Indonesia is an island country in Southeast Asia between the Indian Ocean and Pacific Ocean. The country consists of over 17,000 islands, including Sumatra, Bali, Java, Sulawesi, and parts of Borneo and New Guinea — more than half of the population lives in Java, which is the world’s most populated island. Indonesia is the only G20 member in Southeast Asia, and has the largest economy in the region.
Pregnant employees are entitled to 3 months of paid maternity leave, usually split as 6 weeks before and 6 weeks after. The leave is paid at the full salary. Fathers are entitled to 2 days of leave for the birth of their child.
Employees are entitled to paid sick leave as long as they can provide medical proof. The leave can last for 1 year if the sickness persists. Sick leave payments are as follows:
There are 16 public holidays in Indonesia, and employees are entitled to at least 12 days of paid time off after 1 year at their company. Once an employee reaches 6 years at their company the leave becomes 1 month, and after 8 years it becomes 2 months.
Employees can also request paid leave for their bereavement or their children’s special occasions, such as baptism, circumcision, or marriage.
The minimum wage requirement in Indonesia is around IDR 4,600,000. Working hours are 40 hours per week, either 7 hours a day for 6 days per week, or 8 hours per day for 5 days a week. Overtime is regulated by the contract or collective agreements, with a maximum of 18 hours per week. Overtime is paid at between 150% and 400% of the regular salary.
Before reaching the decision to terminate an employee, the employer has to make a genuine effort to avoid the termination by negotiating with the employee. They need to try to find an accommodation such as coaching, a change in working hours, or better working methods.
If this has been done and termination still cannot be avoided, the employer must explain the reasons for termination in writing and provide notice. If the employee who has been dismissed believes the termination is unjust, they can challenge the decision in the Labor Court, who will give the final ruling.
Notice periods are generally 30 days, but employers can determine longer notice periods within their employment contracts.
Severance pay is determined by how long the employee has worked at the company:
Employees who resign and have at least 5 years of tenure are entitled to separation pay that is determined in their employment agreement and/or labor agreements.
Indonesia has a mandatory holiday bonus made before called the Tunjangan Hari Raya (THR) bonus, paid out before the longest religious holiday in Indonesia.
★ 0.24%-11.74% - Work Accident Insurance
★ 3.7% - Old Age Insurance
★ 0.3% - Death Insurance
★ 2% - Pension
★ 4% - Health Insurance
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Unlike full-time employees, contractors work on projects with multiple companies at a given time and are technically self-employed. Full-time employees are solely focused on their employer and usually receive benefits (such as health insurance, equity or stock options, and time off) as an additional form of compensation. While it can be cheaper to work with international contractors instead of paying benefits to a full-time employee, you run the risk of misclassification. It's recommended to work with an EOR for contractor onboarding and payments, so you can know that your international contractors are paid compliantly and on time.