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Employing in Indonesia

At a glance

Employment in Indonesia

Foreign companies that employ workers in Indonesia face several challenges and must adhere to the legal and regulatory framework that is in place. Most notably there are restrictions depending on the type of local entity they have incorporated. In some cases, using an outsourced employer will make the process smoother, and it is recommended to use professional legal services as well. Our guide explains Indonesian policies on leave, termination and payment of benefits.

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Payroll & Tax in Indonesia

Complying with local payroll and tax requirements is essential for a company doing business in Indonesia. Issues such as tax rates and withholding and social security are all essential in ensuring a smooth human resources operation. Many companies will consider outsourcing these administrative tasks to a GEO (Global Employment Organization).

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Immigration / Work Permits in Indonesia

Foreign workers are required to have the proper visas and work permits in Indonesia, as established by immigration laws. Because the country’s immigration laws are often applied inconsistently, this process can be difficult and time-consuming. The most common work permit is called an IMTA work permit.

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Incorporation

There are several business structures available for incorporation in Indonesia, and each has advantages and disadvantages. Generally, the ease of doing business in Indonesia has improved in recent years. In some cases it will depend upon the type of industry that you are in, and the scope of planned business activity. Our guide has a comparison of the time and cost for incorporating standard company structures including Rep Office, WFOE and JV.

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GEO Solutions or DIY Employment in Indonesia?

Indonesia is South East Asia’s largest economy and has consistently experienced strong economic growth over the past few years. Companies entering Indonesia must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities. Typically, Indonesia has developed a reputation for its inconsistent application of employment and incorporation regulations, which can make it difficult for non-Indonesian nationals to set up a business. A GEO or Indonesia Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have an Indonesian entity established that can run payroll.

A DIY approach will typically take several months until there is a properly incorporated WFOE ready to run payroll and cost up to 6 figures if registered capital is required. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Indonesia

Payroll Indonesia
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

 
Grossed income Tax Rate (%)
0-50,000,000 5
50,000,001-250,000,000 15
250,000,001-500,000,000 25
>500,000,000 30
Tax Returns Supplied

Yes

Employers Social Security and statutory contributions
  • Working accident protection: 0.24%-1.74%
  • Death insurance: 0.3%
  • Old age saving: 3.7%
  • Healthcare: 4%
Employees Social Security and statutory contributions
  • Working accident protection: N/A
  • Death insurance: N/A
  • Old age saving: 2%
  • Healthcare: 1%
Corporate Income Tax Rate

The flat rate is 25%.

Payroll Tax

N/A

Sales Tax

VAT is taxed at 10%.

Withholding Tax
  • Dividends: 15%
  • Interest: 15%
  • Royalties: 15%
Work Permits
Business Visas
Others
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