Table of Contents
Key Country Facts
Indonesia is a country located in Southeast Asia and Oceania, consisting of over 17,000 islands. It is the world's largest island country, with a population of over 270 million people. The country is known for its diverse culture, rich natural resources, and stunning landscapes.
Indonesia covers an area of approximately 1.9 million square kilometers, making it the 14th largest country in the world by land area.
Indonesia has a tropical climate, with high temperatures and high humidity throughout the year. The country experiences 2 main seasons: a wet season from October to April, and a dry season from May to September. Due to its location near the equator, Indonesia is also prone to natural disasters such as earthquakes, volcanic eruptions, and tsunamis.
Indonesia has a diverse culture, with hundreds of ethnic groups and languages spoken throughout the country. The country's culture is heavily influenced by Hindu and Buddhist traditions, as well as Islamic and Western influences. Traditional arts and crafts, such as batik textiles, wood carvings, and puppetry, are an important part of Indonesian culture.
The majority of Indonesians are Muslim, with over 87% of the population practicing Islam. Other religions practiced in Indonesia include Christianity, Hinduism, Buddhism, and Confucianism.
The official language of Indonesia is Indonesian, which is based on Malay. The language is spoken by over 170 million people in Indonesia and is also used as a second language in neighboring countries. English is also widely spoken in Indonesia, particularly in urban areas and among the younger generation.
The payroll cycle in Indonesia typically runs on a monthly basis, with employees being paid at the end of each month. Employers are required to calculate and deduct income tax, social security contributions, and health insurance contributions from employees' salaries each month.
Employment law in Indonesia is governed by the Labor Law, which outlines the rights and obligations of both employers and employees. The law covers a wide range of topics, including minimum wage, working hours, leave entitlements, and termination procedures.
Minimum wage rates in Indonesia vary by region and are reviewed annually. The minimum wage in Jakarta, for example, is IDR 4.4 million per month.
Employment contracts in Indonesia must be in writing and include important details such as the job description, salary, working hours, and duration of employment. The contract must be written in Indonesian, although an English translation may also be provided.
Employment contracts in Indonesia can be either fixed-term or indefinite. Fixed-term contracts are typically used for temporary or project-based work, while indefinite contracts are used for permanent positions.
Probation Period / Trial Period
Probation periods are common in Indonesia and are typically used to assess an employee's performance before confirming their employment. The maximum length of a probation period in Indonesia is 3 months, although it can be shorter depending on the industry and type of job.
During the probation period, employers can terminate an employee's employment without providing notice or severance pay.
Only a permanent employment agreement may provide for a probationary period and usually period of maximum 3 months. A fixed-term employment agreement cannot include probation.
The employee must be paid at or above the minimum wage and the employer can terminate the employment relationship during the probation period without notice and without obligation to pay a severance package.
The standard working hours in Indonesia are eight hours per day and 40 hours per week. However, the government has introduced a flexible working hour system, which allows employers and employees to agree on a different working schedule as long as it does not exceed 40 hours per week.
Overtime is payable in Indonesia for work that exceeds the standard working hours. Overtime pay is calculated at a rate of 1.5 times the employee's regular hourly rate for the first hour of overtime and twice the regular hourly rate for each subsequent hour.
Bonuses are common in Indonesia, and employers are not legally required to provide them. However, many companies offer bonuses as a way to reward employees for their performance. The amount and timing of bonuses can vary depending on the industry and company policies.
Termination of employment in Indonesia must be done in accordance with the Labor Law. Employers are required to provide notice to employees before terminating their employment, and employees are entitled to severance pay if they have worked for the company for at least 1 year.
The notice period for termination of employment in Indonesia varies depending on the length of service. For employees who have worked for less than 1 year, the notice period is 1 month. For employees who have worked for more than 1 year, the notice period is 2 months.
Redundancy / Severance Pay
Employers in Indonesia can terminate an employee's employment due to redundancy, which occurs when there is a surplus of labor or a decrease in business activities. Employers must follow a specific procedure when carrying out redundancies, including providing notice to employees, consulting with employee representatives, and offering a severance payment. The amount of the severance payment is determined by the employee's length of service and salary.
Female employees in Indonesia are entitled to 3 months of paid maternity leave. The employer is required to pay the employee's full salary during the maternity leave period, and the employee must provide a doctor's certificate to confirm the pregnancy.
Paternity leave is not currently mandated by law in Indonesia, although some companies may offer it as a benefit to their employees.
Parental leave is also not mandated by law in Indonesia, although some companies may offer it as a benefit to their employees.
Vacation and Annual Leaves
Employees in Indonesia are entitled to a minimum of 12 days of paid annual leave per year, which increases with the length of service. After 1 year of service, employees are entitled to 14 days of annual leave, and after 5 years of service, employees are entitled to 18 days of annual leave.
Employees in Indonesia are entitled to a minimum of 12 days of paid sick leave per year, which can be accumulated over time. Employers may require a medical certificate to confirm the employee's illness or injury.
In addition to maternity leave, annual leave, and sick leave, employees in Indonesia may be entitled to other types of leave such as bereavement leave, study leave, or religious holiday leave. The amount and type of leave may vary depending on the company policy and industry.
Employers in Indonesia may offer other benefits such as health insurance, life insurance, retirement savings plans, and transportation allowances. The amount and type of benefits can vary depending on the company policy and industry. Some benefits, such as health insurance and social security contributions, are mandated by law.
There are 14 national holidays in Indonesia, including religious holidays such as Eid al-Fitr and Christmas, as well as Independence Day and National Heroes' Day. Employers are required to provide a day off for each national holiday, although employees may be required to work if their job requires it.
Taxation in Indonesia is governed by the Indonesian tax law, which includes both personal and corporate tax regulations. Here is a brief overview of the personal income tax and social security system in Indonesia:
Personal Income Tax
In Indonesia, personal income tax is calculated on a progressive scale, ranging from 5% to 30% depending on the level of income. The tax year in Indonesia runs from 1 January to 31 December. An individual taxpayer is required to file an annual tax return by 31 March of the following year, although the deadline may be extended in certain circumstances.
The following are the current tax rates for personal income tax in Indonesia:
- Income up to IDR 50 million: 5%
- Income between IDR 50 million and IDR 250 million: 15%
- Income between IDR 250 million and IDR 500 million: 25%
- Income above IDR 500 million: 30%
The social security system in Indonesia is managed by the Social Security Agency (BPJS). Employers are required to register their employees with the BPJS and contribute to the social security system. The contributions are based on the employee's salary and are made up of 2 parts:
- Jamsostek (social security for employment):
- Contribution rate for employers: 3.7% of employee's gross monthly salary
- Contribution rate for employees: 2% of employee's gross monthly salary
- Health Insurance:
- Contribution rate for employers: 4% of employee's gross monthly salary
- Contribution rate for employees: 1% of employee's gross monthly salary
The total contribution is deducted from the employee's salary and paid by the employer to the BPJS. The social security system provides benefits such as health insurance, pension, and disability benefits to employees.
Visas and Foreign Worker
To work legally in Indonesia, foreign nationals must obtain a work visa, also known as a temporary stay permit (KITAS). Here is some general information about obtaining a work visa in Indonesia:
Types of Work Visas:
There are several types of work visas available in Indonesia, depending on the nature and duration of the work. The most common work visas are:
- Temporary Work Permit (IMTA):This permit is required for foreign nationals who will be working in Indonesia for a maximum period of 6 months.
- Temporary Stay Permit for Work (KITAS):This permit is required for foreign nationals who will be working in Indonesia for a period of 6 to 12 months.
- Permanent Stay Permit for Work (KITAP):This permit is required for foreign nationals who will be working in Indonesia for more than 12 months.
To obtain a work visa in Indonesia, foreign nationals must meet the following requirements:
- Job Offer:The foreign national must have a job offer from an Indonesian employer.
- Sponsorship:The Indonesian employer must sponsor the foreign national's work visa application.
- Skills and Qualifications:The foreign national must have the required skills and qualifications for the job.
- Medical Checkup:The foreign national must undergo a medical checkup in their home country to ensure they are free from certain diseases.
- Passport and Photo:The foreign national must have a valid passport and recent passport-sized photo.
The process for obtaining a work visa in Indonesia typically involves the following steps:
- The Indonesian employer applies for the work permit and sponsorship from the Ministry of Manpower and Immigration Office.
- Once the work permit is approved, the foreign national applies for the visa at the Indonesian Embassy or Consulate in their home country.
- After arriving in Indonesia, the foreign national must register with the local immigration office and obtain a temporary stay permit.
- The foreign national must then apply for a work permit and a KITAS or KITAP at the local immigration office.
It is important to note that the process and requirements for obtaining a work visa in Indonesia can vary depending on the individual's circumstances and the type of visa. It is recommended to seek professional assistance from a lawyer or immigration specialist to ensure a smooth and successful application process.