Employer of Record Guide in 

Indonesia

Annual Leave

• Minimum entitlement: 12 working days per year after 12 months of continuous employment
• Accrual: Typically earned monthly (1 day per month)
• Carryover: Unused leave may be carried forward or paid out, depending on company policy
• Payout: Must be compensated upon termination

Sick Leave

• Paid sick leave: Up to 12 months at full pay, followed by 6 months at 75% pay, then 6 months at 50% pay
• Medical certificate: Required for sick leave exceeding 2 consecutive days
• Chronic illness: Extended provisions for long-term medical conditions

Maternity Leave

• Duration: 3 months (1.5 months before birth, 1.5 months after birth)
• Pay: 100% of salary, paid by employer
• Flexibility: Timing can be adjusted based on medical recommendations
• Job protection: Position must be held during leave period

Paternity Leave

• Duration: 2 days for the birth of a child
• Pay: 100% of salary
• Timing: Must be taken around the time of birth

Religious Leave

• Hajj pilgrimage: Up to 40 days of unpaid leave for Muslim employees
• Religious holidays: Paid leave for major religious observances
• Prayer time: Reasonable accommodation for daily prayers

Other Leave Types

• Marriage leave: 3 days paid leave
• Bereavement leave: 2 days for immediate family, 1 day for other relatives
• Circumcision leave: 2 days for employee's child
• Baptism leave: 2 days for employee's child

Summary

Termination Types

Termination for Cause:

• Serious misconduct, criminal conviction, or breach of contract
• No severance required if properly documented
• Must follow due process including warning procedures

Termination Without Cause:

• Requires approval from labour authorities or mutual agreement
• Severance and other compensation required
• Must demonstrate business necessity

Notice Period Requirements

Indonesia does not have standard notice periods. Instead, the focus is on severance payments and proper procedures:

• Mutual agreement: Preferred method, requires written agreement
• Labour court approval: Required for unilateral termination without employee consent
• Immediate termination: Only for serious misconduct with proper documentation

Severance Pay

Severance calculations are complex and based on length of service:

Note: Rights compensation includes unused leave, bonus prorations, and other entitlements.

Probationary Periods

• Duration: Maximum 3 months for permanent employees
• Fixed-term contracts: No probationary period allowed
• Termination during probation: Easier termination process but still requires proper documentation

Final Pay Requirements

• Timeline: Final payments must be made within 7 days of termination
• Components: Base salary, overtime, unused leave, severance, and other entitlements
• Documentation: Detailed breakdown required

Legal Protections

Employees cannot be terminated for:

• Pregnancy or maternity leave
• Union activities
• Filing complaints with authorities
• Discrimination based on religion, ethnicity, gender, or political beliefs

National Public Holidays

Indonesia recognises both fixed and variable religious holidays:

Regional Holidays

Each province may declare additional local holidays based on:

• Local religious observances
• Cultural celebrations
• Regional historical events

Holiday Pay Rules

• Regular pay: Employees receive normal salary for public holidays
• Work on holidays: 2× regular pay for first 8 hours, escalating rates thereafter
• Substitute holidays: If holiday falls on weekend, substitute day may be declared

Religious Accommodation

Indonesia's diverse religious landscape requires employers to:

• Accommodate major religious observances for all faiths
• Provide flexible scheduling for religious practices
• Respect dietary and dress code requirements

Required Documents for Employment

• Employment Contract: Must be in Indonesian language, include job description, salary, benefits, and termination clauses
• Work Permit: Required for foreign employees (various types available)
• Tax Registration: NPWP (tax identification number)
• Social Security Registration: BPJS Kesehatan and Ketenagakerjaan
• Bank Account: For salary payments (typically required to be Indonesian bank)

Work Authorization

Indonesian Citizens:

• National ID card (KTP)
• Educational certificates
• Health certificate

Foreign Workers:

• Work permit (ITAS/ITAP)
• Visa documentation
• Educational qualification recognition
• Health and police clearance certificates

Language Requirements

• Official language: Bahasa Indonesia
• Contracts: Must be in Indonesian (bilingual versions acceptable)
• Workplace communication: Indonesian proficiency generally required
• Documentation: All official documents must be in Indonesian

Background Checks

• Criminal background: Police clearance certificate required
• Educational verification: Diploma authentication through relevant authorities
• Previous employment: Reference checks commonly conducted
• Health screening: Medical examination may be required for certain positions

Data Protection & Privacy

• Personal Data Protection Law: Compliance with Indonesian data protection regulations
• Employee consent: Required for collection and processing of personal data
• Data storage: Must comply with local data residency requirements
• Cross-border transfers: Restricted and require specific approvals

Probation Period Setup

• Duration: Maximum 3 months for permanent employees
• Performance evaluation: Regular assessments during probationary period
• Termination rights: Easier termination process during probation
• Benefits: Full benefits typically apply during probation

Onboarding Timeline

What the EOR Handles

Borderless AI manages:

• Employment contract preparation in Indonesian
• Work permit applications and renewals
• Tax registration and compliance
• Social security enrolment
• Payroll processing and statutory contributions
• Local regulatory compliance

Worker Classification

Indonesian law strictly distinguishes between employees and independent contractors:

Employees:

• Subject to employer control and supervision
• Entitled to full labour law protections
• Receive regular salary and benefits
• Covered by social security programmes

Independent Contractors:

• Operate with autonomy and independence
• Invoice for services provided
• Responsible for own taxes and social security
• Limited labour law protections

Note: Misclassification can result in significant penalties, back payments, and legal liability.

Labour Unions & Industrial Relations

• Union rights: Workers have the right to form and join unions
• Collective bargaining: Common in larger companies and certain industries
• Bipartite cooperation: Employer-employee consultation committees required in companies with 50+ employees
• Strike regulations: Strikes must follow specific legal procedures

Cultural Considerations

Indonesian workplace culture emphasises:

• Respect and hierarchy: Formal communication and respect for seniority
• Religious accommodation: Flexibility for prayer times and religious observances
• Work-life balance: Family and religious obligations are highly valued
• Consensus building: Decision-making often involves consultation and agreement

Remote Work Framework

Remote work arrangements must consider:

• Legal framework: Employment laws still apply regardless of work location
• Equipment provision: Employer responsibility for necessary tools and technology
• Health and safety: Workplace safety obligations extend to home offices
• Tax implications: Potential impact on tax residency and obligations

Compliance Monitoring

Key areas requiring ongoing attention:

• Regulatory updates: Frequent changes to employment regulations
• Social security compliance: Regular reporting and payment obligations
• Tax compliance: Monthly and annual reporting requirements
• Labour inspection: Potential workplace inspections by authorities

Writers should double-check all statements and verify current Indonesian employment regulations with local legal counsel before publication.