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Labor law in
Indonesia.

SALARY PAYMENT IN Indonesian Rupiah (IDR, Rp)

CONTRACT LANGUAGES Bahasa Indonesia / English

PAYROLL TAX 10.24% – 11.74%

PAYROLL CYCLE Monthly

TIME TO HIRE 12 hours

Notice period law in Indonesia

The standard notice period in Indonesia is 30 days. During probation periods (only possible on indefinite-term contracts), the minimum notice is seven days.

Severance laws in Indonesia

Employers may need to pay both severance and ‘service appreciation’ payments when dismissing employees, depending on the employee’s length of service.

Severance pay (salary = basic salary + all allowances):

  • 0 to 1 years’ employment → 1 month’s salary  
  • 1 to 2 years’ employment → 2 months’ salary 
  • 2 to 3 years’ employment → 3 months’ salary 
  • 3 to 4 years’ employment → 4 months’ salary 
  • 4 to 5 years’ employment → 5 months’ salary 
  • 5 to 6 years’ employment → 6 months’ salary 
  • 6 to 7 years’ employment → 7 months’ salary 
  • 7 to 8 years’ employment → 8 months’ salary 
  • Above 8 years’ employment → 9 months’ salary 

Service appreciation pay (a reward for services rendered):

  • 3 to 6 years’ employment → 2 months’ salary 
  • 6 to 9 years’ employment → 3 months’ salary 
  • 9 to 12 years’ employment → 4 months’ salary 
  • 12 to 15 years’ employment → 5 months’ salary 
  • 15 to 18 years’ employment → 6 months’ salary 
  • 18 to 21 years’ employment → 7 months’ salary 
  • 21 to 24 years’ employment → 8 months’ salary 
  • Above 24 years’ employment → 10 months’ salary 

Hiring in Indonesia, Made Easy

Your business can easily hire employees in Indonesia without opening a local entity. We handle local employment law, complex tax regulations, and international payroll in 180+ countries worldwide. All you need to do is focus on your business.

FAQs

The principal legislation that governs Indonesian employment law is Law No. 13 of 2003 on Employment (Employment Law)

It is possible to terminate an employee during the probation period in Indonesia. Employers must give a 7 day notice in such cases.

In many cases, employers will hire on a fixed-term contract, which would not include a probation period.

For fixed-term contracts, there is no probation period. In cases where termination is appropriate, there is a minimum 1 month notice period required, or payment in lieu of notice.

An employee can terminate employment during their probationary period in Indonesia. They must provide 7 days of notice.

In many cases, the employee would be hired on a fixed-term contract; in such cases, employees must provide a minimum 14 day notice period when resigning.

Terminating employment in Indonesia after the probationary period is often a complicated process. In all cases of early termination (i.e. termination of a fixed-term contract before the end of the contract period), the reason must be justified. Legitimate reasons would include:

  • Absence for more than 5 days after 2 summons
  • Violation of employment agreement and after 3 warnings
  • Imprisonment for more than 6 months
  • Grave wrongdoings (Stealing of goods, falsification of information, drunkenness, immorality, intimidation or persuasion to do something illegal of colleagues; destruction of property, exposed colleague to danger, leaking of company secrets, or commission of criminal acts)
  • Retirement of the employee
  • Death or occupational accident or illness for more than 12 months

If the reason is justified, the termination procedure follows:

  1. Provide written notice. Simple Termination Letter sent by email with confirmation of receipt
  2. Await employee’s reply. Employees may accept or reject the termination.
    1. If the employee does not reject termination, then the termination is confirmed after the notice expiration. Go to step 3.
    2. If the employee rejects termination within 7 days after receiving notification letter:
      1. Negotiation (between employer and employee/Labor Union if member) and mutual agreement within 30 days after rejection
        1. If the negotiations are successful: the termination proceeds as determined during the negotiation. Go to step 3.
        2. If the negotiations are unsuccessful, the employer must request permission from the institute for settlement of industrial relation disputes. If that is successful, the termination proceeds as determined. Go to step 3.
          1. If permission to terminate is rejected at this stage, the termination will then be disputed in court where a final determination will be made.
  3. Employer reports termination. The employer then reports the termination to the ministry (provincial and district offices) responsible for government affairs related to manpower. 
  4. Due payment. The employer then makes all appropriate payments, which could include:
    1. Severance / Service appreciation pays, if applicable
    2. Accrued untaken leave days
    3. Termination Bonus, if written in employment agreement
    4. Any other payments required
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