Indonesia HR Information

Updated on: 2025/08/04 14:03 (UTC)

Overview

Labor standards are less comprehensive in Indonesia than in other, more centralized nations, and labor unrest is frequent. The central labor law is the Manpower Act of 2003. Other laws governing employment include the Trade Union Act of 2000 and the Industrial Relations Disputes Settlement Act of 2004.

Hiring

Employment Contracts

All employees must have a work agreement written in Indonesia and signed by both the employer and the worker. A work agreement must state the terms and conditions of employment, including:

• employer’s name, address and type of business;
• worker’s name, sex, age and home address;
• occupation and type of work;
• duty stations or workplace;
• amount of wages and method of payment;
• rights and obligations of the worker and the employer;
• starting date and duration of the contract;
• place and date of the work agreement; and
• signatures of both parties.

The provisions in a work agreement must be at least as favorable to the worker as the labor law and regulations, the company regulations or the collective bargaining agreement. Oral work agreements are permitted for permanent work, but in such cases the employer must prepare a letter of appointment for the worker that includes:

• worker’s name and address,
• starting date of work,
• type of work, and
• amount of wages

Employers with 10 or more workers must establish company regulations that specify the rights and obligations of the employer and the workers, working conditions, disciplinary provisions and rules of conduct, and the period of their validity. Employers are not required to have internal regulations if there is already a collective bargaining agreement in place.

Indonesian workers can enter into either fixed-term or open-ended labor contracts. Regulations limit the time companies can employ outsourced workers and guarantee holiday allowances, annual leave, and social security benefits for these workers. Outsourcing licenses expire in three years and are subject to review every six months.

An employment agreement for an indefinite period may require a probationary period of not more than three months. If a probationary period is required, it must be stated in the employment contract.

A probationary period may not be imposed on a definite-period worker.

The maximum validity of the initial definite-period employment agreement is two years, extendable one time for up to one year. Subsequently, it is possible to renew a definite-period employment agreement once for up to two years, but only after a break of at least 30 calendar days after the original employment agreement has expired.

Restrictions on Hiring

With certain exceptions, the legal minimum age for employment in Indonesia is 15.

Employers may not hire workers under the age of 18 to perform hazardous work and may not hire any workers under the age of 15 with the following exceptions:

• Children 13 to 15 years of age may be employed for light work for a maximum of three hours a day if the employer gets permission from the children’s parents or guardians and if the work does not interfere with the children’s schooling.
• Children at least 14 years old may be employed as part of their school’s education curriculum or as part of a training program.
• Children may be employed to develop their talents or interests, but for no more than three hours a day and only if directly supervised by their parents or guardians.

A Ministry of Manpower regulation legalizes the employment of children under the age of 14 whose families need their income. This regulation requires parental consent to employment, prohibits dangerous or difficult work, limits work to four hours daily, and requires employers to report the number of children working.

Foreign employees may fill only white-collar jobs, and their employers are required to justify their hiring by explaining the skills and expertise they possess that a local would not. The employer must appoint an Indonesian counterpart to work with the foreign worker to ensure the transfer of skills from the foreign worker to the counterpart.

Specific rules apply to the employment of foreign nationals in the banking industry:

• Banks with a minimum of 25 percent foreign ownership may employ expatriates as directors, commissioners, executive officers, and/or expert advisors or consultants.
• Banks with fewer than 25 percent foreign ownership may only employ expatriates as expert advisors or consultants. However, if a foreign shareholder of such bank is also a controlling shareholder, the bank may employ expatriates as directors and commissioners.
• Branch offices may only employ an expatriate as the head of the branch office or as an expert advisor or consultant.
• Representative offices may only employ an expatriate as the head of the representative office or as an expert advisor or consultant.

Recordkeeping and Reporting

There are no labor laws or regulations specifically governing an Indonesian company’s maintenance and storage of employment-related data and documents. All businesses are subject to periodic inspections by officials from the Local Manpower Office to ensure compliance with labor laws and regulations, however, and officials can request any number of documents during these inspections, including:

• mandatory manpower reports,
• company regulations or collective labor agreements,
• employment agreements,
• evidence of registration of definite-period employment agreements,
• various expatriate employment documents,
• evidence of participation in and contributions paid to social security,
• payroll list, and
• various documents related to the company’s organizational structure and occupational health and safety provisions.

Background Checks

The labor code does not address background checks.

Noncompetition Agreements

The labor law does not restrict an employer’s ability to impose noncompetition agreements on an employee provided the employer and the employee have entered into a formal agreement.

Reference Citations

Employment Contracts: Manpower Act No. 13 of 2003, arts. 22, 54, 56-58, 60, 63-66, 108-115

Restrictions on Hiring: Manpower Act No. 13 of 2003, arts. 1, 68; Regulation No 37/POJK.03, 2017 (Indonesian)

Immigration and Work Permits

In General

Employers seeking to employ foreign workers must have a Manpower Utilization Plan (RPTKA) that has been approved by the Ministry of Manpower.

Visas and Work Permits

Employers seeking to employ foreign workers must complete a Manpower Utilization Plan (RPTKA) approved by the Ministry of Manpower.

Employers hiring foreign employees are also obliged to:

• pay the foreign workers at least $100 per month,
• enroll the foreign workers in an insurance program offered by insurance companies that are registered in Indonesia (for expatriates who have worked in Indonesia for less than 6 months) or Indonesia’s Social Security Administrator (Badan Penyelenggara Jaminan Sosial or “BPJS”) (for expatriates who have worked in Indonesia for at least 6 months),
• appoint Indonesian companion employees for the transfer of technology and skills from the foreign workers and provide training for the Indonesian companion employees; and
• provide Indonesian language training for the foreign workers.

There is no specific labour market test requirement, although the Manpower Law states that foreign workers will not be granted a work permit if local employees can perform the job.

Foreigners are specifically prohibited from occupying positions of authority in human resources.

Government regulations, effective April 1, 2021, under the Job Creation Act’s amendments to the Manpower Law of 2003 have been revised regarding the work permit application process for the use of foreign workers.

Penalties

The Department of Immigration imposes stiff penalties on employers that fail to comply with the requirements for hiring foreign workers. Pursuant to the Manpower Law, employing a foreigner without an IMTA may subject an employer to sanctions of one to four years’ imprisonment and a criminal fine of 100 million to 400 million rupiah.

Government regulations, effective April 1, 2021, under the Job Creation Act’s amendments to the Manpower Law of 2003 have been amended regarding the work permit application process for the use of foreign workers.

Reference Citations

Visas and Work Permits: Manpower Act No. 13 of 2003, arts. 42-43, 46

Nondiscrimination

In General

Indonesian law requires that every person available for a job have the same opportunity to get the job without discrimination and that every worker have the right to receive equal treatment without discrimination from the employer.

Disability Discrimination

An enterprise that employs workers with disabilities must take their disabilities into account in providing access to the workplace, tools and protective equipment. For every 100 workers a company employs, it is required to employ one worker with a disability.

Gender Discrimination

Under Indonesian law, women:

• cannot be discriminated against because of their gender in recruitment or in working conditions;
• cannot be terminated because of marriage, pregnancy or childbirth; and
• must be paid equal wages for equivalent work.

Employers must not require women to undergo pregnancy tests as part of the hiring process or at any time during employment unless the work presents a recognized significant risk to the health of the woman or child.

Sexual harassment in the workplace is prohibited. Sexual harassment is verbal or physical conduct of a sexual nature affecting the dignity of women or men, which is unwelcome, unreasonable and offensive to the recipient. To constitute sexual harassment in the workplace, employees must perceive that their reaction to the conduct may affect decisions regarding their job or be a factor in evaluating job performance.

Reference Citations

Nondiscrimination: Manpower Act No. 13 of 2003, arts. 5-6, 32, 153

Disability Discrimination: Manpower Act No. 13 of 2003, art. 67; A Guide To Disability Rights Laws in Indonesia

Gender Discrimination: Guidelines on Sexual Harassment Prevention at the Workplace (2011); Indonesian Constitution, 1945, arts. 28-29 (Indonesian)

Employee Privacy

Employee Data

There are no laws governing employee privacy in Indonesia.

Employee Monitoring and Surveillance

Indonesia’s 2008 law on Electronic Information and Transaction is the main regulation addressing the use of an employee’s private or personal information and requires the consent of the worker concerned to such use.

Reference Citations

Monitoring and Surveillance of Employees: Law on Electronic Information and Transaction, 2008 (Indonesian)

Compensation

Hours of Work

Regular weekly working hours are limited to 40. Regular daily working hours are limited to seven hours a day, six days a week or eight hours a day, five days a week. For every four hours worked, a 30-minute break is required. The law also requires one day of rest every week for those who work a six-day workweek and two days of rest for those with five-day workweeks.

Minimum Wage

Indonesia has no national minimum wage. Area wage councils determine minimums for different parts of the country. Effective for 2022, the lowest provincial monthly minimum wage is for Central Java, at Rp 1,812,935, and the highest provincial monthly minimum wage is for Jakarta, at Rp 4,641,854. Effective for 2021, the lowest provincial monthly minimum wage was for Yogyakarta, at Rp 1,765,000, and the highest provincial monthly minimum wage was for Jakarta, at Rp 4,416,186.548.

The jurisdictions’ names in the chart below generally are linked to provincial government websites that contain additional details regarding the minimum wage rates in these jurisdictions, but for cases when a province or one of its local jurisdictions does not publish the provincial minimum wage data on its website, a link to the national government’s presentation of minimum wage data for that province is provided.

Overtime

Employers must pay employees overtime if they work:

• more than 40 hours a week or more than eight hours per day in a five-day workweek or
• more than seven hours in a day in a six-day workweek.

Employers must abide by the following rules regarding overtime:

• the worker must consent to the requirement to work overtime,
• the worker can only work overtime up to three hours per day or 14 hours per week, and
• the employer must provide the employee with food and drink of at least 1,400 calories if the overtime work is carried out for three hours or more. This cannot be replaced with money.

Overtime must be paid at 1.5 times the normal hourly rate for the first hour and two times the normal rate for the subsequent two hours.

Overtime work performed on weekly rest days of employees working six-day workweeks must be compensated at two times the normal wage for the first seven hours of overtime work, three times the normal wage for the eighth hour of overtime work, and four times the normal wage for the ninth and 10th hour of overtime work.

Overtime work completed on statutory holidays of employees working six-days a week must be compensated with two times the normal hourly wage for the first five hours of work, three times the normal hourly wage for the sixth hour of work, and four times the hourly wage for the seventh and eighth hours of overtime work.

Overtime work performed by employees working five day workweeks on either a weekly rest day or a statutory holiday must be compensated at two times the normal hourly wage for the first eight hours of work, three times the normal hourly wage for the ninth hour of work, and four times the normal hourly wage for the 10th and 11th hour of work. Effective Nov. 2, 2022, employees may not work more than four hours of overtime in a day or 18 hours of overtime in a week.

Wage Payment

Employers must pay wages at least once per month on an agreed-upon date. Late wage payments are assessed fines of 5 percent of wages outstanding per day for the first eight days, 1 percent per day after that. This additional penalty should not exceed 50 percent of the wages that should have been paid. If the wages are still not paid after one month, the employer is required to pay interest on the outstanding amount at the same rate as the enterprise’s credit loans.

Wages must be paid at the place of employment, where work usually occurs, at the company office, or by bank transfer. Payments in the form of drugs or liquor are prohibited. At the time of payment, employers must provide employees with clear individual wage statements detailing pay and deductions.

Mandatory Bonuses

Workers with 12 months’ service are entitled to a religious bonus of at least one month’s salary to be paid at least one week before their religious holiday. Workers with three to 12 months of continuous service are entitled to a prorated amount of the religious allowance.

Reference Citations

Hours of Work: Manpower Act No. 13 of 2003, arts. 77, 79

Minimum Wage: Manpower Act No. 13 of 2003, art. 89-90; Minister of Manpower Decree No. Kep. 231/Men/2003 (Indonesian)

Overtime: Manpower Act No. 13 of 2003, arts. 78, 85; Ministry of Manpower Decree on Overtime Hours and Wages, No. Kep.102/Men/VI/2004, art. 11

Wage Payment: Manpower Act No. 13 of 2003, arts. 54, 94; Government Regulation on Wage Protection, No. 8 of 1981, arts. 10, 12, 16 (Indonesian)

Mandatory Bonuses: Ministry of Manpower Regulation No. Per-04/Men/1994 (Indonesian)

Benefits

Vacation

Workers are entitled to 12 days of paid annual leave after they have worked for 12 consecutive months. At least six days of this leave must be taken consecutively. In some companies, employees who have been with the employer for six consecutive years get one month of paid leave in each of the next two years. This long break is available after every six years the worker has been with the company. Annual leave must be taken within six months of its accrual.

Holidays

Public holidays in Indonesia are as follows

• Jan. 1: New Year’s Day
• Chinese New Year
• Prophet Muhammad’s Birthday
• Hindu New Year
• Ascension of the Prophet Muhammad
• Nyepi Day
• Good Friday
• International Labor Day
• Eid Al-Fitr (multiple days)
• Waisak Day
• Ascension
• Pancasila Day
• Eid Al-Adha
• Aug. 17: Independence Day
• Birthday of Prophet Muhammad
• Christmas Day

Workers cannot be required to work on holidays unless the nature of the job is such that work must be performed on these days, as determined by the minister of manpower. Employees who are required to work on a holiday must be paid twice their normal wage.

Holidays that occur on a weekend are not moved to another date.

Maternity Leave

Female workers have the right to employer-paid maternity leave one and one-half months before and one and one-half months after giving birth.

A worker who suffers a miscarriage may also take one and one-half months of paid leave.

These periods of leave can be extended if the need is attested to by an obstetrician or midwife. Workers who take leave must be reinstated to the same position in the same workplace upon return to employment. If a female worker is pregnant and/or breast-feeding, she may not be required to perform work that endangers her health or that of her child. Termination on the basis of marriage, pregnancy or childbirth is illegal.

Paternity Leave

A male employee is entitled to two days’ employer-paid leave following the birth of a child or his wife’s miscarriage.

Sick Leave

Employers are required to compensate employees absent from work due to illness provided the employee submits medical certification. For the first four months, compensation must be at 100 percent of wages; for the second four, 75 percent; the third four, 50 percent; and subsequent months, 25 percent. After 12 months’ absence due to illness, the employer can fire the employee.

Female employees are entitled to two days’ menstruation leave if they are unable to work.

Other Leave

Workers are entitled to paid leave in the following circumstances:

• wedding (three days);
• birth of child/paternity leave (two days);
• children’s wedding (two days);
• son’s circumcision (two days);
• child’s baptism (two days);
• wife’s miscarriage (two days);
• death of a spouse, child, child-in-law, parent or parent-in-law (two days);
• death of another member of a worker’s household (one day);
• state obligations;
• religious obligations; and
• trade union activities with the permission of the employer.

Pensions and Social Security

All employees, including foreign workers, who have been employed for at least six months in Indonesia are obliged to become a member of the social security program. Social security for workers covers the following benefits:

• workers’ compensation,
• old age,
• death, and
• pension.

Effective Jan. 1 2022, the legal retirement age is 58, and will gradually increase by one year every three years until it reaches 65. Effective April 26, 2022, retirement benefits can be obtained by employees when they:

• reach age 56;
• reach the pensionable age as set out in their employment contract or collective bargaining agreement;
• resign;
• are laid off;
• leave Indonesia permanently;
• suffer a permanent disability; or
• pass away.

Survivors’ benefits: Death benefits are available to survivors of deceased participants in the social security system who were under the age of 55 when killed or 55 and older and receiving a periodic pension.

Medical insurance: Employers must provide medical coverage for workers, their spouses and up to five children. The policy premium is 5 percent of workers’ pay, borne partly by the employer (4 percent of basic salary plus fixed allowance) and partly by the worker (1 percent of basic salary plus fixed allowance).

Workers’ Compensation

A work accident is one that occurs in connection with employment and includes diseases arising from the workplace as well as accidents that occur during travel to and from work. Workers who suffer an occupational accident are entitled to compensation for transportation costs and costs of treatment and rehabilitation, as well as payments to cover temporary incapacity to work, partial or total disability (mental or physical), and death benefits.

Presidential Regulation No. 7 of 2019 clarified the definition of occupational disease, the scope of coverage, and the types of diseases that are covered under work accident social security.

Reference Citations

Vacation: Manpower Act No. 13 of 2003, arts. 79, 84

Holidays: press release (Sept. 22, 2021), Office of Assistant to Deputy Cabinet Secretary for State Documents & Translation; Ministry of Manpower Decree on Overtime Hours and Wages, No. Kep.102/Men/VI/2004, art. 11 (Indonesian)

Maternity Leave: Manpower Act No. 13 of 2003, arts. 76, 82, 153

Paternity Leave: Manpower Act No. 13 of 2003, art. 93(4)(e)

Sick Leave: Manpower Act No. 13 of 2003, arts. 81, 93(3)

Other Leave: Manpower Act No. 13 of 2003, art. 93(4)

Pensions and Social Security: Manpower Act No. 13 of 2003, art. 99; Labor Social Security Act, No. 3 of 1992, arts. 1, 3, 17-19, 22 (Indonesian); Government Regulation on Workers Social Security Program No. 14 of 1993, arts 2-7 (Indonesian)

Workers’ Compensation: Labor Social Security Act, No. 3 of 1992, arts. 6, 8-11 (Indonesian); Government Regulation on Workers Social Security Program, No. 14 of 1993, arts. 12-21 (Indonesian); Government Regulation No. 79 of 1998 on the First Amendment of the Government Regulation No. 14 of 1993, art. 22 (Indonesian)

Labor Relations

In General

Indonesian law allows workers to form and join unions of their choice without previous government authorization or excessive requirements. A union’s membership must exceed 50 percent of the workers before it can engage in collective bargaining on their behalf. If a labor dispute cannot be resolved through negotiation, conciliation or arbitration, workers have the right to strike and employers to impose a lockout, either with seven days’ notice. If company ownership changes, an existing collective labor agreement remains in effect until it expires.

Right to Organize

Indonesian law allows workers to form and join unions of their choice without previous authorization or excessive requirements. The law stipulates that at least 10 workers must join together to form a union and that membership must be open to all workers, regardless of political affiliation, religion, ethnicity or gender. Unions may draw up their own constitutions and rules and elect representatives, and individual unions can join together to form trade federations and federations to form trade confederations. The government records, rather than approves, the formation of a union, federation, or confederation.

Even if more than one trade union represents workers at a company, there can only be one collective labor agreement, which must apply to all workers at the business. If there is a single union, its membership must exceed half the employer’s workers or it must hold a vote and win the support of more than half the workers in order to engage in collective bargaining.

Collective labor agreements are valid for two years and can be extended by agreement of the employer and the union(s) for a third year. Negotiations on a new agreement can start as early as three months before the end of the prior agreement; if no agreement on a new contract is reached, the prior one stays in effect for another year.

The agreements should include employee and employer rights and the period of the agreement. Terms cannot contradict Indonesian labor law. The parties can agree to make changes to the agreement during the time it is in effect. Agreements with individual workers cannot violate terms of a collective agreement.

The law allows the government to petition the courts to dissolve a union whose activities conflict with the constitution or whose leaders or members commit in the name of the union crimes against the security of the state that result in a sentence of at least five years in prison. Once a union is dissolved, its leaders and members may not form another union for at least three years.

Works Councils

The Labor Code does not address works councils.

Dispute Resolution

Under the Industrial Relations Disputes Settlement Act, the parties to a dispute must first try to resolve it through negotiations. If a consensus is not reached within 30 days, the dispute moves to the local government labor office, which offers the parties a choice of conciliation or arbitration. If the parties fail to make a choice within seven days, the dispute is handed over to a mediator. If no agreement is reached through any of these avenues, either party may file a legal petition in Industrial Relations Court, which will render a binding decision.

The law requires that regional and national labor dispute resolution committees adjudicate charges of anti-union activities. The committees’ decisions can be appealed to the state administrative court. The law also requires that employers obtain the approval of the labor dispute resolution committee before firing workers.

Strikes and Lockouts

All workers, whether or not union members, have the legal right to strike, though public sector workers and those involved in public safety activities can strike only if the action does not disrupt public interests or endanger public safety.

Unions or workers’ representatives must provide seven days’ written notice to the company and the local government labor office of the intention to strike. In that interim period, the local labor office is required to try to resolve the dispute.

In practice, however, workers and employers rarely follow dispute settlement procedures, and workers rarely give formal notice of the intent to strike because the government labor offices respond slowly and have little credibility among workers.

The law prohibits anyone from preventing workers and unions from exercising their right to strike, and employers cannot replace striking workers, impose sanctions or take other retaliatory actions against striking workers or unions.

If a labor dispute remains unsettled, employers are allowed to stage a lockout, as long as it is not in retaliation for workers or unions demanding their rights under work agreements, company regulations, collective labor agreements or labor legislation. Public sector employers and those involved in public safety cannot stage lockouts. Employers are required to provide seven days’ written notice to workers or unions and the local labor office of the intention to lock out workers. In that interim period, the local labor office is required to try to resolve the dispute. If no agreement is reached and the lockout begins, the government labor dispute resolution bodies will continue to seek to resolve the dispute.

Successorship Clauses

If a trade union is dissolved or company ownership changes, the collective labor agreement remains in effect until it expires. If one company merges with another, the collective labor agreement with the better terms for workers applies to the merged firm. If only one of the companies has an agreement, all workers in the merged company fall under that agreement until it expires.

Reference Citations

Right to Organize: Trade Union Act, No. 21 of 2000, arts. 3-5, 9, 11-12, 14, 18, 28 (Indonesian)

Dispute Resolution: Manpower Act No. 13 of 2003, arts. 136-149; Industrial Relations Dispute Act, 2004, art. 40

Strikes and Lockouts: Manpower Act No. 13 of 2003, arts. 137-138, 140-149; Ministry of Manpower Decree No. Kep.232/Men/2003 (Indonesian)

Successorship Clauses: Manpower Act No. 13 of 2003, art. 61

Safety, Health and Security

In General

Employers are required by law to maintain a safe and comfortable workplace and to reduce or eliminate the dangers of workplace accidents and illness. Workplace drug and alcohol use is strictly prohibited. Employers should obtain the consent of their employees prior to using the employees’ electronically stored information.

Workplace Safety and Health

The Work Safety Act of 1970 outlines basic workplace protections to:

• reduce the risks of accidents involving (for example) fire, explosion or electrical shock;
• control the sources of exposures that can pollute the workplace environment’s air and cause work-related diseases;
• create a safe and comfortable workplace through such factors as temperature, lighting, ventilation, cleanliness and proper storage of materials;
• create harmony between worker, environment, working method and process; and
• provide personal protective equipment to workers.

Employers are required to establish an occupational health and safety management system if they:

• employ 100 or more workers or
• require workers to engage in high-risk work.

Workplace Violence: Indonesia’s Ministry of Manpower requires companies to establish a taskforce for the prevention and handling of sexual violence in the workplace. Companies are also required to compensate victims and sanction perpetrators of sexual violence in the workplace.

Drug and Alcohol Use

While national legislation limits smoking in workplaces to designated “smoking rooms,” under Indonesian law implementation of the ban must be left to local jurisdictions, some of which have acted and some not. No jurisdiction has enacted a complete ban on smoking.

Drugs are strictly prohibited in the workplace, and possession can be grounds for termination without compensation. The drinking of alcohol in Indonesian workplaces is also banned.

Reference Citations

Workplace Safety and Health: Manpower Act No. 13 of 2003, arts. 86-87; Work Safety Act of 1970, art. 10 (Indonesian)

Termination

Termination by Employer

Effective September 1, 2023, the Job Creation Law No. 6 of 2023 amends the main Manpower Law No. 13 of 2003. Under the amendment, employers must give 14 working days’ notice of termination and notice is effective unless the employee objects in writing within seven working days. Previously, employers were required to consult the worker’s union—or contact workers directly if they are not union members—before terminating employment. If an agreement could not be reached between those parties, the employer was required to seek the government’s permission to terminate the worker. During the termination process, the employer could suspend the worker but was required to continue to pay salary and provide benefits.

It is quite difficult to terminate employees in Indonesia. The Manpower Act states that employers, as well as trade unions and workers, must “make all efforts” to prevent the termination of employment. Employers must consult the worker’s union—or contact workers directly if they are not union members—before terminating employment. If an agreement cannot be reached between those parties, the employer must seek the government’s permission to terminate the worker. During the termination process, the employer can suspend the worker but must continue to pay salary and provide benefits.

Employers do not need permission to dismiss a worker when:

• the employee is on probation,
• the employee has offered a written resignation,
• a contract for a specified period of time expires or
• a worker has reached retirement age, as specified in company regulations, collective agreements or labor law.

Employers have the right to terminate the employment of a worker for the following conduct:

• theft of company goods or money;
• fraud that harms the company;
• alcoholic intoxication or consumption of other addictive substances at work;
• indecency at work;
• gambling at work;
• attacks, threats or intimidation of co-workers or supervisors;
• abuse of the employer or his or her family;
• persuasion of others at work to break laws or regulations;
• reckless or deliberate damage to life or company property;
• divulging trade secrets;
• missing work for five consecutive days without submitting a written explanation or
• committing crimes that warrant a five-year or longer prison sentence.

Indonesian law prohibits employers from terminating workers because they:

• are absent due to illness, as long as the worker is not absent for more than 12 straight months and the illness is confirmed in writing by a physician;
• are absent because fulfilling government obligations;
• are absent because fulfilling religious obligations;
• are absent to get married;
• are absent because of pregnancy, childbirth, miscarriage or to breast-feed;
• are related to another worker, unless such a termination is required by collective bargaining agreement or company regulations;
• are involved with a trade union;
• have reported a crime committed by the employer;
• have a particular belief, religion, political viewpoint, ethnicity, color, race, sex, physical condition or marital status or
• are disabled or ill because of a work-related incident and the period of recovery cannot be determined.

Termination by Employee

Workers can end the employment relationship by giving at least 30 days’ notice. Unless they terminate the contract for cause, however, employees do not receive severance or reward pay.

Workers can ask the government for permission to terminate a contract and still be eligible for severance and reward pay if the employer:

• is physically or verbally abusive to the worker,
• orders or persuades the worker to commit illegal acts,
• does not pay wages promptly for three consecutive months or more,
• does not live up to obligations to the worker,
• instructs the worker to perform duties outside his or her contractually assigned job or
• assigns jobs that endanger the life, safety, health or morality of the worker, if such a job has not been specified in the work contract.

If a worker gets permission to terminate the contract for cause, he or she gets double severance pay, reward pay and benefits payments. If the worker loses the case, however, the employer may terminate the contract without providing any severance or reward pay.

Plant Closings and Mass Layoffs

Should the nature of the employer change, through either a merger or a change in ownership, the employer is given considerable leeway to terminate its workers.

Under such circumstances, the employer may terminate employees if:

• the workers are not willing to continue their employment,
• the employer does not want to employ the workers in the new enterprise,
• the enterprise closes down because of losses for two consecutive years or because of force majeure (”act of God”),
• the employer is under a suspension of payment obligation,
• the employers has instituted new efficiency measures,
• the enterprise closes for other reasons or
• the enterprise goes bankrupt.

In these cases, the terminated workers are entitled to severance and reward pay and payment for benefits, but if the terminations are because the employer does not want to employ the workers in the new enterprise or the company closes for reasons other than losses or force majeure, severance pay is doubled.

Payment on Termination

Terminated employees are entitled to:

• severance pay,
• a lump sum that constitutes a reward for service rendered and
• payment for any benefits to which they are entitled, such as unused annual leave and housing and health care allowances.

The amount of severance starts at one month’s salary for up to a year of service with the company and increases by a month’s salary for each further year of service up to a maximum of nine months’ wages for eight years or more of service.

The reward pay starts at two months’ salary for workers who have been with a company for from three to six years and increases by a month’s salary for every three further years of service up to a maximum of 10 months’ wages for 24 years of service or more.

Workers who are fired for cause do not receive severance or reward pay, but are entitled to payments for benefits.

Unemployment Insurance

There is no unemployment insurance system in Indonesia.

Reference Citations

Termination by Employer: Manpower Act No. 13 of 2003, arts. 153, 161-172

Termination by Employee: Manpower Act No. 13 of 2003, art. 162

Plant Closings and Mass Layoffs: Manpower Act No. 13 of 2003, art. 164

Payment on Termination: Manpower Act No. 13 of 2003, art. 156

Personal Taxes

Residency Requirements

An individual is regarded as being resident in Indonesia for tax purposes if he or she:

• is domiciled in Indonesia,
• stays in Indonesia for more than 183 days within a period of 12 months or
• is present in Indonesia with an intention to reside.

Taxable Income

Indonesian residents are taxed on their worldwide income. Nonresidents are taxed on Indonesia-source income only. Income subject to tax includes employment income, dividends and royalties.

Tax Rates

Nonresidents are assessed a flat income tax rate of 20 percent. For residents, Indonesia taxes income in progressive bands from 5 percent to 30 percent.

The contribution rates for the Old Age Guarantee Program are 3.7 percent for employers and 2 percent for employees, and the contribution rates for the Pension Plan Program are 2 percent for employers and 1 percent for employees.

Reference Citations

Residency Requirements: Income Tax Law, 2008, art. 2

Web References

In English unless otherwise noted.

Law and Regulation

Constitution of the Republic of Indonesia

Industrial Relations Disputes Settlement Act of 2004

Manpower Act of 2003

Trade Union Act of 2000

Government Websites and Publications

Directorate General of Taxes (Indonesian)