Indonesia PEO Services

Hiring in Indonesia

Working in Indonesia appears not as tense as in many other countries.  Companies in Indonesia tend to adopt a more hierarchical structure.  Therefore, employees are used to working as a group rather than as individuals.  Their communications are also often more subtle and indirect. For example, one may not always take the word “yes” to mean “agree” or the word “no” to mean ‘disagree’.

Indonesia PEO Services

Employment Contracts

Employment contracts in Indonesia must be written in Bahasa Indonesia or bilingually in both English and Indonesian. A contract must contain provisions for compensation, benefits, and termination of employment and the currency used is usually Indonesian Rupiah. There are two types of employment agreements in Indonesia, fixed term contracts and unspecified term contracts. The maximum term for a fixed term contract is 5 years.


Working Hours in Indonesia

Working hours in Indonesia 40 hours per week. It can be 7 hours for a 6-day week or 8 hours in a 5-day week. Overtime will be compensated as 1.5 times of regular pay for the first hour and double of regular pay thereafter. Allowable maximum overtime work is 3 hours per day and 14 hours per week. Employer requesting an employee to work overtime must provide a written notice to the employee.

Holidays in Indonesia

Here is the list of public holidays in Indonesia:

  • New Year’s Day
  • Chinese New Year
  • “Nyepi” Bali Hindu New Year
  • Good Friday
  • Labor Day
  • Ascension Day of Jesus Christ
  • Ascension Day of the Prophet Muhammad
  • Buddhist Holy Day of Waisak
  • Ascension Day
  • Eid al-Fitr
  • Independence Day
  • Idul Adha
  • Islamic New Year
  • Birthday of the Prophet Muhammad
  • Christmas Day

Vacation Days

Indonesian employees are entitled to 12 days of annual leave per year. In addition, there is a tradition of “Cuti Bersama” or “taking leave together”. The purpose is to encourage domestic tourism to improve the efficiency of civil servants. “Cuti Bersama” mostly occurs in the between of public holidays and weekends. For example, if Thursday is a public holiday, the government may designate Friday as a “Cuti Bersama” day.  Under this arrangement, employees may enjoy a full vacation from Thursday to Sunday. “Cuti Bersama” are not fixed dates but are simply announced by the government.

Sick Leave

In Indonesia, employees taking sick leave will have their salaries paid in full by the employer. However, prolonged absence due to illness may result in deduction of employee’s salary.  As such, deduction rate is based on the duration of the absence.  An employer may also terminate an employee who has been absent for 12 months.

Maternity/Paternity Leave

Female employees are entitled to 3 months of paid maternity leave, 1.5 months each before and after giving birth.  In case of miscarriage, a female employee will be entitled to 1.5 months paid leave or as specified by a doctor.  Male employees are entitled to two days of paid paternity leave.

Leave for Family Occasions

Three days of paid leave will be available to an employee for marriage. Besides, two days of paid leave will apply to these occasions :

  • Marriage of the employee’s child
  • Circumcision of the employee’s child
  • Baptism of the employee’s child
  • Death of the employee’s child

Employers have an obligation to pay full salary in these occasions But this does not apply to any allowance in relation to attendance to work.

Health Insurance in Indonesia

Employers in Indonesia must enrol their employees, local or expatriate, to the government health care system.


Known as “THR”, the 13th month salary of a year considered as allowance for religious holidays, is mandatory in Indonesia. To cater for the Muslim tradition, THR is normally paid a week before Idul Fitri (the end of Ramadhan). Some companies may choose to pay THR to non-Muslim employees at the end of the year.

Employees who have worked for less than a year in a company will get a prorated amount.


Probation / Termination / Severance

A probationary period of up to 3 months may be specified for an employment contract for an unspecified period of time. It does not apply to a fixed term contract.

While no notice period is required for employers, employees have to give a 30-dary notice when tendering resignation.

There are various payments which may arise upon end of employment :

Standard Severance Payment

One month’s salary for employees who have worked for less than one year, plus an additional one-month salary for each year of service, up to a maximum of nine month’s salary.

Long Service Payment

Two months’ salary for the first three years of service, plus an additional one month’s salary for every three years of service thereafter up to 21 years, with a maximum of 10 month’s salary for a service of 24 years or more.

Compensation Payment

  • Unexpired annual leave not yet taken
  • Relocation expenses
  • Medical and housing allowance
  • Other benefits provided in the employment contact, company regulation, or the CBA
  • Other compensation amounts as determined by the Industrial Relations Court

Separation Payment

  • As governed by the employment contract

There are also 5 termination reasons for which employers need only pay the compensation owed to employees.  Under those cases, there is no need for making severance or separation payment :

  • Resignation of employees on their own accord
  • Grave misconduct
  • Absence due to sickness for more than 12 months
  • Disability due to work-related accident
  • Five days of missing work

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