Employ Candidates Compliantly in Indonesia

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  1. Overview: Indonesia
  2. Global HR Compliance
  3. Global PEO and payroll
  4. Work permit for hiring expats via PEO
  5. Expand without a company set up
  6. Contractor vs. employee: which is better?
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Global HR Compliance in Indonesia

If you hire international workforce, or plan to hire, then Hiring and Firing Workforce in Indonesia Guide below will help you understand the nuances of labor legislation in the country.

Companies hire international workforce for various reasons but in most cases they are:

  • entering the foreign markets to sell company products. To do so, the company hires sales representatives who would represent their product and sell it to their local client base.
  • hiring a global talent with unique skills that is unavailable in the local market or costs the company less than the talent with similar skills hired in the home country.

Before entering a certain foreign market or engaging a global talent, it is crucial for the company to understand how it can make local hires and reward its workers on a monthly basis. Growing companies often face a challenge of paying benefits and bonuses to the commission-based independent sales representatives they are working with.

If you intend to hire and pay your foreign workforce in full compliance with labor laws and regulations of Indonesia, then the Global Employer of Record service from Acumen International may be the best way for you to go. We are an International PEO company and we specialize in global employment, meaning we can employ your employees in Indonesia and act as their legal employer on your behalf. We will payroll your foreign workforce monthly and provide benefits to them through our global network so you don’t have to set up your own legal entities there.

We are experts in global workforce employment in , and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in Indonesia.

Hiring and Firing Workforce in Indonesia Guide

One of the greatest challenges individuals or companies face whilst doing business in Indonesia and any country for that matter is the need to familiarize and comply with the nitty-gritty details of the local labor regulations. Unfortunately, these challenges have scared many off their dreams of expanding globally. However, there is good news for you: you can now and always expand globally without having to go through all the stresses and strains of global expansion.

Acumen International can help you fast-track your possibilities of entering and expanding your business in Indonesia by providing you with an Employer of Record services. Our unique mix of PEO/EOR solutions will enable you to jumpstart your global operations almost immediately, cost-effectively and compliantly without any requirement to set up a legal entity first or thereafter.

Here are some of the key facts you need to know about employment in Indonesia:

# Employment Contracts

Workers in Indonesia can either be employed on a permanent basis where the length of the contract is undefined or on a fixed-term basis with the exact duration of the employment is clearly specified. Fixed-term contracts are always concluded in writing, in Indonesian language. An initial fixed-term contract cannot have more than 2 years duration, however, can be extended only once up to one year. Also, an employer can renew such contract once for up to 2 years after the employee has had a minimum of 30 days from the previous employment. Indefinite duration contracts are not required to be drawn up in writing. Such contracts require that the employer provides the employee with a letter of appointment instead.

# Minimum (Statutory) Employment Rules and Regulations in Indonesia

# Hours of work
The normal working day is 8 hours for 5 working days’ week, 7 hours per day for 6 working days’ week and a maximum of 3 hours for under 18 years old employees. Employees are entitled to 30 mins of unpaid rest after every four working hours, a daily time off for prayer as required by their religion and a full day rest per week.

# Probation period
The maximum probation period is 3 months and it’s usually given to employees holding an indefinite employment contract. An employer cannot force probation on an employee with a fixed-term contract.

# Annual leave
There are 14 legally approved holidays for workers in Indonesia: New Year’s Day, Birthday of Prophet Mohammed, Lunar New Year, Day of Silence, Good Friday, Labor Day, Ascension of Christ, Buddhist Waisak Day, Ascension of the Prophet Mohammed, Eid-ul-Fitr, Independence Day, Eid-ul-Adha, Islamic New Year and Christmas.

An employee who has consecutively worked for an employer for at least one year is entitled to a 12-day annual leave, during which his/her full wage will be paid. Employees are encouraged to use up their leave right within the 6 months it was given, otherwise it will be cancelled without a guarantee of compensation. This may not be the case if the reason for not using the leave is caused by the company.

# Parental leave
Female employees are eligible for 3 months of paid maternity leave, of which 1.5 months will be used during pregnancy and the remaining 1.5 months to be used after childbirth. A female worker who miscarried her baby is entitled to 1.5 months of paid leave. A male employee whose wife either gave birth or had miscarriage or whose child is to be circumcised/baptized is entitled to receive 2 days of paid leave from his employer.

# Sick leave
All employees have the right to an indefinite sick leave. Though the number of days off during this period is indefinite, its benefit tends to decrease, given time. An employer is obligated to pay a sick employee his complete wage during the first 4 months of being on leave, and subsequently, 75 percent of his wage up till the 8th month of absence, 50 percent up till the 12 month and 25 percent for more than 12 months. An employer may end an employee’s contract who has recorded more than 12 months of sick absence.

# Overtime
An employer must pay for every extra hour worked by his employee. Normally, overtime is compensated for at a rate of 1.5 of the employee’s hourly wage for the first hour of overtime, and at double rate for the following 2 hours.

# State minimum salary
The monthly minimum wage is 3.35 Million IDR. Employers must pay their employee a minimum of once in every month, or otherwise pay a fine of 5 percent for the first 8 days of deferment and 1 percent thereafter.

# Employment termination
It is obligatory for an employer to discuss the conditions of ending a contract with the employee or his representatives before ending the contract. The only exceptions to this rule are for employees who are on their trial period, sick, have reached their retirement age or want to resign on their own. After these requirements are met, a 30-day notice of termination must be provided by the initiator. An employer is required to pay the terminated employee a dismissal package which include severance pay, payment for unused entitlements, reward for service pay and transport fee, if the termination is not done in just cause. An employee is entitled to ONLY a pay for his unused entitlements if he is terminated with good cause.

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