Hiring in Indonesia with an EOR can help companies hire swiftly by removing the need to establish a legal entity in the country.  An EOR handles all administrative tasks related to employment, including payroll, tax, and benefits management, as well as regulatory compliance. 

As EORs take up the role of a primary employer, companies can focus on their core business functions, and rapidly scale their workforce in new markets. They handle the employee benefits adhering to the local labor laws. By using an EOR in Indonesia, companies can optimize their hiring process, and manage risks associated with international labor laws.

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The primary benefit of partnering with an EOR is that companies can hire employees 100% in compliance with Indonesian labor laws and employment regulations. For instance, Indonesian law requires employers to provide certain benefits, such as religious holiday allowance (THR), health coverage, and pension funds. EORs can take care of these aspects and reduce compliance risks. Further, EORs can also handle the aspect of Labor Unions and its regulations in Indonesia. They can help companies generate Collective Labour Agreements (CLA) recognized by the Manpower Law.

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Gloroots, a SaaS-driven EOR, simplifies your global expansion. Our platform enables fast employee onboarding, tax compliance, and payroll administration. We also assist with localized benefits and insurance plans for your global workforce which you can offer from the Gloroots platform to retain talent. In short, you can streamline operations and keep up with the changing compliance scenario with Gloroots as your trusted EOR partner in Indonesia.

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EOR costs generally include a setup fee and an ongoing management fee, which is often a percentage of the employee's salary. This fee typically ranges from 5-20% but can vary depending on the complexity of the services provided and the number of employees being managed.

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These fees usually cover a comprehensive suite of services, such as payroll administration, local labor law compliance, benefits administration, tax reporting, and more.

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EOR pricing in Indonesia can vary depending on the number of employees, the scope of services required, and the specific EOR provider. When considering EOR services, ensure getting custom pricing quotes to assess and choose the most suitable option for your business needs. 

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Gloroots’ pricing model is simple and provides optimum investment value. We manage admin tasks and legal compliances associated with employment. Gloroots offers a live dashboard that helps you track your Indonesian workforce’s expenses in real time. It also offers HR support and benefits management to the employees hired through EOR.

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Key Metrics For Foreign Employers

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With a strong economy, strategic location, and a young workforce, it's a hub of opportunities. benefit from its culture, diverse markets, and business-friendly environment. Leverage infrastructure development and embrace entrepreneurship. 

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Source: The Global Talent Competitiveness Index 2023

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Through Gloroots' Recrew platform, you can effortlessly connect with exceptional talent in Indonesia and effectively grow your team.

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Proper employee classification is crucial in Indonesia to avoid legal issues. Opt for a reliable PEO/EOR to safeguard your business. They ensure compliance, accurate classification, and smooth payroll. These experts also manage benefits for your workforce's protection. Trust them for employment tasks in Indonesia while you focus on your business.

Three major laws govern employment laws in Indonesia are governed:

• Labor Law of 2003 on Manpower as recently amended by Law No. 11 of 2020 on Job Creation and recently revoked by Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation;
• Law No. 21 of 2000 on Labor Union; and
• Law No. 2 of 2004 on Industrial Relations Dispute Settlement.

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EMPLOYMENT CONTRACT

Employers provide two kinds of employment contracts: fixed-term and indefinite-term contracts.

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Fixed-term contracts are for specific job roles and don't exceed 2 years. They require no probation period and must be in writing and in Indonesian.

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Indefinite-term contracts are for full-time employees and often include a 3-month probation.

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Contracts include:

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•  Employee's name, age, address, gender
•  Company's name, address, business type
•  Job title or role
• Work location
• Salary and payment details
• Employment terms, rights, obligations
• Start date, agreement details

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To ensure clarity, trust, and smooth employment, well-structured contracts are vital. Gloroots' Indonesian PEO and EOR solutions can handle contract creation for you.

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This might sound overwhelming, but it doesn't have to be. Gloroots eliminates these barriers for you. With Gloroots' Employer of Record offering, hiring and managing employees globally is a piece of cake.

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Get an overview of what you need to know when hiring in Indonesia. Contact us.

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Working Hours

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The total working hours must not exceed 40 hours in a single week. Employers are required to provide a rest period of at least half an hour to employees on working days after they have worked for four consecutive hours.

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Do note, that these working hour regulations may not be applicable to certain businesses. Work with a compliance expert or an EOR to get the best out of Indonesian talent and to stay compliant with local working hours regulations

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Overtime:

Employees are eligible for overtime compensation if they work over 7 hours daily. Employees must receive compensation for working on weekends and public holidays.

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Overtime pay is calculated at 1.5 times the regular hourly wage for the initial hour and doubles for every two hours thereafter.

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Minimum Wage:

The minimum wage requirement in Indonesia varies across regions, with Central Java setting it at 1,798,979 IDR and DKI Jakarta at 4,416,186 IDR, among others. Additionally, Indonesia has implemented labor law reforms, including the introduction of an hourly wage for part-time workers through Government Regulation 36 of 2021.

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To determine the hourly wage for part-time workers, a formula is applied: the monthly wage is divided by 126. Similarly, the daily wage can be calculated by dividing the monthly wage by 25 for a six-day workweek or by 21 for a five-day workweek.

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While employers and employees have the flexibility to negotiate their agreement, it is important to ensure that the final salary adheres to the minimum calculation provided by the aforementioned formulas.

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Public holidays

Indonesia observes 14 days of public holidays every year.

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Annual Leave:

In Indonesia, paid leave entitlement is specified in the employment contract, typically granting employees a minimum of 12 days of paid annual leave per year once they have completed one full year of employment. Additionally, employees who have worked continuously for six years with the same employer are entitled to one month of leave in their seventh year of service and another month of leave in their eighth year of service.

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Maternity Leave and Paternity Leave

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Female employees in Indonesia receive three months of fully paid maternity leave before the estimated due date and an additional one and a half months of leave after giving birth.

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The maternity leave is compensated at 100.00% of the regular salary rate.

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Paid Sick Leaves:

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In the event of illness or injury, employees in Indonesia are eligible for paid sick leave upon presenting a medical certificate. Long-term sick leave, lasting for more than one year, may be recommended by a doctor in writing.

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INCOME TAX

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Compensation for employees on extended sick leave is structured as follows:

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This ensures that employees on prolonged sick leave receive appropriate financial support throughout their recovery period.

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Termination Process:

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Terminating an employee should be carried out meticulously in Indonesia. 

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Before letting go of an employee, employers must try to find solutions and agreements, like adjusting schedules or giving extra training. If firing the employee becomes necessary, the reasons for the decision should be clearly explained in writing. If the employee thinks the firing is unfair, they can challenge it in the Labor Court.

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Employees can be fired for different reasons, like breaking the work agreement, being imprisoned, being sick for more than a year, or not coming to work without a good reason. It's important to know that not all reasons are about the employee's behavior. Employers might also have valid business-related reasons, like company changes, merging with another company, financial issues, or closing down the business permanently.

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Notice Period:

Typically, notice periods in Indonesia are set at 30 days, although employers have the option to stipulate longer notice periods in the employment contract.

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Severance Pay:

In Indonesia, the entitlement to severance pay is determined based on the employee's length of service:

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Probation Periods:

The probation period for permanent employees in Indonesia is set at three months.

Global hiring comes with challenges. From navigating employment laws to ensuring compliance with payroll processes, data protection regulations, and more. Setting up infrastructure abroad and staying updated on evolving compliance requirements can be overwhelming. 

Gloroots simplifies the process of cross-border hiring by offering a centralized solution. The EOR solution handles everything – from onboarding, payments, administrative activities, to tax compliance, and more. Our in-market expert team absorbs all employment and payroll related risks by providing compliant employment contracts, timely payments, and tailored benefits. In short, Gloroots lets you focus on finding the right talent while we handle the complexities. 

Contact our experts today to kickstart your global hiring campaign in Indonesia.

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Unlock growth in Indonesia with Gloroots as your trusted Employer of Record (EOR). We handle payroll, tax, benefits, and compliance, letting you focus on employees and company growth. Partner with Gloroots' Indonesia EOR for streamlined operations and compliance with employment laws. We manage cross-border complexities, ensuring a smooth expansion. Focus on talent and team growth while we handle compliance and payroll. Trust Gloroots to navigate Indonesia's labor market and unlock your business potential.

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