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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 include government remittances, benefits, allowances and deductions, that must all be done with proper care. Add to that the mere fact that Payroll calculation is in and of itself a difficult task, and you’d see the appeal of outsourcing your payroll processing in Indonesia.

Firstly, there are the personal income tax deductions ranging from 5 to 30 percent. Then there’s also the social security contributions involving a 2% contribution from employees and a 3.7% contribution from employers that goes into pension/old age insurance. In Indonesia, companies with a minimum of 10 employees are required to register for a tax ID number with BPJS (Jamsostek) after incorporation. Note 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. Most importantly, payments must be made to employees and tax authorities from a bank account based in Indonesia.


Employee’s Rights in Indonesia

The Indonesian government and law gives employees the following rights:

  • Working hours are 40 hours per week;
  • Employees are to receive a regional minimum wage which vary according to regions;
  • Employees are to 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;
  • Employees are to receive statutory absence/payment when the employees apply for annual leave, maternity leave, sickness, and personal leave based on the regulations;
  • Employees are to receive religious holiday allowance (THR/Tunjangan Hari Raya) based on the regulations;
  • Employees are to receive overtime rates.

Notably, there is also a mandatory 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 in the private sector is 4%, and the minimum amount that should be paid by the employer is 1% of the employee’s UMR (minimum regional wage) – this premium is calculated with a salary cap of 12 million Rupiah.


A Closer Look at the Calculations of the Indonesia Payroll Process

Let’s take for example an unmarried individual who earns 50 million rupiah in basic monthly salary.

  • Annual salary: 12 x 50,000,000 = 600,000,000 IDR
  • THR Payment (one month salary): 50,000,000 IDR
  • Social security contributions (BPJS): 

    • Occupational accident protection: 0.24% x 600,000,000 = 1,440,000 IDR
    • Death insurance: 0.3% x 600,000,000 = 1,800,000 IDR
    • Healthcare insurance: 4% x  600,000,000IDR = 240,000,000
  • Annual gross income: 893,240,000 IDR
  • Personal Income deduction: 6,000,000 IDR
  • Old Age Saving Deduction: 2% x 600,000,000 = 12,000,000IDR
  • Pension Deduction: 2,400,000 IDR
  • Taxable income: 872,840,000 IDR

Outsourcing Payroll Processes in Indonesia

Given the tedious steps and the constant rollout of ambitious pension programs, navigating through the Indonesia payroll process is undeniably a tedious one. If you find the payroll processes complicated, why not outsource the payroll of your staff in Indonesia? Offering a range of outsourcing services, find out how InCorp Group can help you – contact us today for more information.

FAQs

What is the deadline for the payroll reporting in Indonesia?

The payroll reporting deadline in Indonesia is the 10th of the following month.

Is health insurance mandatory under payroll processing for employees in Indonesia?

Yes, there is a mandatory provision of health insurance (BPJS Kesehatan) for employees in Indonesia. This must be paid by both the employees and the employer.

How is the payroll calculated in Indonesia?

Let’s take for example an unmarried individual who earns 50 million rupiah in basic monthly salary.

  • Annual salary: 12 x 50,000,000 = 600,000,000 IDR
  • THR Payment (one month salary): 50,000,000 IDR
  • Social security contributions (BPJS):
    • Occupational accident protection: 0.24% x 600,000,000 = 1,440,000 IDR
    • Death insurance: 0.3% x 600,000,000 = 1,800,000 IDR
    • Healthcare insurance: 4% x 600,000,000IDR = 240,000,000
  • Annual gross income: 893,240,000 IDR
  • Personal Income deduction: 6,000,000 IDR
  • Old Age Saving Deduction: 2% x 600,000,000 = 12,000,000IDR
  • Pension Deduction: 2,400,000 IDR
  • Taxable income: 872,840,000 IDR

Contact Our Vietnam Team

Vidvant Brahmantyo

Vidvant Brahmantyo

Chief Executive Officer

Indonesia

Outsource your payroll processing in Indonesia