • Jan 1: New Year's Day
  • Jan 22: Chinese New Year
  • Feb 18: Ascension of the Prophet Day
  • Mar 22: Holy Day of Silence
  • Apr 7: Good Friday
  • Apr 22 and Apr 23: Eid al-Fitr
  • May 1: Labor Day
  • May 18: Ascension of Jesus
  • Jun 1: Pancasila Day
  • Jun 4: Vesak Day
  • Jun 29: Eid al-Adha
  • Jul 19: Islamic New Year
  • Aug 17: Independence Day
  • Sept 29: Prophet's Birthday
  • Dec 25: Christmas

Sick Leave

When employees are sick or injured, they are entitled to paid sick leave, provided they show medical confirmation of their ill health. Employees can also have long-term sick leave lasting for longer than one year. A doctor should recommend such leave in writing.

Payment to employees on prolonged sick leave is as follows:

  • 100% in the first four months
  • 75% in the second four months
  • 50% the third four months
  • 25% of wages until termination

Maternity Leave

Employees are entitled to three months of fully paid maternity leave before the estimated due date and one and a half months of leave following the birth. The maternity leave is paid at 100% of the regular salary rate of pay.

Paternity Leave

New fathers are entitled to 2 days' leave for the birth of their child or a miscarriage.

Other Leave

Employees are entitled to up to 2 days of paid leave due to the death of their spouse, one day of paid leave for the death of their parents or parent-in-law, or the death of their children. If a member of the employee's household dies, they shall be entitled to 1 day of paid leave.



The reasons for which employees can be discharged from work are as follows:

  • The employee violates the employment agreement
  • The employee is imprisoned
  • The employee has been ill for more than 12 months
  • The employee is absent from work for more than five days without a valid reason, provided they have been notified twice
  • The employee has reached retirement age

Not all employee dismissal reasons should be related to their misbehavior. The employer can discharge employees for several business-related reasons:

  • There can be a change in the company's status, its merger with another business, or the acquisition of its ownership
  • The employer becomes insolvent
  • The employer has suffered continuous losses for two years consecutively, as proven by financial reports
  • The employer is closing the business permanently

Notice Period

Notice periods within Indonesia are generally 30 days, although employers can specify longer notice periods within the employment contract.

Severance Pay

Severance pay is mandatory if applicable and is determined by the employee's length of service.

  • Less than 1 year – 1-month wage
  • Between 1 and 2 years – 2 months' wage
  • Between 2 and 3 years – 3 months' wage
  • Between 3 and 4 years – 4 months' wage
  • Between 4 and 5 years – 5 months' wage
  • Between 5 and 6 years – 6 months' wage
  • Between 6 and 7 years – 7 months' wage
  • Between 7 and 8 years – 8 months' wage
  • More than 8 years – 9 months' wage



There are two types of Visas for foreign nationals who intend to live and work in Indonesia.

Electronic ITAS (e-ITAS) - Employers need to apply for an ITAS on behalf of future employees. The ITAS grants employees the right to stay in Indonesia and open a bank account. They can also stay in the country and, after three years, apply for permanent residency.

Before applying for the ITAS, the employee must also get a Visa Izin Tinggal Terbatas (VITAS) – an Indonesian limited-stay permit visa.

The Kartu Izin Tinggal Tetap (KITAP) is a visa an employee can also apply for, which grants the employee a permanent residence permit (KITAP), but this is only available to people who have held an ITAS for three or more years.

Employee Background Checks

Legal and Background Checks

  • Criminal Records - Yes
  • Medical History - If required for employment
  • Drug Screening - If required for employment
  • Credit Checks - If required for employment
  • Social Media - No

Employers in Indonesia frequently carry out background checks on applicants. Indonesian employment laws do not expressly regulate background checks. Certain background checks are in practice subject to the consent of the applicant.

Last updated on January 19, 2024

If you have any queries or suggestions, reach out to us at