Employing in Indonesia: What You Need to Know
Law No. 13 on Manpower of 2003 (the Labour Law) creates the legal framework for employment in Indonesia, and applies to both local Indonesians and foreigners employed in Indonesia. It is not possible do contract out any terms of the employment legislation, although practically many contracts does not comply. In the case of conflict between a contract and the law, the law overrides the terms of the contract. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Indonesia.
Key Factors to Consider When Employing in Indonesia
There are several key areas to be aware of within Indonesia’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
-
Contracts
In Indonesia, parties are usually free to negotiate and document their own employment contracts, so long as they contain key information such as employee names, the type of work and wage amount. The terms of employment (such as minimum regional wage and leave entitlements) may not less favourable than those prescribed by law.
Employee Entitlements
| Information | Explanation |
|---|---|
| Working on Sundays ? | No |
| Time Off Work ? | An employee is entitled to paid 12 days annual leave. |
| Medical Leave ? | Employees are entitled to both paid sick leave as well as extended paid sick leave. Workers who are ill and unable to perform their work are entitled to receive full pay for the first four months, then 75% for the next four months, and 50% for the following four months. From that point onwards, employees are entitled to 25% of their wages until termination of their employment contract. |
| Annual Leave Accrual Entitlement ? | All employees are entitled to 12 working days of paid leave each year after one year of continuous work. |
| Maternity Leave in Indonesia ? | Female employees are entitled to not less than 4 months of maternity leave. |
Employment Termination
| Information | Explanation |
|---|---|
| Termination of Employment ? | Employment contracts are considered to have terminated if:
Outside of the probationary period, termination of an indefinite term employment contract requires bipartite negotiations and settlement – this can be achieved through conciliation, mediation or proceedings before the Industrial Relations Courts. If a fixed term contract terminates for a reason other than one of the above, the party terminating the contract is required to pay compensation to the other party. This compensation must be equivalent to the amount of wages the employee is entitled to receive from the point of termination to the date of contract expiration.
|
Probation
| Information | Explanation |
|---|---|
| Probation Period ? | In Indonesia, employees under a definite term contract cannot be employed on a trial or probationary basis, although employees under indefinite term contracts may be employed on a probationary basis for a maximum period of up to three months. |
Pension
| Information | Explanation |
|---|---|
| Pension Requirements ? | In Indonesia, the employer is the prime provider of social welfare. Employers with more than 10 employees or paying a monthly salary exceedings IDR1,000,000 must register with the Jaminan Sosial Tenaga Kerja (Jamsostek), which is state-owned company provided the Worker’s Social Security Programme. There are requirements for both employee and employer contribution rates based on a percentage of salary. The categories of Welfare Contributions include:
|
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 local entity 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.
Outsourcing Employment Through a GEO Employer of Record Service
Using Shield GEO Employer of Record Services in Indonesia
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Indonesia. For companies which intend to employ their staff directly through their incorporated Indonesian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Indonesia.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Indonesia.
The Shield GEO solution is an attractive alternative where
– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Indonesia
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Indonesia
– the company needs help with tax, employment, immigration and payroll compliance in Indonesia
Shield GEO can contract directly with the company to employ and payroll their staff in Indonesia. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.
Payroll
| 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. |
| Currency ? | Indonesian Rupiah (IDR) |
|
|||||||||||
| Tax Returns Supplied | Yes |
||||||||||
| Employers Social Security and statutory contributions |
|
||||||||||
| Employees Social Security and statutory contributions |
|
Payroll and Tax in Indonesia
There are specific rules for payroll and taxation in Indonesia, depending upon whether your company employs foreign nationals or local Indonesian employees. The primary concerns for a foreign company that needs to comply with tax laws in Indonesia are: Individual income tax (IIT) for employees in Indonesia, social security costs, capital gains tax, payroll tax, sales tax, withholding tax, business tax and permanent establishment concerns. Most Indonesian taxes are largely similar to that of other jurisdictions.
| Information | Explanation |
|---|---|
| Remote Payroll ? | A remote payroll in Indonesia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Indonesia. The best option for a non-resident company to payroll its employees (local and foreign) in Indonesia is to use a fully outsourced service like a GEO or FESCO which will employ and payroll the staff on their behalf. |
| Local Payroll Administration ? | In some cases, a company will register their business in Indonesia under one of the forms available, but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider. |
| Internal Payroll ? | Larger companies with a commitment to Indonesia may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Indonesian payroll, and can fulfill all tax, withholding, and payroll requirements. This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Indonesian employment laws. |
| Fully Outsourced Payroll & Employment ? | Companies can outsource the employment and payroll of their staff in Indonesia to a GEO, like Shield GEO. This is possible for both foreign workers and Indonesian nationals. This is the easiest, fastest and safest way to payroll staff in Indonesia. Shield GEO manages all aspects of payroll for workers in Indonesia, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client. Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips. Read more about outsourced payroll and employment through Shield GEO. |
Jump to...
Setting up payroll in Indonesia
| Information | Explanation |
|---|---|
| Currency ? | Indonesian Rupiah (IDR) |
| Social Security Registration ? | Jamsostek is mandatory for every employment in Indonesia, especially for local employees. Depending on
the type of business, the rate ranges from 6.24% to 7.74% of the fix income, from which 2.00% is employee
contribution.
The breakdown of the rate is as follows:
• Work Accident Insurance, ranging from 0.24% to 1.74%, depending on type of business.
• Life Insurance, 0.30%
• Pension Fund, 3.70% employer contribution and 2.00% employee contribution.
In addition to the above, the company can insure its employees with Jamsostek Health Insurance (3.00% for
single employee, 6.00% for married employee). This insurance is not mandatory, provided that the company
has offered a better health insurance choice than what Jamsostek offers.
|
Tax Figures
| Information | Explanation | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Corporate Income Tax ? | The flat rate is 25%. |
||||||||||
| Income Tax Rate ? |
|
||||||||||
| Payroll Tax ? | N/A |
||||||||||
| Sales Tax ? | VAT is taxed at 10%. |
||||||||||
| Withholding Tax ? |
|
||||||||||
| Income Tax (Personal Allowance) ? | Employers have responsibility to withhold employees’ income tax every time they pay their salary, other
allowances, and benefits. The deduction is based on Article 21 Income Tax Act. The rates are progressive,
starting from 5% and increasing gradually up to 30% for the higher income layers.
|
||||||||||
| Time to prepare and Pay Taxes ? | 221 hours |
||||||||||
| Time required to start a Business ? | 24.89999962 days |
Payments
| Information | Explanation |
|---|---|
| Frequency of Salary Payment ? | Monthly |
| Invoice / Payslips required ? | Monthly pay slips available on web-site, pdf or paper |
| Minimum Wage ? | Annual (US$)1,087 |
Immigration and Work Permits in Indonesia
Foreign workers are required to have the proper visas and work permits in Indonesia, as established by immigration laws. The process of obtaining the required documentation to live and work in Indonesia can be complex and long, due to new laws and regulations, lack of posted regulations, irregular application of existing regulations and other matters. Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Indonesian market. If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.
Have your own company?
It is possible for companies that have established a local entity in Indonesia to arrange IMTA Work permits. It is highly recommended to utilise an Indonesian Immigration specialist to assist with the application and processing.
The employment of foreigners in Indonesia is regulated by the Manpower Ministry (Menteri Tenaga Kerja). Visas for foreign workers are issued by the Directorate Jenderal of Immigration, within the Ministry of Justice. Both of these government entities process various parts of the application.
In contrast to many other jurisdictions, there is no charge for immigration forms and folders. A Memorandum signed in January 2013 by the Director General of Immigration indicated that all immigration forms must be given and processed free of charge by the immigration offices.
The process, however, is known for its extreme slowness, worsened by the fact that regulations are often applied inconsistently and processing times therefore vary quite dramatically.
The steps for obtaining a work permit are described in detail below.
1. The company must ensure it complies with the conditions of the Expatriate Placement Plan
The guidelines of the Expatriate Placement Plan (Rencana Penempatan Tenaga Kerja Asing – RPTKA) set out what foreign expertise is required for the development of the country, and therefore who may be issued work permits.
National, multinational and joint venture firms are required to submit a manpower plan to the Kemenakertrans detailing their foreign labour requirements. Foreigners must receive a recommendation from the Manpower Department if the company is Indonesian, of the Investment Board Department if the employing company is a foreign company.
The following documents are required for a job position to be eligible for the RPTKA:
- A letter detailing the reasons for hiring the foreign worker and what specific position is expected to be filled
- The application form
- The company’s deed of establishment, ministerial approval and adjustments
- Evidence of the company’s paid up capital of at least IDR 1,000,000,000
- Company organisation chart
- Letter of recommendation for the relevant technical ministry, if the company is involved in education, transportation, oil & gas, or mining
- There must be one Indonesian counterpart employee per foreign worker (not applicable to directors)
- An education and training plan for the Indonesian counterpart
- The Wajib Lapor Ketenagakerjaan (WLK), an annual report stating the numbers of expats and local employees.
2. The company applies for the work permit
Company sponsorship is a requisite step for foreigners who wish to undertake work in Indonesia to obtain a work permit. Once the RPTKA has been granted by the government, the company must apply for a work permit – the Ijin Mempekerjakan Tenaga Kerja Asing (IMTA).
If the company is domestically owned, the RPTKA must be submitted to the Manpower Department. If the company is foreign owned, the RPTKA should be submitted to the Investment Coordinating Board.
Certain small Indonesian companies are prohibited from hiring expats, and “medium-sized” companies can only hire 2 foreign workers. For larger companies, there is no cap, although the 1:1 ratio must be satisfied.
The work permit cannot be issued if an Indonesian worker could fill that same position.
An IMTA can be issued for up to 12 months.
The following documents must be included:
- Proof of the foreign worker’s education which is relevant to the position they will hold
- A certificate of competence, or work experience of at least 5 years in a relevant position
- A statement from the foreign worker, agreeing to transfer their knowledge to their Indonesian counterpart
- A copy of thee employment agreement of the Indonesian colleague
- A taxpayer identification card, if the expat is working longer than 6 months
- An insurance policy issued by an insurance company incorporated in Indonesia
- A National Social Security policy, if working for longer than 6 months
- RPTKA approval
- A copy of the worker’s passport, showing that they are 25 years or older but no older than 55, for oil and gas, and 60, for teachers
- Two colour passport-sized photographs
- A letter of recommendation from a technical ministry, if applicable
3. Register for the Skill & Development Fund Fee
Companies employing foreigners are charged $100/month to offset the cost of training Indonesian workers. This is administered through the Manpower Ministry, and paid to the Skill & Development Fund Fee (Dana Pengembangan Keahlian dan Keterampilan – DPKK). This fee must be paid before a work permit can be approved.
Manpower plans can only be approved for one year. If companies decide to employ more foreign workers than stipulated in their manpower plan, they must revise the plan and wait several months for approval.
For positions other than a director, the foreign worker’s expertise must be proven, since government regulations limit the employment of foreigners in Indonesia to only “experts”, due to high unemployment of nationals.
4. Obtain residence permit
Once the RPTKA is approved, the TA01 recommendation must be applied for at the Manpower Ministry so that the foreign worker is able to obtain a temporary residence visa.
Use the Shield GEO Employer of Record Solution?
Once you get in touch with us, one of our experienced consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed throughout the process.
Get in touch if you'd like a simple solution to employing in IndonesiaTypes of visas in Indonesia
| Category | Description of Visa |
|---|---|
| Work Permit (IMTA) | This is available to expert foreign workers who have knowledge that no Indonesian national is able to contribute to the job. |
| Business visa | These are issued for businesss purposes and do not allow foreigners to be employed or work in Indonesia. They may conduct negotiations, short term work assignments or training assignments. |
Setting up a company in Indonesia
When setting up a company you may want to consider these factors:
-
Business Factors
Companies should consider business factors such as:
- The industry and type of business
- Nationality of the headquarters/individual(s) and
- Presence of existing trade agreements or relationships
-
Location
Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.
-
Regional Language
Regional language may be an influence. Although Indonesian is the national language, there are over 700 living languages spoken in Indonesian such as Javanese, Sundanese and Minangkabau.
There are several types of business entities available in Indonesia, the most common vehicle being the foreign investment company (Penanaman Modal Asing or PMA). Other entity types include foreign representative offices. Branch offices are generally not allowed. Foreigners can either set up a limited liability company which is 100% foreign owned or a limited liability company through a joint venture with Indonesian partners. The steps for setting up these business types are explained below.
Representative Office
Foreign companies are allowed to establish a representative office in Indonesia, subject to significant restrictions, including only being able to perform marketing or promotion activities or market research. Only certain sectors, including trading, serices, oil and gas mining and banking, are allowed to set up a representative office.
Steps Required:
1. The Head of the representative office submits an application to the Indonesian Investment Coordinating Board.
2. Obtain domicile letter
3. Register with the Tax Office
4. Register with the Company Registry
Time: 22-33 days
Cost: Around IDR 10,000,000
Foreign representative offices are often useful for developing a principal foreign company’s business interests in Indonesia, but are not permitted to conduct business in Indonesia. There must be an individual nominated by the principal foreign company as responsible for the management of the representative office.
FROs are prohibited from:
- Generating revenues
- Entering directly into contracts or transactions in relation to any sale or purchase of goods and services with any business or individual in Indonesia for business purposes
- Engaging in the management of any Indonesian company, subsidiary or branch.
The head of the representative is required to submit an application to the Indonesian Investment Coordinating Board, or may grant a power of attorney to its lawyers to do so.
Once the application is submitted, a licence can be expected within 5 days.
Benefits include that there are no capital requirements, and that a representative office can handle sales and delivery activities.
Steps involved are:
1. Obtain the Indonesian Investment Coordinating Board approval of representative office
This application requires the following documentation:
- Letter of appointment from the parent company
- Power of Attorney to sign the application if the parent company is represented by another party
- Copy of valid passport (for foreigners) or copy of ID card (for Indonesians) for the individuals nominated as executives of the representative office
- Letter of statement concerning the willingness to stay and only work as a representative office executive without engaging in other business in Indonesia
Time: 3-5 days
2. Obtain Domicile Letter
A letter of domicile must be obtained from the local government.
Time: 3-5 days
3. Register with the Tax registry
The representative office must apply for a taxpayer identification number (NPWP) from the Tax Office.
Time: 2 days
4. Register with the company registry
Time: 14-21 days
Limited Liability Company (Perseroan Terbatas)
The Perseroan Terbatas is a limited-liability corporation (LLC) organized by foreign nationals and capitalized with foreign funds. The limited liability company must go through the entire registration and incorporation process, and is the most costly business structure to setup.
Steps Required:
- Pay fees for obtaining clearance of the company name at a bank
- Arrange for notary to obtain standard form of company deed
- Notarise company documents
- Apply to the Ministry of Law and Human Rights for approval of the deed of establishment
- Obtain the Building Management Domicile Certificate
- Apply for the Certificate of Company Domicile
- Pay non-tax state revenue fees for legal services
- Apply for permanent business trading license
- Obtain company registration certificate
- Register with Ministry of Manpower
- Apply for social security, health care insurance, taxpayer registration number and VAT collection
Time: 2-3 months
Cost: Approximately IDR 2,000,000
A limited liability corporation s a common investment vehicle for Indonesia-based business wherein foreign parties (individuals or corporate entities) can incorporate in the country.
A limited liability company can give greater control over the business venture in Indonesia, and avoid a multitude of problematic issues which can potentially result from dealing with a domestic joint venture partner.
Such problems often include profit not being maximized, leakage of the foreign firm’s intellectual property and the potential for joint venture partners to set up in competition against the foreign firm after siphoning off knowledge and expertise.
The steps for setting up a LLC are explained in detail below.
1. Pay fees for obtaining clearance of the company name at a bank
The company name must be cleared with a notary through a computerized processing system. The notary must pay the fee of IDR 200,000 at a bank before obtaining clearance for the proposed company name. They will then obtain a payment receipt with a code.
Time: 1 day
Cost: IDR 200,000
2. Arrange for notary to obtain standard form of company deed
The notary will then use this code online to reserve the company name as proof of payment. The reserved name will be blocked for a period of 60 days, although this procedure is not necessary if the founding shareholders are confident the same name has not already been used.
The company name must not:
- Have been lawfully used by any other company or which is similar to another company’s name
- Be identical or similar to the name of a state, government, or international agency without approval
- Fail to conform to the purposes and objectives and activities of the company
- Consist of a set of numbers, letters or figures that do not form any words
The Ministry of Law and Human Rights may reject name application reservations if names are the same or resemble those of another company.
The application form for the company name must be accompanied by the following information:
- The payment number of the approval of the use of the company’s name from the bank
- The booked name of the company
Time: 4 days
Cost: Included in Step 3
3. Notarise company documents
An application to use a name similar to or the same as a well-known trademark will be rejected unless approval is obtained from the holder of the trademark. The maximum notary fee for objects of deed with an economical value of between IDR 100,000,000 and 1,000,000,000 is 1.5% of the total object of the deed’s value.
Time: Online process, less than a day
Cost: Depends on the value of the object of the deed
4. Apply to the Ministry of Law and Human Rights for approval of the deed of establishment
The application for approval of establishment of a company should be able to be electronically filed, by attaching the certificate of the bank account and a copy of the relevant bank transmittal advice.
The application must be filled in at most 60 days since the date of the deed establishment, which will be approved by the Ministry of Law. After 14 days, the Ministry of Law will issue the legalization on the establishment of the company. The establishment of company will be announced in the Supplement State Gazette within 14 days by the Ministry of Law.
Time: Less than 1 day
Cost: Included in Step 1
5. Obtain the Building Management Domicile Certificate
Companies located in an office building need to get the Building Management Domicile Certificate from the Building Management Office before proceeding to the next step.
Time: 1 day
Cost: No charge
6. Apply for the Certificate of Company Domicile
All Indonesian limited liability companies are required to possess a certificate of company domicile. This is issued by the head of the village where the company is located or by the building management if the office space is leased. This is required for several documents.
Time: 2 days
Cost: No charge
7. Pay non-tax state revenue fees for legal services
The requirement to pay the non-tax state revenue fee for legal services is stated on the website of the Legal Entity Administration System.
The cost breakdown is as follows:
- IDR 1,000,000 for validation of the company as a legal entity
- IDR 30,000 for publication in the State Gazette
- IDR 550,000 for publication in the Supplement State Gazette
Time: 1 day
Cost: IDR 1,580,000
8. Apply for permanent business trading license
The company must then apply for the permanent business trading license (SIUP) at the Ministry of Trade. This constitutes the business license for a non-facility company engaging in trading business and contains details about company activities, and the person in charge of the company.
Usually, the following documents must be attached:
- A copy of the company’s articles of association
- An attestation of location and the address of company offices
- ID card of the company’s President or Director
- Letter of approval from the Ministry of Law and Human Rights
After the application is reviewed, the Municipality will pass it along to the technical agency at the regional office for cooperatives for further review. It usually takes around 2 days to obtain the signature of the head of that regional office, after which the SUIP is provided.
Time: 15 days
Cost: No charge
9. Obtain company registration certificate
The Company registration certificate (Tanda Dafta Perusahaan – TDP) must be obtained from the local government office, trade sub-division. The SIUP must be obtained before the TDP can be obtained, with the same documents as the previous step required for submission.
Time: 14 days
Cost: No charge
10. Register with Ministry of Manpower
Companies must submit a manpower report in the company to the Ministry of Manpower and Transmigration, or the appointed officer, within a period of no more than 30 days from establishment of the company. The report must contain the following information:
- Company identification
- Manpower relation
- Manpower protection
- Employment opportunities
Ratification of the registration of mandatory labour affairs report in the company is expected to be completed within one working day.
Time: 1 day
Cost: No charge
11. Apply for social security, health care insurance, taxpayer registration number and VAT collection
Companies must then apply for the Workers Social Security Program (BPJS Ketenagakerjaan), healthcare insurance, and for a taxpayer registration number and VAT collector number. These are processed with the Social Security Administrative Bodies and Tax Office.
For social security and healthcare insurance the employer must provide the following personal information for each candidate:
- Name
- Date of birth
- Name of health service provider as selected by the employee
- Other personal information including:
- Employee and family member(s) who will be covered by the health insurance program
- Employee salary information
- Information on participation status
To register for tax, the following must be sent:
- Deed of establishment
- Identity card of one active director
- Statement letter regarding confirmation on place of business from one of the active directors
Time: 7 days, simultaneous with previous procedures
Cost: No charge
Joint Venture
A joint venture (JV) is a form of foreign invested enterprise (FIE) that is created through a partnership between foreign and Indonesian investors, who together share the profits, losses and management of the JV. It is used most often when there is a need for a local business partner who can offer distribution channels, government relationships or significant market knowledge. Despite this the JV structure can bring challenges and risks by entering a business relationship with Indonesian investors.
Steps Required:
- Register Business License
- Obtain Certificate of Approval
- Name Internal Supervisor
A joint venture (JV) is a form of foreign invested enterprise (FIE) that is created through a partnership between foreign and Indonesian investors, who together share the profits, losses and management of the JV. As a foreign investor, there are several advantages to creating a JV:
- Foreign investors can draw upon local market knowledge, business networks and the expertise of their Indonesian business partner
- JVs are not required to rent premises in Indonesia, although a registered office is required
- Indonesian partner companies can obtain a 30-year license to undertake business
As with any partnership, in addition to the advantages of working together, JVs also face serious challenges. It is strongly recommended that prior to choosing this form of investment vehicle you consult with the foreign partner of an existing JV in order to better understand the advantages and disadvantages of the JV structure.
A JV is a limited liability company, where the liability of the JV’s investor(s) is generally limited to the assets of the JV. The “total investment” of a JV is the amount of capital required to start-up the business until it becomes self-sufficient from its investors.
Parties to an incorporated joint venture typically enter into a joint venture agreement or shareholders’ agreement which supplements the terms of the company’s articles of association. This agreement has no particular requirements, other than its terms should not contravene the mandatory corporate governancy requirements of Indonesia’s company law.
The time and costs of forming a joint venture are not specifically dictated under Indonesian law.
Outsourcing Employment Through a GEO Employer of Record Service
Whether to incorporate in Indonesia, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.
If the company intends to have staff in Indonesia they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where
- the company is looking to setup an office quickly
- the company wants to work within a defined budget
- the company wants to limit its initial commitment in Indonesia
- the company needs help with tax, employment, immigration and payroll compliance in Indonesia
The complexity of employment regulations in Indonesia makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.
Shield GEO provides a comprehensive service in Indonesia allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Indonesia.
Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Indonesia. Read more about outsourced employment through Shield GEO.
- Indonesia Employer of Record Overview
Indonesia
Join 3800+ employers managing overseas employees