An additional headache when your company’s headcount begins to grow in Indonesia is managing the specific procedures for payroll processing while ensuring the regulatory requirements, which includes government remittances, benefits, allowances and deductions, that must all be done with proper care.
Firstly, there are the personal income tax deductions ranging from 5 to 30 percent. Then also the social security contributions involving a 2% contribution from employees and a 3.7% contributions from employers. In Indonesia, companies with a minimum of 10 employees are required to register for a tax ID number with BPJS (Jamsostek) after incorporation. Note though that companies with less than 10 employees are not required to register for social security payments. The payroll reporting deadline is the 10th of the following month, and all reports must be kept for at least five years. Importantly, payments must be made to employees and tax authorities from a bank account based in Indonesia.
Moreover, the law gives employees in Indonesia the following rights:
- working hours are 40 hours per week;
- receive a regional minimum wage which vary according to regions;
- receive social security (BPJS for the employee/BPJS ketenagakerjaan), which includes work accident insurance (0.24% – 1.74% of the monthly salary that must be paid entirely by the company), life insurance benefit (0.3% of the monthly salary that must also be paid entirely by the company), and old age benefit (5.7% of the monthly salary that must be paid by both the company (3.7%) and the employee (2%)) as well as BPJS health care program;
- receive statutory absence/payment when the employees do not take the annual leave, maternity leave, sickness, and personal leave based on the regulations;
- receive religious holiday allowance (THR/Tunjangan Hari Raya) based on the regulations;
- receive overtime rates.
Notably, there is also a provision of health insurance (BPJS Kesehatan) for employees in Indonesia, which must be paid by both the employees and the employer. The maximum amount of money that should be paid by the employer is 4% of the maximum salary of IDR 4,000,000, and the minimum amount that should be paid by the employer is 1% of the employee’s UMR (minimum regional wage).