Employment in Indonesia is governed by the Manpower Law (Law 13 of 2003) as amended by the Job Creation Law, together with Government Regulation 35 of 2021 on contracts, working time and termination. Minimum wages are set by each province. Here is what employers need to know about leave, pay, tax and ending employment.
The Manpower Law sets minimum rest and leave. Company regulations (Peraturan Perusahaan) and collective labour agreements set out the details and often grant more.
At least 12 working days of paid leave after 12 months of continuous service.
1.5 months before and 1.5 months after the birth, with full pay. Women who miscarry are entitled to 1.5 months' rest.
Paid leave when the employee's wife gives birth or has a miscarriage.
Employees who cannot work because of illness keep being paid on a sliding scale: 100% of wages for the first 4 months, 75% for the next 4 months, 50% for the following 4 months, and 25% after that until the employment is ended.
Law 4 of 2024 on Mother and Child Welfare allows maternity leave to be extended in specified medical circumstances and gives fathers additional leave in some cases. Check the implementing rules that apply.
Set up each Indonesian leave type in IceHrm with its own accrual, carry forward and approval rules, such as annual leave that only becomes available after 12 months of service. Employees see their live balance before they apply, and managers see who is away on a shared calendar. Leave management →
Indonesia has no single national minimum wage. Each provincial governor sets a provincial minimum wage (UMP) every year, effective 1 January, and many cities and regencies set a higher local minimum (UMK). Jakarta and the industrial regencies around it have among the highest rates.
Either 8 hours a day over 5 days, or 7 hours a day over 6 days. Some sectors may use different schedules.
A maximum of 4 hours a day and 18 hours a week, with the employee's written or digital consent.
1.5 times the hourly wage for the first overtime hour and 2 times for each hour after that.
For a six-day, 40-hour week, overtime on a weekly rest day or public holiday is paid at 2 times the hourly wage for the first 7 hours, 3 times for the 8th hour, and 4 times for the 9th to 11th hours. Different hour bands apply to a five-day week. The hourly wage for overtime is 1/173 of the monthly wage.
Employers must pay a religious holiday allowance (Tunjangan Hari Raya) once a year before each employee's main religious holiday, generally one month's wages for employees with 12 months of service and pro rata for shorter service.
Capture attendance and overtime in IceHrm and feed the hours straight into payroll, so the right overtime multipliers are applied to what was actually worked. Time & attendance →
Resident individuals pay income tax (PPh 21 for employees) at progressive rates. Employers withhold tax monthly using the effective-rate (TER) tables introduced in 2024 and reconcile to the annual rates in December, then give each employee an annual withholding slip.
| Taxable income | Rate |
|---|---|
| Up to IDR 60 million | 5% |
| IDR 60 million – IDR 250 million | 15% |
| IDR 250 million – IDR 500 million | 25% |
| IDR 500 million – IDR 5 billion | 30% |
| Over IDR 5 billion | 35% |
Severance paid in a lump sum is taxed separately at final rates from 0% (up to IDR 50 million) to 25%.
Employers must register employees with two social security agencies: BPJS Kesehatan for health insurance and BPJS Ketenagakerjaan for employment programmes. Employers deduct the employee share from pay and remit both shares each month.
| Programme | Employer | Employee |
|---|---|---|
| Work accident protection (JKK) | 0.24% – 1.74% | – |
| Death insurance (JKM) | 0.3% | – |
| Old age savings (JHT) | 3.7% | 2% |
| Pension (JP) | 2% | 1% |
| Health insurance (JKN) | 4% | 1% |
| Job loss insurance (JKP) | Funded from existing contributions | |
Build Indonesian pay the way you already structure it, with your own salary components, deductions and formula columns, such as BPJS contribution columns with wage caps. Want to know how well IceHrm handles payroll calculations for Indonesia? Contact us or see Payroll →
Employers, employees, unions and the government must try to avoid termination. When it cannot be avoided, the employer must give the employee (and their union, if they are a member) a written termination notice at least 14 working days in advance, or 7 working days during probation. If the employee rejects the termination, it goes through bipartite negotiation and the industrial relations dispute process.
On termination, the employer must pay severance pay (uang pesangon), long service pay (uang penghargaan masa kerja) and compensation for entitlements such as untaken annual leave. The base amounts are below; the multiplier depends on the reason, for example 0.5 times severance for efficiency due to losses.
| Length of service | Severance pay |
|---|---|
| Less than 1 year | 1 month |
| 1 year, less than 2 years | 2 months |
| 2 years, less than 3 years | 3 months |
| 3 years, less than 4 years | 4 months |
| 4 years, less than 5 years | 5 months |
| 5 years, less than 6 years | 6 months |
| 6 years, less than 7 years | 7 months |
| 7 years, less than 8 years | 8 months |
| 8 years or more | 9 months |
| Length of service | Long service pay |
|---|---|
| 3 years, less than 6 years | 2 months |
| 6 years, less than 9 years | 3 months |
| 9 years, less than 12 years | 4 months |
| 12 years, less than 15 years | 5 months |
| 15 years, less than 18 years | 6 months |
| 18 years, less than 21 years | 7 months |
| 21 years, less than 24 years | 8 months |
| 24 years or more | 10 months |
Fixed-term (PKWT) employees do not receive severance pay. Instead, they are entitled to compensation money when the contract ends: one month's wages for 12 months of service, pro rata for shorter or longer periods, for employees with at least 1 month of continuous service.
The government publishes the list of national holidays and collective leave days (cuti bersama) each year by joint ministerial decree. Many holidays follow the Islamic, Chinese, Balinese or Buddhist calendars, so their dates change from year to year.
Employees do not have to work on official public holidays. Where the nature of the work requires it, or by agreement, employees can work on a holiday and must be paid overtime.
Leave groups give each office its own holiday calendar, so you can load each year's national holidays and collective leave days once and apply them to the right employees automatically. Holiday calendars →
Employees are hired either on an indefinite contract (PKWTT) or a fixed-term contract (PKWT). A fixed-term contract must be in writing in Indonesian using the Latin alphabet; a bilingual version is allowed, but an unwritten fixed-term contract is treated as indefinite.
Indefinite contracts can include a probation period of up to 3 months, during which the employee must still be paid at least the minimum wage. Fixed-term contracts cannot include probation; if they do, it is void. A time-based fixed-term contract, including extensions, can last up to 5 years, and must be registered online with the Ministry of Manpower within 3 working days of signing.
Send contracts for e-signing, store them on the employee's record, track probation and contract end dates, and use onboarding task lists so BPJS registration is done on time. Documents & e-signing →
This guide is general information to help you plan HR processes, not legal, tax or financial advice. Employment law and rates change regularly and awards, enterprise agreements and state rules may give employees more than the minimums shown here. Always confirm current requirements with the official sources or a qualified adviser.
Configure leave types, accrual rules and public holidays for Indonesia, keep employee records and contracts in one place, and run payroll with your own salary components. Want to know how IceHrm handles payroll calculations for Indonesia? Talk to us.
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