How to hire employees in Indonesia

Indonesia presents Southeast Asia's largest consumer market and labor force of 153 million workers, with 145.8 million employed as of early 2026. Strategic location spanning 17,000+ islands, competitive labor costs, and growing tech and manufacturing sectors position Indonesia as a prime expansion target.

But market size doesn't equal straightforward hiring.

Early missteps in employment contract structure, work permit applications, or severance calculations trigger labor disputes, Ministry of Manpower penalties, and expansion delays that compound with scale.

Hiring employees in Indonesia requires:

• Clarity on hiring models (PT entity vs. representative office vs. EOR vs. contractor)
• Mandatory employer obligations under Indonesian Labor Law
• Work permit requirements and local worker ratios
• Severance and termination benefit calculations
• Legal distinctions separating compliant employment from misclassification risk

This guide walks you through each step: choosing the right hiring model, understanding work permit processes, managing BPJS payroll compliance, navigating severance obligations, and avoiding compliance traps that catch unprepared employers off guard.

Core truth: Hiring employees in Indonesia requires navigating local worker prioritization laws, complex severance formulas, and work permit quotas. One permit violation or severance miscalculation costs more than doing ten hires correctly.

What Are Your Employment Options When Hiring in Indonesia?

Before posting a job or sponsoring a work permit, decide how you'll employ talent. Foreign companies typically choose between four models: establishing a local PT entity, setting up a representative office, partnering with an Employer of Record (EOR), or engaging contractors. Each has distinct implications for compliance risk, cost structure, operational scope, and work permit capabilities.

PT entity setup → means full legal presence. Register an Indonesian limited liability company, handle all employer obligations directly, including work permits, and bear complete liability.

EOR hiring → outsources employment compliance and work permit sponsorship to a third-party legal employer while you retain operational control over daily work.

Contractor engagement → treats individuals as independent service providers, not employees. But only when the relationship genuinely reflects independence under Indonesian law.

The stakes extend beyond administrative complexity. Misclassifying an employee as a contractor triggers back payments for severance, social security contributions, and potential Ministry of Manpower sanctions. Setting up a PT entity takes 3-6 months and costs USD 5,000-15,000+, including notary fees, Ministry of Law and Human Rights registration, tax registration, and paid-up capital requirements (minimum IDR 10 billion for certain sectors, though reduced thresholds apply for small-medium enterprises).

Choosing the wrong model doesn't just slow hiring. It creates legal exposure and operational restrictions that multiply with every employment contract.

1. Hiring Through a Local Entity

Establishing a PT gives you direct control over employment, work permit sponsorship, payroll, and benefits administration. You become the legal employer. Full responsibility for Labor Law compliance, BPJS registration, income tax withholding, severance accruals, and Ministry of Manpower filings.

This model makes sense when:

• You're committing to long-term commercial operations in Indonesia
• Hiring at scale (typically 10+ local employees)
• You need to generate revenue and conduct business activities directly
• You require intellectual property ownership and operational infrastructure locally

The trade-off: PT formation requires minimum paid-up capital (varies by sector and business activity), Indonesian director requirements for certain structures, ongoing legal and accounting support, and locks you into administrative obligations, including annual audits, tax filings, and Ministry reporting, even if hiring slows.

2. Hiring Through an Employer of Record (EOR)

An EOR becomes the legal employer in Indonesia while you direct the employee's day-to-day work. The EOR handles employment contracts (in Indonesian language), work permit applications, payroll processing, BPJS enrollment and contributions, income tax withholding, severance accruals, and Ministry of Manpower compliance.

You maintain operational control. They absorb legal liability and sponsorship obligations.

EOR hiring suits:

• Companies are testing the Indonesian market before entity commitment
• Scaling quickly (hires live in 4-6 weeks, including work permit processing for expatriates)
• Expanding into Indonesia without establishing PT entities
• Hiring local Indonesian talent without work permit complexity

It's not a workaround. It's a legitimate employment model under Indonesian law, ideal when speed, compliance assurance, work permit capability, and low upfront cost matter more than direct entity ownership.

3. Hiring Independent Contractors

Contractors are appropriate for project-based work, specialized consulting, or genuinely independent engagements. Indonesian law distinguishes employees from contractors based on control, integration into business operations, continuous work relationships, and economic dependence. Not what the contract says.

Misclassification happens when companies treat contractors like employees:

• Setting their working hours and requiring office presence
• Providing equipment, workspace, and company email
• Directing how work is performed (not just deliverables)
• Maintaining ongoing relationships beyond specific projects
• Expecting exclusive availability

Indonesian labor courts interpret ambiguous relationships as employment, triggering retroactive severance obligations calculated under statutory formulas (which can reach 9+ months of salary for long-tenured workers).

Local Entity Vs EOR Vs Independent Contractor: Side-by-Side Comparison

What Are The Legal Requirements for Hiring in Indonesia?

Indonesian employment law is governed by Law No. 6 of 2023 (Job Creation Law or Omnibus Law), which updated the previous Law No. 13 of 2003. This framework introduced significant changes, including streamlined business licensing, revised severance calculations, expanded outsourcing provisions, and modified fixed-term contract rules.

The law applies to all private sector employees nationwide, with provincial and district governments setting regional minimum wages annually.

Key employer obligations:

• Register the company with the Ministry of Manpower
• Obtain a business identification number through the OSS system
• Provide written employment contracts in the Indonesian language
• Register employees with BPJS employment social security and BPJS healthcare
• Maintain accurate payroll records and personnel files
• Withhold and remit progressive income tax
• Comply with working time regulations (40 hours/week, 8 hours/day standard)
• Provide mandatory benefits, including religious holiday allowance, annual leave, and severance for terminations
• Sponsor work permits for foreign employees
• Maintain local-to-foreign worker ratios as mandated by the sector

Indonesia's enforcement environment is active. The Ministry of Manpower conducts labor inspections. Employees can file complaints through the labor courts. Non-compliance with employment contracts, BPJS registration, or severance calculations results in administrative sanctions, back payment orders, and potential criminal charges for serious violations.

The presumption strongly favors employee protection and local worker prioritization, not employer flexibility.

What Are the Employment Contract Rules in Indonesia?

Written employment contracts are legally mandatory and must be prepared in the Indonesian language. Foreign-language contracts without Indonesian translations carry no legal weight. The contract must be signed before the employee begins work and registered with the local Manpower Office.

Contracts must clearly specify:

• Employer and employee details (full names, addresses, identification numbers)
• Job title and detailed description of duties
• Contract type (indefinite or fixed-term)
• Work location
• Employment start date
• Probation period (if applicable, indefinite contracts only)
• Salary and allowances breakdown
• Working hours and days
• Benefits and entitlements
• Termination notice provisions

Types of Employment Contracts

Indefinite-term contracts are the default for permanent, ongoing employment. They continue until lawfully terminated by either party with proper procedures and severance calculations.

Fixed-term contracts are permitted only for:

• Temporary work of limited duration
• Seasonal work
• Work related to new products, activities, or additional products is still in the experimental phase
• Work outside the company's normal business activities

Maximum duration is 5 years total (including any extensions) per Constitutional Court Decision No. 168/PUU-XXI/2023. Exceeding this limit or using fixed-term contracts for permanent work automatically converts the contract to indefinite status.

Fixed-term contracts cannot include probationary periods (probation only allowed in indefinite contracts).

Full-time employment follows standard 40-hour workweeks (8 hours/day for 5-day weeks, or 7 hours/day for 6-day weeks). Overtime is compensated at 1.5x hourly rate for the first hour, 2x for subsequent hours on workdays; 2x for the first 7 hours, 3x for the 8th hour on rest days.

Part-time arrangements require proportional salary and benefits calculations.

Probationary clauses (indefinite contracts only) allow employers to assess new hires during the first 3 months maximum, with specific termination rules during this window.

What to Include in an Offer Letter?

Employment offers must specify the job title, duties, reporting structure, work location, and contract type.

Essential contract elements:

• Basic monthly salary (meeting or exceeding provincial minimum wage)
• Fixed allowances (transport, meals, housing if provided)
• Variable allowances (performance bonuses, commissions if applicable)
• Working hours and weekly schedule
• Annual leave entitlement (minimum 12 working days per year after 1 year of service)
• Sick leave provisions (as per Labor Law standards)
• Religious holiday allowance (1 month's salary paid before a major religious holiday)
• BPJS enrollment details (healthcare and employment insurance)
• Severance calculation method (for indefinite contract terminations)
• Probation period terms (indefinite contracts only, maximum 3 months)
• Notice period requirements

Clarity matters. Ambiguous job descriptions, unclear salary components, or missing mandatory benefits create disputes during terminations when severance calculations become contested. Indonesian labor courts interpret contract ambiguities in favor of employees, particularly regarding severance entitlements.

NDAs and Confidentiality Agreements

Confidentiality clauses are enforceable under Indonesian law, particularly when protecting trade secrets, client information, proprietary processes, or business strategies. Intellectual property (IP) created during employment typically belongs to the employer unless otherwise specified.

Post-employment non-compete clauses face legal ambiguity in Indonesia. While not explicitly prohibited, they are difficult to enforce and must be reasonable in scope, duration (typically 6-12 months), and geography, supported by compensation during the restriction period, and clearly stated in the employment contract.

Courts rarely enforce broad non-competes that prevent employees from earning a livelihood. Garden leave provisions or paid restriction periods strengthen enforceability but remain uncertain.

How Payroll Costs and Taxes Work in Indonesia?

Indonesia's labor cost advantage remains significant, though rising minimum wages and mandatory benefits increase total employer burden. Average monthly wage stands at IDR 3.33 million (about USD 210), with total employer costs adding 6-8% for BPJS contributions.

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1. Payroll and Salary Structure in Indonesia

Salaries are quoted and paid in Indonesian Rupiah (IDR). Compensation typically includes basic salary, fixed allowances, variable compensation, and mandatory benefits.

Minimum wage varies by province and district, set annually by local governments. Examples for 2026:

• Jakarta: IDR 5.68-5.79 million/month (USD 323-365)
• West Java: IDR 2.0-2.4 million/month (varies by district)
• East Java: IDR 2.2-2.6 million/month (varies by district)
• Bali: IDR 2.9 million/month

Professional salary ranges (monthly gross):

• Entry-level roles: IDR 5-8 million (USD 315-505)
• Mid-level professionals: IDR 10-20 million (USD 630-1,260)
• Senior managers: IDR 25-50 million (USD 1,575-3,150)
• Executive roles: IDR 60-150 million+ (USD 3,780-9,450+)

Typical salary structure:

• Basic salary: 75% of total compensation (standard practice for severance protection)
• Fixed allowances (transport, meals): 25%
• Variable allowances (bonuses, commissions): additional

2. Employer Payroll Obligations

Employers contribute to BPJS employment social security covering:

• Old Age Security: 3.7% of gross salary
• Death Benefit: 0.3% of gross salary
• Work Accident Insurance: 0.24-1.74% depending on risk category
• Pension: 2% of gross salary

Employers also contribute to BPJS healthcare: 4% of capped salary (maximum IDR 12 million salary base).

Total employer BPJS contributions: approximately 10.24-11.74% of gross salary, depending on work accident risk category.

3. Employee Tax Contributions

Employees pay progressive income tax withheld at source:

• 5% on annual income up to IDR 60 million
• 15% on IDR 60-250 million
• 25% on IDR 250-500 million
• 30% on IDR 500-5,000 million
• 35% on income exceeding IDR 5,000 million

Employees also contribute to BPJS:

• BPJS employment (Old Age Security): 2% of gross salary
• BPJS employment (Pension): 1% of gross salary
• BPJS healthcare: 1% of capped salary

Total employee deductions: approximately 3-4% BPJS + progressive income tax (varies by salary level).

4. Social Security Contributions

Both employer and employee contributions fund Indonesia's social security system, administered by BPJS. Registration is mandatory for all employees, with penalties for non-compliance including administrative fines and denial of business permits.

Contributions are remitted monthly by the 10th of the following month.

5. Minimum Wage and Statutory Pay Requirements

Provincial and district minimum wages are legally binding. Employers cannot pay below applicable thresholds, even during probation.

2026 minimum wage increases range 5-7% nationwide following the government formula, adjusting for inflation (2.5-3.5%) plus economic growth (approximately 5%).

Failure to pay minimum wage or delay salary payments triggers employee complaints and Ministry of Manpower sanctions.

How Employers Pay Employees in Indonesia?

1. Payment Methods

Salaries are paid via bank transfer to the employee's Indonesian bank account. Cash payments are uncommon and create compliance risks.

Payslips must be provided monthly, containing gross salary breakdown (basic + allowances), BPJS deductions (employee portions), income tax withholding, and net pay, provided in Indonesian language.

2. Salary Payment Frequency

Payroll runs monthly, with salaries typically due by the last working day of the month or first working day of the following month (as specified in contract or company regulations).

Delays in payment breach labor law and give employees grounds for reporting violations to the Ministry of Manpower.

How To Onboard Employees in Indonesia?

1. New Hire Onboarding Checklist

Register the employee with BPJS employment and BPJS healthcare before their first working day. Provide signed employment contracts (in Indonesian language), company regulations, role-specific training materials, and access to payroll systems.

Onboarding essentials:

• Sign employment contract (fixed-term or indefinite)
• Register with the local Manpower Office
• Enroll in BPJS employment insurance
• Enroll in BPJS healthcare
• Register for income tax withholding (obtain tax number if employee doesn't have one)
• Open payroll bank account (if needed)
• Provide company regulations and employee handbook
• Schedule workplace safety orientation
• Set up payroll access and benefits information
• Assign a direct manager and clarify performance expectations
• Provide job-specific training and an integration plan

For foreign employees, additional steps include work permit application through the employer, limited stay permit sponsorship and processing, registration with immigration authorities, and skills transfer plan documentation (required for work permit justification).

Schedule orientation covering workplace safety (mandatory under Indonesian occupational health and safety regulations), employment rights under Labor Law, BPJS enrollment procedures, and reporting structures. Ensure employee understands leave policies, overtime rules, religious holiday allowance entitlement, and performance review timelines.

2. Required Employee Documentation

Indonesian labor regulations require employers to collect specific employee documents during onboarding. These records support BPJS registration, tax withholding, employment contract filing, and statutory compliance.

Documents you need from new hires:

• National ID copy
• Tax identification number or assistance in obtaining one
• Family card copy
• Educational certificates and transcripts
• Previous employment reference letters (if applicable)
• Bank account details for payroll
• Recent passport-sized photographs
• Health examination results (for specific industries)
• BPJS healthcare card (if already enrolled) or assistance in enrolling

For foreign employees: valid passport (minimum 18 months validity), limited stay permit, work permit approval letter, skills and qualifications certificates (attested), previous work experience documentation, and proof of Indonesian language capability (for certain roles).

Maintain signed copies of employment contract, confidentiality agreements, acknowledgment of company regulations, and tax forms (withholding statements) in employee's personnel file. These documents become critical during labor inspections or disputes.

What Are The Best Practices Of Interviewing and Hiring in Indonesia?

Indonesian labor law prohibits discrimination based on gender, religion, ethnicity, political views, or disability. Interview questions must focus on job-related qualifications, competencies, and work authorization status.

• Avoid questions about marital status or family planning intentions (particularly for female candidates), religious practices or beliefs, ethnic origin or tribal affiliations, political affiliations, age (except minimum legal working age verification: 18 years), pregnancy or plans to have children, or disability (unless directly relevant to essential job functions with reasonable accommodations).
• Data privacy considerations are growing in Indonesia following the implementation of Law No. 27 of 2022 on Personal Data Protection, effective October 2024. Candidate information must be collected with consent, stored securely, used only for hiring purposes, and handled according to data protection requirements.
• Indonesian candidates value clear communication and professional processes. Communicate hiring timelines clearly (Indonesian hiring processes typically span 2-4 weeks from first interview to offer), provide prompt feedback after interviews (delays signal disorganization), discuss compensation transparently, including salary breakdown and BPJS benefits, and clarify probation period expectations (indefinite contracts only).
• Cultural considerations matter. Indonesia's workforce is predominantly Muslim, requiring sensitivity to prayer times (five daily prayers), Friday midday prayers, and Ramadan observances (fasting during daylight hours). Interview scheduling should accommodate these practices naturally.
• Hiring practices should demonstrate a commitment to local talent development, aligning with the government's emphasis on prioritizing Indonesian workers. For roles requiring expatriate expertise, clearly articulate knowledge transfer plans and training commitments for local staff.

A sluggish or culturally insensitive hiring process damages an employer's brand in a market and competition for skilled talent remains high.

Work Permits and Right to Work in Indonesia

Hiring employees in Indonesia requires understanding local work permit rules and compliance obligations, especially when engaging foreign nationals. Employers must follow structured processes to ensure lawful employment and avoid penalties.

Work Permit Requirements for Foreign Employees

Foreign nationals must complete a formal approval process before they can legally work in Indonesia. Employers are responsible for initiating and managing these applications.

• Indonesian nationals automatically have the right to work and do not require permits
• Foreign nationals need a work permit issued by the employer
• Employees must also obtain a limited stay permit
• Employers must submit a manpower plan through the OSS system
• Justification is required to show the need for foreign expertise
• A skills transfer plan for local employees must be included
• Processing generally takes 2 to 4 weeks, with the full timeline around 6 to 8 weeks

Following these steps ensures foreign employees are authorized to work legally and without delays.

Local Compliance Obligations and Penalties

Beyond work permits, employers must comply with workforce regulations designed to protect local employment and ensure fair labor practices.

• Employers must contribute to a foreign worker compensation fund
• Monthly contributions range from USD 100 to USD 1,200 per foreign employee
• Many industries require workforce ratios favoring Indonesian workers
• Certain roles, such as HR, public relations, and procurement, are restricted to locals
• Foreign employees must participate in documented skills transfer programs
• Violations can result in fines of up to IDR 500 million per offense

Staying compliant with these requirements helps businesses avoid legal risks and supports smooth international hiring operations in Indonesia.

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How Does Employment Termination Work in Indonesia?

1. Lawful Grounds for Termination

Termination in Indonesia is heavily regulated. Employers cannot unilaterally terminate without following specific procedures and, in most cases, obtaining employee consent or labor court approval.

Lawful termination grounds include:

• Gross misconduct (theft, fraud, assault, intoxication, disclosure of confidential information)
• Repeated violations of the employment contract after warnings
• Company closure or bankruptcy
• Efficiency reasons (restructuring, financial losses)
• Employee resignation
• Mutual agreement
• Retirement (age 56 or as specified in contract, maximum 65)
• Death or permanent disability
• An extended absence without a valid reason
• Contract expiry (fixed-term only)

For misconduct-based terminations, the employer must follow disciplinary procedures: verbal warning, written warnings (typically 3 levels: warning 1, warning 2, final warning), and termination only after a documented pattern of violations.

For business reasons (efficiency, restructuring), the employer must negotiate with the employee or the union, attempt alternatives (salary reduction agreements, hour reductions), and seek approval from a labor dispute mediator or an industrial relations court if no agreement is reached.

2. Notice Periods

Notice requirements depend on the termination reason and contract type. Mutual agreement terminations follow negotiated terms. Resignation by an employee typically requires 30 days' notice (as specified in the contract). Termination by the employer requires advance notification before severance negotiations.

During probation (indefinite contracts only, first 3 months), either party can terminate with 7 days' notice and no severance obligation.

After probation, all terminations (except gross misconduct or resignation) trigger severance entitlements calculated under the statutory formula.

3. Severance Requirements

Indonesia's severance system is among the most generous in Asia. Calculations follow the statutory formula with three components:

Severance Pay based on tenure:

• Less than 1 year: 1 month
• 1-2 years: 2 months
• 2-3 years: 3 months
• 3-4 years: 4 months
• 4-5 years: 5 months
• 5-6 years: 6 months
• 6-7 years: 7 months
• 7-8 years: 8 months
• 8+ years: 9 months

Service Appreciation Pay based on tenure:

• 3-6 years: 2 months
• 6-9 years: 3 months
• 9-12 years: 4 months
• 12-15 years: 5 months
• 15-18 years: 6 months
• 18-21 years: 7 months
• 21-24 years: 8 months
• 24+ years: 10 months

Compensation for Rights includes unused annual leave, transportation/accommodation costs for repatriation (if applicable), and other contractual entitlements.

Multiplier applied to total severance depends on the termination reason:

• Company-initiated termination (business reasons): 1x Severance + 1x Service Appreciation + Rights Compensation
• Mutual agreement: negotiated (typically 0.5-1x Severance + Service Appreciation + Rights Compensation)
• Gross misconduct: 0x (no severance except Rights Compensation)
• Employee resignation: 0x (no severance except unused leave)
• Retirement: 2x Severance + 1x Service Appreciation + Rights Compensation
• Death: 2x Severance + 1x Service Appreciation + Rights Compensation

Example calculation for an employee with 8 years tenure, IDR 10 million monthly salary (basic), terminated for business reasons:

• Severance: 9 months × IDR 10 million = IDR 90 million
• Service Appreciation: 3 months × IDR 10 million = IDR 30 million
• Rights Compensation: Unused leave + other rights = IDR 5 million (example)
• Total: IDR 125 million (approximately USD 7,875)

Severance calculations use basic salary (not total gross with allowances), emphasizing the importance of salary structure decisions at hiring.

Indonesian law requires termination disputes to be resolved through bipartite negotiation (employer and employee direct discussion), tripartite mediation (involving a local Manpower Office mediator if bipartite fails), or the industrial relations court if mediation fails.

Employers attempting to circumvent severance obligations through forced resignations, constructive dismissal, or contract manipulation face labor court challenges and potential 2x severance orders.

Employee vs Contractor Classification in Indonesia

Indonesian authorities assess classification based on continuous work relationships, control, integration into business operations, and economic dependence. Contracts labeled "independent contractor" mean nothing if the working relationship resembles employment.

Misclassification consequences include:

• Retroactive severance payments (calculations from the start of the relationship)
• Back payment of BPJS contributions (employer and employee portions)
• Unpaid religious holiday allowances (for all years worked)
• Income tax penalties for improper withholding
• Ministry of Manpower administrative sanctions and fines
• Potential criminal charges for labor law violations

Employee filing a complaint with the local Manpower Office claiming employment relationship despite contractor agreement triggers an investigation of the relationship's substance: does the worker have a fixed schedule? Work from the employer's office? Use the employer's equipment? Receive instructions on work methods? Serve only this client?

If the investigation reveals an employment relationship disguised as contracting, reclassification happens retroactively with full severance and benefit obligations calculated from the start of the relationship.

What Compliance Risks Should Employers Know When Hiring in Indonesia?

BPJS non-compliance (failure to register employees, late contribution payments, or incorrect salary reporting) results in administrative fines up to 5% of the monthly contribution amount, potential business permit suspension, and employee complaints.

• Contract violations (unsigned contracts, missing Indonesian language versions, contracts not registered with Manpower Office, or fixed-term contracts used for permanent work) create unenforceable employment terms favoring employees in disputes. Courts may convert a fixed-term contract to an indefinite status, triggering severance obligations.
• Severance miscalculations or refusal to pay legally owed severance triggers labor court claims. Courts may order 2x severance payment for wrongful termination or procedural violations. Employers attempting to minimize severance through forced resignations or constructive dismissal face enhanced penalties.
• Work permit violations (employing foreign nationals without valid work permits and stay permits, exceeding approved positions, or using tourist visas for work) result in fines (IDR 100-500 million per violation), foreign worker deportation, and potential criminal charges for employer representatives.
• Minimum wage violations (paying below provincial/district minimums) trigger employee complaints, Ministry of Manpower sanctions, and back payment orders with penalties.
• Failure to pay religious holiday allowance (1 month's salary before a major holiday) is heavily penalized and given cultural significance. Delays or non-payment generate widespread employee complaints and Ministry enforcement actions.

With 27.4 million workers in the creative economy and 121.9% rise in job postings, competition for skilled talent in tech, fintech, and logistics sectors is intensifying. Compliance failures don't just cost money through fines and severance. They damage the employer brand in a market where local worker prioritization and proper employment treatment are national priorities.

How an Employer of Record (EOR) Helps You Hire in Indonesia?

An EOR eliminates PT entity formation delays, absorbs work permit complexity for foreign hires, and handles payroll, BPJS compliance, income tax withholding, and severance accruals.

What you gain with an EOR:

• Speed: Local hires live in 2-3 weeks, foreign hires in 6-8 weeks, including work permit processing (vs. 3-6 months for PT setup first)
• Work permit capability: EOR sponsors work permits and stay permits for foreign employees, managing applications and skills transfer documentation
• Certainty: Labor Law adherence, BPJS enrollment, accurate income tax withholding, and statutory severance calculations
• Control: Employee reports to you, performs work under your direction
• No minimum capital requirements: avoid IDR 10 billion+ paid-up capital for PT establishment
• Local expertise: Indonesian language contracts, Manpower Office registrations, religious holiday allowance payments, provincial minimum wage compliance

EORs don't replace strategic workforce planning. They enable it.

• Testing the Indonesian market without committing to PT setup costs (USD 5,000-15,000+)? An EOR model makes sense.
• Scaling from 2 to 20 employees within 12 months without entity administrative burden? An EOR enables rapid, compliant growth.
• Hiring Indonesian talent while maintaining flexibility for regional expansion? An EOR avoids locking into single-country entity infrastructure.

The model works because it's legally recognized: the EOR is the statutory employer handling all Ministry obligations and BPJS compliance, you're the operational employer directing daily work, and the employee receives full Labor Law protections, including severance accruals, religious holiday allowance payments, and BPJS enrollment.

How Gloroots Simplifies Hiring in Indonesia?

When hiring in Indonesia through Gloroots, the entire process is managed for you end-to-end. You do not need to coordinate Manpower Office registrations, navigate BPJS enrollment complexities, manage work permit applications, or handle severance calculations.

Gloroots runs the complete hiring workflow:

• Candidate sourcing, shortlisting, and background verification
• Initial screening to assess skills, experience, and role fit
• Interview coordination for final selection
• Offer issuance with a compliant employment contract (Indonesian language, fixed-term or indefinite)
• Statutory registrations: Manpower Office filing, BPJS employment, and healthcare enrollment
• Work permit processing for foreign hires: manpower plan application, work permit sponsorship, stay permit processing
• Payroll setup with accurate income tax withholding and provincial minimum wage compliance
• Religious holiday allowance calculations and timely payment
• Severance accrual tracking using statutory formulas
• Employee onboarding aligned with Indonesian Labor Law requirements
• Ongoing compliance management: contract renewals, BPJS contributions, annual reporting

This model removes operational overhead entirely, allowing you to focus on building and managing your team while Gloroots handles hiring execution, compliance, work permits, and onboarding from start to finish.

Gloroots provides end-to-end EOR services in Indonesia, handling employment contracts (Indonesian language, registered with Manpower Office), work permit sponsorship for foreign employees (complete lifecycle), payroll processing with income tax withholding, BPJS enrollment and monthly contributions (employment and healthcare), religious holiday allowance payment administration, severance accruals (statutory calculations), and Ministry of Manpower compliance filings.

Local compliance expertise ensures your hiring aligns with Indonesian Labor Law requirements, from contract drafting (fixed-term vs. indefinite selection) to termination procedures and accurate severance settlements.

The platform combines self-service functionality (contract management, onboarding workflows, payroll visibility, BPJS contribution tracking) with dedicated customer success support (local Indonesian compliance experts).

With Gloroots, you get:

• Audit-ready reporting for Ministry inspections
• Transparent cost breakdowns (salary, BPJS contributions, religious holiday allowance accruals, severance reserves)
• Finance-team-friendly invoicing with country-level detail
• GL mapping for multi-country payroll consolidation
• Real-time visibility into work permit processing status and compliance deadlines

Gloroots scales with you: whether hiring your first Indonesian employee or expanding a distributed team across 140+ countries, the infrastructure supports growth without the complexity of multi-entity management, BPJS administrative burden, or work permit coordination challenges.

It's not a vendor relationship. It's workforce infrastructure that adapts to your expansion strategy while absorbing the regulatory complexity of Indonesian employment, local worker prioritization requirements, and Labor Law compliance.

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FAQs About Hiring Employees in Indonesia

1. Can a foreign company hire employees in Indonesia without setting up a local entity?

Yes. Foreign companies can hire through an Employer of Record (EOR) without establishing a PT entity. The EOR becomes the legal employer, handling compliance, BPJS enrollment, income tax withholding, work permit sponsorship (for foreign hires), and severance accruals while you direct the employee's work.

2. What are the legal requirements for hiring employees in Indonesia?

Employers must provide written contracts in the Indonesian language, register employees with the local Manpower Office, enroll in BPJS employment and healthcare, withhold progressive income tax, comply with provincial minimum wage requirements, provide religious holiday allowance, and follow Labor Law provisions on working hours, leave, and severance for terminations.

3. How much does it cost to hire an employee in Indonesia?

Employer costs include gross salary plus approximately 10.24-11.74% for BPJS contributions (employment and healthcare social security), plus 5-7% religious holiday allowance accrual. 

4. How long does it take to hire and onboard an employee in Indonesia?

Through an EOR, hiring and onboarding Indonesian nationals are completed within 2-3 weeks from offer acceptance. For foreign nationals requiring work permits, the timeline extends to 6-8 weeks, including approvals and permit processing.

5. What is the easiest way to hire employees in Indonesia compliantly?

Partnering with an EOR is the fastest, lowest-risk path. The EOR handles contracts (Indonesian language, Manpower Office-registered), BPJS enrollment, income tax withholding, religious holiday allowance payments, work permit sponsorship for foreign hires, severance accruals, and Ministry compliance while you maintain operational control, enabling compliant hiring within 2-3 weeks for local staff or 6-8 weeks for foreign workers.

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