The world of work is changing. Companies aren’t limited by their physical borders anymore and can hire global remote workers with ease. They’re looking around the world for top talent in countries such as Indonesia.
Businesses are turning to Indonesia for its large and diverse workforce, relatively low labor costs, and strategic location as a gateway to Southeast Asia. If you’re interested in hiring employees from Indonesia, it’s key to understand how much it costs. This guide will break down everything you need to know.
Costs to Consider
There are a number of costs to keep in mind when hiring employees from Indonesia. Some are legally mandated, while others are optional but frequently offered. We’ll also go over some fringe benefits that can help attract and retain top talent.
Mandatory Costs
- Salary
- Taxes and benefits
- Paid time off
- Overtime pay
- Severance pay
Optional and Frequently Offered Benefits
- Extended health plan
- Added Benefits
- Bonuses, discounts, and rewards
Optional Perks
- Coworking space
- Health and wellness benefits
Mandatory Costs of Hiring in Indonesia
To start, you need to take the following costs into account —- there’s no way around it. So, make sure to budget for them to ensure you comply with Indonesia’s local laws and regulations.
Salary
The minimum wage in Indonesia varies by province and ranges from IDR 1,986,670 (approximately USD 134) per month in West Java to IDR 4,901,798 (approximately USD 332) per month in Jakarta. The exact amount depends on factors such as location and industry. Salary averages in Indonesia differ depending on the location. In Jakarta, the average monthly salary is IDR 8.66M, equivalent to 582.71 USD.
Taxes and contributions
Unlike the US, there is no employer payroll tax contribution in Indonesia. However, employers must contribute to social security in the range of 10.24% to 11.74% of employee salaries.
Paid Leave
Employees in Indonesia are entitled to the following types of paid leave from work.
Vacation: In Indonesia, employees are entitled to a minimum of 12 days of paid annual leave after one year of continuous service. This entitlement increases to 15 days after four years of continuous service and a maximum of 20 days after eight years of continuous service.
Sick leave: Employees are entitled to a certain number of sick leave days per year, which varies depending on their length of service. For example, an employee who has worked for less than one year is entitled to 12 days of sick leave per year, while an employee who has worked for more than six years is entitled to 24 days of sick leave per year. During sick leave, the employee is entitled to receive their full salary, which is typically the responsibility of the employer.
Maternity and Parental Leave: In Indonesia, female employees are entitled to a total of three months of maternity leave, which can begin up to one month before their expected delivery date. During this time, they receive a minimum of 1/3 of their salary, which is covered by the employer. Male employees are entitled to 2 days of paid paternity leave. There is no mandated parental leave policy for employees in Indonesia beyond these provisions. However, you can choose to provide additional leave or other benefits for new parents.
Public holidays: Indonesia has 13 public holidays; however, employers are not required to pay employees on these days. Some employers may choose to provide additional compensation or time off in lieu of working on a public holiday. It ultimately depends on the employer's policies and the employment contract between the employer and the employee.
Overtime Pay
The overtime pay rate in Indonesia is typically 150% of the regular hourly wage for the first hour of overtime and 200% of the regular hourly wage for any subsequent hours. However, there may be different regulations or agreements in place depending on the industry and the employment contract.
Severance Pay
Employers are required to provide severance pay to their employees who have been terminated without just cause. The amount of severance pay is determined based on the length of service of the employee and their last salary. The minimum amount of severance pay is one month's salary for every year of service, with a maximum of nine months' salary. However, some companies may offer more generous severance packages than what is required by law.
Optional Costs
Attracting in-demand talent in today’s job market isn’t easy. The ongoing labor shortage has companies locked in fierce competition around the world, making it increasingly important to level up. Consider implementing the following benefits to attract and retain top talent.
Benefits
Offering a solid benefits package shows job seekers and employees that you value your team. An EOR, like Borderless, offers localized benefits packages that typically include the following:
- Medical Insurance
- Vision Insurance
- Dental Insurance
- Life Insurance
- Retirement Contributions
In addition to health insurance, it’s wise to add extra perks to your benefits package. Consider offering a health and wellness spending account, professional development opportunities, and monthly subscriptions. These are just a few attractive offerings that can help incentivize new hires.
Bonuses and Extras
Along with attracting top talent, bonuses come with a range of benefits. They help to improve retention rates, strengthen company morale, and boost productivity. Providing your team with a variety of generous bonuses shows them you value their hard work. There are a number to choose from, like signing, referral, and holiday bonuses.
Perks and Rewards
In addition to bonuses, many employers opt to provide their team with fun perks and gifts as a way to show their appreciation. For example, employers offer employees rewards based on their interests, such as free sports tickets or live shows. They wine and dine employees and work to show them a good time outside of working hours.
Another approach many top companies take is to offer quality employees more paid time off and flexible working arrangements.
Workspace Costs
Working with a global team helps cut down on costs surrounding real estate, utilities, cleaning, office furniture, etc. In short, remote-first work can save you a ton. However, it’s a good idea to put aside some money for your distributed team members' workspaces.
Many companies offer their remote employees a budget for their home office or set them up in a coworking space. These membership-based workspaces have been proven to help employees thrive and are available throughout Indonesia’s big cities.
Wework, for example, has four locations throughout Jakarta and a range of options. You can set your employees up at a desk or in an office, starting at 6 USD per day. Hub Bali Legian in Bali is another affordable option, with desks at just over 67 USD.
Save with Borderless
Sign up with Borderless to learn everything you need to know about hiring in Indonesia. Our intuitive platform and dedicated team will make sure you take care of your new teammates and maintain compliance every step of the way. Book a demo today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
