Country Overview
Indonesia is the world’s largest archipelago, comprising over 17,000 islands with a rich cultural tapestry and diverse landscapes. Living in Indonesia offers a blend of vibrant city life and relaxed tropical living — from the fast-paced capital of Jakarta to the tranquil beaches of Bali and the historic temples of Yogyakarta. Major urban centres like Jakarta, Surabaya, and Bandung are economic hubs with growing opportunities, while regions such as Bali cater to tourism and digital nomads with a more laid-back atmosphere.
Indonesia has a population of approximately 288 million and is home to around 168,000 foreign work permit holders. The economy is diverse — with significant contributions from manufacturing, mining, agriculture, financial services, and a fast-growing digital sector. All non-Indonesian nationals require a proper work visa and stay permit (KITAS) before performing any paid work, and Indonesia operates a sponsor-based work permit system administered by the Ministry of Manpower.
*This guide is intended for general informational purposes only and should not be viewed as legal or tax advice. The information discussed may change frequently, and Access Financial cannot guarantee that all content remains current at all times.
2026 Key Legislative Updates
Jakarta’s 2026 provincial minimum wage (UMP) rises 6.17% to IDR 5,729,876/month under Government Regulation No. 49/2025. New wage formula uses inflation + (economic growth × alpha 0.5–0.9). Mandatory Tapera public housing savings (3% total) phased in for private employers. Full transition to e-Visa / e-ITAS system via evisa.imigrasi.go.id.
Contracts
Indonesian employment contracts define the type, duration, notice, pay, and benefits of the engagement. Under the Manpower Law (as amended by the Job Creation Law and its implementing regulations), all employees are entitled to a written agreement that clearly sets out the terms of work.
Contract Types
| Contract Type | Duration | Key Features |
|---|---|---|
| Permanent (PKWTT) | Indefinite | Open-ended; full statutory benefits and severance entitlements; probation up to 3 months permitted |
| Fixed-Term (PKWT) | Up to 5 years (incl. extensions) | Defined end date; no probation period allowed; completion compensation due on contract end |
| Daily / Casual | Project-based | For irregular work; converts to PKWTT if worker exceeds 21 days/month for 3 consecutive months |
| Outsourcing | Via licensed vendor | Permitted only for non-core business activities; vendor must hold a valid licence |
PKWT to Permanent — 5-Year Rule
If a fixed-term contract (PKWT) runs for more than 5 years continuously (including extensions), it automatically converts to a permanent (PKWTT) contract. PKWT contracts may not include a probation period — any probation clause inserted into a fixed-term agreement is void by law.
What Your Contract Must Include
Mandatory Provisions
- Job title and description of duties
- Start date and contract duration (if PKWT)
- Salary or pay rate and pay frequency
- Working hours and place of work
- Annual leave entitlement
- Notice period (both sides)
- Reference to company regulations (PP) or CLA
- BPJS social security details
Common Additional Clauses
- Confidentiality / NDA provisions
- Intellectual property assignment
- Restrictive covenants (limited enforceability)
- THR (religious holiday bonus) clause
- Bonus and commission structure
- Transport, meal, and housing allowances
- Disciplinary and grievance procedure reference
Working Hours & Overtime
Standard full-time hours in Indonesia are 40 hours per week, organised either as 8 hours per day over a 5-day week or 7 hours per day over a 6-day week. Overtime is permitted only with written employee consent and is capped at 4 hours per day and 18 hours per week (excluding rest days and public holidays). Overtime pay is calculated on an hourly rate of 1/173 of the monthly wage.
| Parameter | Rule | Notes |
|---|---|---|
| Standard hours | 40 hrs/week | 8 hrs × 5 days or 7 hrs × 6 days |
| Overtime cap | 4 hrs/day, 18 hrs/week | Excludes work on rest days/public holidays |
| Written consent | Required | Employer must obtain employee’s written agreement |
| Rest break | 30 min per 4 hrs | Mandatory after 4 hours of continuous work |
| Weekly rest | 1 or 2 days | 2 days for 5-day week; 1 day for 6-day week |
| Overtime rate (weekday) | 1.5× then 2× | 1.5× first hour; 2× from second hour onward |
| Overtime rate (rest day/holiday) | 2× / 3× / 4× | Tiered rates apply for hours 1–8, 9, and 10–11 |
Access Financial drafts Indonesian-compliant employment contracts and manages onboarding for EOR engagements.
Working Hours & Overtime
Indonesia’s Manpower Law sets the working hours framework. Overtime requires written consent and the employer must provide food and beverage for shifts exceeding three hours of overtime.
| Parameter | Rule | Notes |
|---|---|---|
| Standard weekly hours | 40 hrs | 5-day or 6-day workweek |
| Standard daily hours | 7 or 8 hrs | Depends on 5-day vs 6-day pattern |
| Overtime daily cap | 4 hrs | Cannot be waived |
| Overtime weekly cap | 18 hrs | Excludes rest day/holiday work |
| Rest break | 30 min | After 4 hours of continuous work |
| Weekly rest | 1–2 days | Saturday/Sunday for 5-day week |
| Meal allowance during OT | Required | Employer must provide food/drink for OT > 3 hrs |
Government Regulation 49/2025 — New Wage Formula
The 2026 provincial minimum wage formula is inflation + (economic growth × alpha), with alpha now ranging 0.5–0.9 (up from 0.1–0.3). Average UMP increase across provinces is 5–8%.
Probation Period
Probation (masa percobaan) is available only for permanent contracts (PKWTT) and is capped by law at 3 months. Fixed-term contracts (PKWT) cannot include a probation period.
| Parameter | Standard practice | Legal notes |
|---|---|---|
| Statutory maximum | 3 months | Permanent (PKWTT) contracts only |
| Probation in PKWT | Not allowed | Any probation clause in PKWT is void |
| Notice during probation | Minimal (per contract) | Typically no severance owed if terminated |
| Pay during probation | At least UMP/UMK | Cannot be below the applicable minimum wage |
| Day-one statutory rights | Full | Minimum wage, BPJS, safety, anti-discrimination |
Immigration & Work Visas
Nearly all foreign nationals require a visa to reside and work in Indonesia. Visa-free entry and Visa on Arrival (VoA) are available for short tourism or business meetings, but neither permits paid work. Working on a tourist or VoA permit can result in fines, detention, and deportation.
e-Visa & e-ITAS — Full Digital System
Indonesia has fully transitioned to the e-Visa system via evisa.imigrasi.go.id. Work permits (e-ITAS, index E23) are now issued digitally and linked to the holder’s passport. New Multiple Entry visas (D1 tourism, D2 business) are also available for regular travellers.
Key Visa Routes
| Visa Route | Sponsor | Duration | Notes |
|---|---|---|---|
| Work e-ITAS (E23) | Indonesian entity / EOR | 6–12 months; extendable | Standard work visa; tied to specific role and employer |
| Intra-Company Transfer | Local subsidiary | Up to 5 years total | Uses standard work KITAS process |
| Investor KITAS | Self (via PT PMA) | 1 or 2 years | For directors/shareholders of foreign-owned company |
| Remote Worker (E33G) | No local sponsor | 1 year | Digital Nomad Visa; income from abroad only; min. USD 60,000/yr |
| Family/Spouse KITAS | Indonesian spouse / KITAS holder | 1–2 years | Residence only; separate permit needed for work |
| Retirement KITAS | No employer | 1 year; renewable | Age 55+; no employment permitted |
| Cost item | Amount | Notes |
|---|---|---|
| DKPTKA Levy (skill development fund) | USD 100/month | Paid by employer per foreign worker |
| e-ITAS issuance (1 year) | ~USD 110 | Government fee; varies by validity |
| Multiple-entry re-entry permit | ~USD 35–50 | Required to leave/re-enter on KITAS |
| RPTKA approval | Employer cost | Approval from Ministry of Manpower required first |
AF’s immigration team supports contractors and professionals relocating to Indonesia. We handle RPTKA, e-ITAS, work permits, and family dependants.
Leave Entitlements
Indonesian statutory leave is set by the Manpower Law and its implementing regulations. Many professional employers offer enhanced leave packages above the legal floor.
Annual Leave
| Parameter | Entitlement | Notes |
|---|---|---|
| Statutory minimum | 12 days/yr | After 12 months of continuous service |
| Market standard (professional) | 15–20 days | Multinationals and senior roles offer more |
| Long-service leave | 1 month every 6 yrs | Customary in long-tenure roles; subject to company regulations |
| Carry-over | 6 months | Unused leave can be carried for 6 months after accrual |
Parental Leave
| Leave type | Duration | Pay | Notes |
|---|---|---|---|
| Maternity | 3 months | 100% of salary | 1.5 months before + 1.5 months after birth |
| Extended Maternity (Law 4/2024) | Up to 6 months | 100% then 75% | Granted in cases of special medical need; first 3 months full pay, next 3 at 75% |
| Paternity | 2 days (statutory) | 100% of salary | Some employers offer enhanced 5–10 days |
| Miscarriage leave | 1.5 months | 100% of salary | With medical certificate |
| Menstrual leave | 1–2 days/month | Per company policy | Optional; subject to medical certification |
Sick Leave
| Duration of illness | Pay |
|---|---|
| First 4 months | 100% of salary |
| Months 5–8 | 75% of salary |
| Months 9–12 | 50% of salary |
| After 12 months | 25% until termination |
Public Holidays 2026
Indonesia has 17 national public holidays in 2026, plus 8 collective leave days (cuti bersama). Dates of religious holidays are set by joint ministerial decree each year.
| Date | Day | Holiday |
|---|---|---|
| 1 January | Thursday | New Year’s Day |
| 17 February | Tuesday | Chinese New Year (Imlek) |
| 17 March | Tuesday | Isra Mi’raj |
| 19 March | Thursday | Nyepi (Balinese Day of Silence) |
| 3 April | Friday | Good Friday |
| 5 April | Sunday | Easter Sunday |
| 1 May | Friday | Labour Day |
| 14 May | Thursday | Ascension Day |
| 21–22 May | Thu–Fri | Eid al-Fitr (Idul Fitri) |
| 1 June | Monday | Pancasila Day |
| 2 June | Tuesday | Vesak (Waisak) |
| 27 July | Monday | Eid al-Adha (Idul Adha) |
| 17 August | Monday | Independence Day |
| 17 August | Monday | Islamic New Year |
| 26 October | Monday | Prophet Muhammad’s Birthday (Maulid) |
| 25 December | Friday | Christmas Day |
Notice Periods
Indonesian labour law requires a minimum 30-day notice for resignation. Termination by the employer follows a structured process involving notification, negotiation, and (where unresolved) referral to the Industrial Relations Court.
| Scenario | Notice | Notes |
|---|---|---|
| Resignation by employee | 30 days | Must be in writing; statutory minimum |
| Termination by employer | 14 working days | Written notice before termination; employee may object within 7 days |
| Probation termination | Per contract | Typically immediate or short notice; no severance |
| Mutual agreement | By agreement | Usually documented in a separation agreement |
| End of PKWT | No notice required | Contract ends on its stated end date; completion compensation due |
Termination & Severance
Indonesia provides comprehensive employee protections. Termination must follow a fair process and the employer must generally pay a combination of severance pay (uang pesangon), service appreciation pay (uang penghargaan masa kerja), and compensation of rights (uang penggantian hak).
| Years of service | Severance (uang pesangon) | Service appreciation |
|---|---|---|
| Under 1 year | 1 month wage | — |
| 1–2 years | 2 months | — |
| 2–3 years | 3 months | — |
| 3–4 years | 4 months | 2 months |
| 4–5 years | 5 months | 2 months |
| 5–6 years | 6 months | 2 months |
| 6–9 years | 7–8 months | 3 months |
| 9+ years | 9 months | 4–10 months (scales with service) |
PKWT Completion Compensation
For fixed-term contracts, the employer must pay a completion compensation equal to 1 month’s wage per 12 months of service (pro-rated). Early termination by the employer requires payment of the remainder of the contract value.
Income Tax
Indonesia’s tax year is the calendar year. Employees are taxed under the PPh 21 PAYE system — employers withhold tax monthly via payroll. Residents (183+ days in Indonesia) are taxed on worldwide income; non-residents pay a flat 20% on Indonesian-source income.
Income Tax Bands 2026
| Band | Annual Taxable Income (IDR) | Rate |
|---|---|---|
| Band 1 | Up to 60 million | 5% |
| Band 2 | 60m – 250 million | 15% |
| Band 3 | 250m – 500 million | 25% |
| Band 4 | 500m – 5 billion | 30% |
| Band 5 | Above 5 billion | 35% |
PTKP — Personal Tax-Free Allowance
Standard PTKP is IDR 54 million/year for a single individual. Add IDR 4.5m for a non-working spouse and IDR 4.5m for each dependent child (max 3). Annual tax return (SPT) is due by 31 March via DJP Online.
VAT (PPN)
| Rate | % | Applies to |
|---|---|---|
| Standard | 12% | Most goods and services (from 2025) |
| Zero-rated | 0% | Exports of goods and certain services |
| Exempt | — | Basic food staples, health, education, financial services |
| Registration threshold | IDR 4.8 billion | Annual turnover above which PPN registration is mandatory |
Let Access Financial handle your Indonesian payroll — seamlessly and compliantly, with local specialists on call.
Benefits
Indonesian statutory benefits cover health, retirement, and religious holiday entitlements. Competitive employers layer supplemental benefits — particularly private medical and allowances — to attract and retain professional talent.
Mandatory Statutory Benefits
| Benefit | Rate / Amount | Notes |
|---|---|---|
| Tunjangan Hari Raya (THR) | 1 month salary | Paid 7 days before religious holiday; pro-rated if < 12 months |
| BPJS Kesehatan | 5% total | 4% employer + 1% employee; capped at IDR 12m |
| BPJS Ketenagakerjaan | ~9–10% total | JHT, JP, JKK, JKM combined |
| Annual Leave | 12 days/yr | After 12 months continuous service |
| Maternity Leave (paid) | 3 months | 100% of salary; up to 6 months under Law 4/2024 |
| Severance Pay | Up to ~32 months | Including service appreciation and rights compensation |
Market-Standard Supplemental Benefits
| Benefit | Prevalence | Typical provision |
|---|---|---|
| Private Medical Insurance | Standard for professional roles | Allianz / AIA / Cigna / Mandiri Inhealth |
| Transport Allowance | Very common | Fixed monthly or company shuttle |
| Meal Allowance | Very common | Per working day or canteen-provided meals |
| Housing Allowance | Common for senior expats | Cash allowance or direct rent payment |
| Child Education Allowance | Common in oil/gas, mining | International school fees covered |
| Hybrid / Flexible Working | Growing | Particularly in tech and professional services |
Pension System
Indonesia operates a multi-pillar system: BPJS Ketenagakerjaan provides the Old Age Savings (JHT) lump sum and the Pension (JP) monthly benefit; on top of this, employers may offer voluntary defined-contribution or defined-benefit plans (DPLK / DPPK).
| Parameter | 2026 | Notes |
|---|---|---|
| JHT contribution (total) | 5.7% | 3.7% employer + 2% employee |
| JHT withdrawal | At retirement (age 56) or on permanent departure | Foreigners may withdraw full balance on KITAS cancellation |
| JP contribution (total) | 3% | 2% employer + 1% employee |
| JP salary cap | IDR 11,086,300/month | Updated March 2026 (from 10,547,400) |
| JP eligibility (foreigners) | Generally excluded | JP is for Indonesian citizens; expats may opt out |
| Retirement age | 58 (2026) | Rising to 65 by 2043 under PP 45/2015 |
| Voluntary pension (DPLK) | Optional | Tax-advantaged supplementary fund |
Insurances
Mandatory and recommended insurances for employers, employees, and contractors in Indonesia.
| Insurance | Required cover | Required by |
|---|---|---|
| BPJS Kesehatan (Health) | Mandatory enrolment | Law 24/2011 — all employers and KITAS holders |
| BPJS Ketenagakerjaan (Workforce) | JKK + JKM + JHT mandatory | Manpower Law & Law 24/2011 |
| Motor Third-Party Liability | Mandatory minimum | Road Traffic Law |
Professional Indemnity Insurance — Contractors
Often contractually required by end-clients in finance, technology, and engineering consulting. Indonesian PI cover is available through international and local insurers. AF can advise on appropriate cover for your sector and assignment.
Private Health Insurance
| Provider | Typical monthly premium | Type |
|---|---|---|
| Allianz Indonesia | IDR 1.0–2.5m (individual) | Comprehensive; international hospitals |
| AIA Indonesia | IDR 800k–2.0m (individual) | Comprehensive |
| Mandiri Inhealth | IDR 600k–1.5m (individual) | Network-based; group plans common |
| Cigna Indonesia | IDR 1.2–3.0m (individual) | International / expat-focused |
AF Solutions
Access Financial supports end-clients, recruitment agencies, and employees operating in Indonesia — from work permit sponsorship and payroll to compliance and ongoing local support.
For End-Clients
Managing a contingent workforce can be complex. Our solutions streamline workforce management, making it simple, compliant, and cost-effective.
For Recruiters
We offer a complete suite of services, allowing you to simply, compliantly, and efficiently place your candidates internationally, with minimum fuss.
For Contractors
Focus on what you do best and let us take care of your payroll, tax compliance, social security, and immigration needs.
Free Consultation
FAQ
Find answers to our most frequently asked questions below.
What solutions do you offer in Indonesia?
In Indonesia, Access Financial provides one compliant engagement model:
Employed/EOR (umbrella): We become the legal employer of your employees in Indonesia. Your business retains full control of the day-to-day work and deliverables, while we carry the employment, payroll, and tax liability.
When should a company consider using an EOR?
An EOR is especially useful in a range of scenarios. It is the most efficient route when you want to convert existing contractors into compliant employees and reduce misclassification risk, or when you need to hire talent in a country where you do not have a local entity. It also allows you to onboard quickly without going through a lengthy and complex company registration process, while ensuring full compliance with local employment law, payroll, and tax regulations. Beyond these core use cases, an EOR is equally valuable when you are testing a new market before committing to a long-term investment, or when you simply need temporary or project-based hires abroad.
Can we hire both local nationals and foreign employees through an EOR?
Yes. Our EOR services cover both local nationals and foreign hires. For foreign nationals, additional visa or work permit requirements apply, and we can support the application process end-to-end — including sponsorship in jurisdictions where we hold the relevant licence.
Is permanent establishment (PE) risk avoided?
An EOR is a third-party business that legally employs international workers on your behalf, creating a clear layer of separation between your company and the staff based in other countries. The EOR becomes the legal employer for those workers, so although the employees continue to deliver services to your business, the legal distancing helps mitigate many common PE risks. That said, PE is determined by the facts on the ground (the nature of the activity, contract-signing authority, where revenue is generated, and so on), not solely by who issues the payslip. We therefore recommend reviewing each engagement with our specialists to confirm the appropriate structure.
What is your pricing model?
Our standard management fee is 5% of the contract value, with a minimum of €550. We also offer volume discounts on bulk engagements. To discuss pricing for your specific scenario, please get in touch with our team here: https://accessfinancial.com/#get-started.
Social Insurance (BPJS)
Indonesia operates two main social security agencies: BPJS Kesehatan (national health insurance) and BPJS Ketenagakerjaan (workforce social security covering accidents, death, old-age savings, pension, and unemployment).
2026 Change — Tapera (Public Housing Savings)
From 2026, Tapera contributions become mandatory for private-sector employees at 3% of salary (employer 0.5% + employee 2.5%). The Pension (JP) salary cap also rose to IDR 11,086,300/month in March 2026.
Employer Contributions
Employee Contributions