Employee benefits in Indonesia: all you need to know

Link copied
to clipboard

The Republic of Indonesia is the fourth most populated country in the world, right after the United States. It is also a massive economic competitor in the Southeast Asian region, with a GDP of over $1 trillion.

Indonesia offers businesses a cost-effective option for sourcing remote employees, particularly due to its highly skilled workforce across different sectors. Notably, there is a large concentration of Indonesian professionals in Information and Communications Technology (ICT). Indonesia (particularly the island paradise of Bali) is also an emerging hotspot for highly-qualified digital nomads and growth-focused businesses can find and hire experienced contractors here at speed.

The biggest challenge for companies considering hiring remote employees in Indonesia is strict compliance with local labor laws. Additionally, employers looking to attract top talent also need to consider the benefits they want to offer candidates to ensure their employment packages are locally competitive and attractive to Indonesian workers.

Jump straight to a key chapter

Who is entitled to benefits in Indonesia?
Statutory and common employee benefits
Supplemental benefits for Indonesian employees
How to set up and manage benefits for international employees

Noncompliance with statutory benefits puts your business at risk of potentially costly legal fees and penalties, while not offering commonly expected supplemental benefits will likely hinder your hiring efforts. It’s crucial to satisfy both conditions to hire and manage employees in Indonesia successfully.

This guide comprehensively covers one of the most detailed aspects of global employment: how to offer the right set of employee benefits, from statutory to supplemental. In this article, we cover the following topics:

Who is entitled to benefits in Indonesia?
Statutory and common employee benefits
Supplemental benefits to consider for Indonesian employees
How to set up and manage benefits for international employees

Who is entitled to benefits in Indonesia?

In Indonesia, employees who have worked for an employer for more than three continuous months are entitled to benefits, including social security, health insurance, paid annual leave, sick leave, and maternity leave. These statutory benefits are detailed in Indonesia’s comprehensive Law No. 13 of 2003 on Employment.

When engaging with remote workers, you should be mindful of their classification. In Indonesia, an employee is defined as someone who has entered into an employment contract, either written or oral, that specifies the terms of employment, including hours, salary, and benefits. They must be performing work under the direction of the employer and receiving compensation. This applies to full-time, part-time, and temporary employees, as well as apprentices and trainees.

Freelancers or independent contractors are classified differently from employees, and usually aren’t eligible for the same statutory benefits. However, this doesn’t mean you shouldn’t consider offering supplemental benefits to contract workers.

A failure to treat your workers according to their role, or provide them with the required benefits, can cause you legal trouble and costly penalties, not to mention employee churn.

Statutory and common employee benefits

According to Indonesia’s local labor laws, statutory benefits include:

Contributions to various types of insurance, including health and work accident insurance — often split between an employer and an employee
A thirteenth-month bonus salary
Overtime pay after certain work hours
Various types of paid leave
Increased pay during public holidays

Additionally, you can expect job applicants to look for other statutory benefits such as:

Comprehensive insurance coverage
A privately managed pension plan

Supplemental benefits, or perks, should expand on what’s mandated to offer more comprehensive coverage.

Most prospective candidates in Indonesia will look into the supplemental benefits offered when evaluating a job opportunity. According to Remote’s Global Benefits Report, 60% of workers have chosen one job over another because it offered better benefits, and 67% of global workers say they expect localized benefits that are on par with those of other professionals in their country or city. That's why having robust and relevant supplemental benefits is so important when hiring in new countries.

Download your Global Benefits Guide and attract top global talent

Remote's global HR experts share practical advice for building a locally relevant and globally compliant benefits program to help you attract and keep the world's best talent.

Let’s look at these statutory employee benefits in more detail.

Minimum wage

Indonesia’s minimum wage varies by province and is annually reviewed. As of 2023, the monthly minimum wage in the capital, Jakarta, is IDR 4,901,798 (roughly $330). However, meeting this minimum standard may not be enough to attract the best candidates. You will want to explore industry standards and offer competitive compensation for each role.

Overtime

Overtime pay in Indonesia is governed by collective agreements and employment contract specifications and can be complicated to calculate, but it generally follows a straightforward pattern. Employees are expected to work 40 hours a week, typically across five days of 8-hour shifts or six days of 7-hour shifts.

Any work performed outside these hours is considered overtime, capped at four additional hours per day and a total of 18 additional hours per week. Overtime hours rendered on a weekday are paid at 150% of the base salary rate for the first hour. This cost increases to 200% for every following hour of overtime. Additional rate changes also apply for rest days and public holidays.

Leave and holiday entitlements

In Indonesia, employees are entitled to 12 paid leave days per year after one year of tenure, with additional tenure bringing more entitlements. For example, six consecutive years of tenure qualifies an employee for a month of paid leave on their seventh and eighth year of employment.

As an HR manager, you should also keep track of holidays to provide employees with appropriate leave time. In Indonesia, there are 16 public holidays.

Paid sick leave is also protected in the country, with employees covered by long-term sick leave of up to 100% of their pay during the first four months, decreasing by 25% every quarter up to termination.

Insurance (health insurance and work accident insurance)

In Indonesia, health insurance and work accident insurance are mandatory. Health insurance contributions are split between the employer and employee in Indonesia with the employee contributing 1% of their salary and the employer covering 4% (up to a maximum limit). Work accident insurance is covered solely by the employer and ranges from 0.24% to 1.74% of the employee’s salary.

Maternity and paternity leave

Employees are entitled to three months of maternity leave before the estimated due date plus one and a half months of leave after. Maternity leave is paid at 100% of the employee’s base salary.

New fathers are entitled to two days of paid paternity leave for birth or miscarriage. Additional parental leaves protected by law, all of which give parents two days of paid leave, include:

The circumcision of the employee’s child
The baptism of the employee’s child
The marriage of the employee’s child
The death of the employee’s child

Lastly, a paid bereavement leave of one day goes to employees who lose a family member other than their child or spouse (for which two days paid leave is offered).

Pension and retirement contributions

In Indonesia, old age and pension contributions are mandatory and split between employees and employers. The employee contributes 2% of their salary to old age and 1% to pension, while the employer contributes 3.7% to old age and 2% to pension.

Want to see a full breakdown of employment costs for new hires in Indonesia? Check out our free Employee Cost Calculator tool.

Supplemental benefits for Indonesian employees

Aside from meeting the minimum standards set by Indonesian law, employers also need to ensure that their job offers are attractive and competitive in the region. As we mentioned above, supplemental benefits, or perks, can make all the difference in how appealing your employment offer may seem to candidates. Most Indonesian professionals expect the following supplemental benefits:

Supplemental insurance

In Indonesia, it is common to offer employees more comprehensive health coverage or coverage for their dependents. Many highly-skilled employees expect to be offered three or four dependents on their employer-partnered insurance or pension provider in addition to government-mandated insurance contributions.

Stipends for home office, learning, and development

You can also make your employee benefits more competitive by offering allowances and stipends to support your remote workers. At Remote, for instance, we offer home office stipends of $500 to all internal employees so they can purchase the supplies and tools they need to be comfortable and productive when working from home. Offering a stipend works well when hiring globally because supplies and equipment can be difficult or expensive to ship to some countries. This way, your employees can choose to invest in the things that best meet their needs.

As another example, we also offer learning and development stipends that employees can use for courses, conferences, coaching, and more to advance their skills and grow in their careers — which is beneficial to both the employee and the company.

Offering these kinds of perks are a great way to stand out in the competitive Indonesian talent market and attract the country’s best talent.

Additional supplemental benefits for remote workers in Indonesia

Here are some additional wellness and lifestyle benefits that exceed the minimum requirements for employees in Indonesia. These benefits are particularly geared toward skilled remote workers:

Freedom of movement

Remote work entails freedom of movement, whether your employees are telecommuting from a cafe, another city, or working from the comfort of their own home. You can make your job offers more attractive by supporting freedom of movement for your employees with a “work from anywhere” policy. This benefit is free to offer and very attractive to top talent.

Flexibility in work hours

Flexibility is among the most essential benefits for remote workers. According to Remote’s Global Benefits Report, over half of remote and hybrid workers (57%) consider flexibility to be more important than their compensation. While employees should never have to sacrifice fair compensation for flexibility, this drives home how important this benefit is for employees who could do their jobs from anywhere — and at any time.

Therefore, consider what work hours might suit your Indonesian workers. Be mindful about when you expect them to show up on calls, for example, especially if the rest of your team is in a dramatically different time zone. An effective approach is to allow workers to set their own hours (within the parameters of what’s necessary for their role). With such an incentive, you'll gain a competitive edge over companies that are not adopting flexible working models while increasing employee engagement, happiness, and productivity.

For more guidance on how to optimize your workplace for flexibility, check out Remote’s dedicated guide to working asynchronously.

Get your Checklist for Hiring International Employees

Work through this checklist to help you stay compliant when you're employing across borders.

A tablet displaying a global payroll platform for distributed teams.

Providing cost-effective benefits to workers in Indonesia

While providing employee benefits that exceed expectations is an ideal approach on paper, it can increase overhead costs when implemented improperly. As a result, you should ensure cost efficiency when deciding on what employee benefits to offer your global team members.

One common pitfall is focusing on vanity perks instead of substantive benefits. While some perks may seem attractive at first, they may not offer real value aside from novelty.

It’s best to focus on employee benefits that reflect your commitment to valuing your workers’ flexibility and freedoms. These benefits, like flexibility in working hours and location, are not only impactful but tend to be free or low-cost for employers to offer.

Additionally, you can leverage stock options or profit-sharing to make employees take more ownership of their roles, or invest in career programs to empower employees and increase tenure longevity. Check out our guide on affordable perks for remote teams to explore these benefits in more detail.

How to set up and manage benefits for international employees

As this guide illustrates, hiring and managing remote workers in Indonesia can be complex. Fortunately, a local employer of record (EOR) can provide in-country legal expertise without requiring you to increase your in-house resources. An EOR can also give you access to software infrastructure to automate much of the process, and speed up and streamline your operations.

You can partner with an EOR like Remote to hire and manage international workers without establishing a local subsidiary in Indonesia.

As a global employment and payroll solution platform, our EOR services in Indonesia come with many competitive advantages, including:

Done-for-you benefits administration and payroll processing
Compliance with local labor laws and taxation legislation (minus paying the corporate tax of a legal subsidiary)
Centralized documentation in the Remote platform
A suite of tools to manage and scale your international team from a single dashboard

Visit Remote to learn more about working with an EOR in countries like Indonesia and beyond, so that you can compliantly scale your business — and hire and manage international team members in top markets across the globe.