Expanding into Indonesia offers global employers a powerful opportunity to access a skilled, young, and growing workforce. However, hiring and managing employees in Indonesia requires careful attention to employment laws, tax regulations like PPh21, and statutory benefits such as BPJS and THR.
This guide explains how an Employer of Record (EOR) in Indonesia helps international companies hire, pay, and manage local employees legally without establishing a local entity. It covers compliance requirements, tax insights, benefits, and practical steps to streamline hiring through EOR solutions.
Table of Contents
- Overview About Indonesia
- What is an Employer of Record in Indonesia?
- Employer of Record vs Legal Entity in Indonesia
- What are the Use Cases for Availing of Services Under Employer of Record Indonesia?
- Laws and Compliance Best Practices to Hire Employees in Indonesia
- Best EOR Companies in Indonesia
- What are EOR Services in Indonesia?
- How to Hire Employees Through an EOR Indonesia Partner
- Taxes in Indonesia (PPh21 Overview)
- Total Compensation Calculator for Hiring Employees in Indonesia
- Key Considerations While Hiring Employees Through EOR in Indonesia
- Employee Benefits in Indonesia (BPJS, THR, and Leave Policies)
- Terminations in Indonesia
- How to Choose the Right EOR Indonesia Services
- Benefits of Working With an Employer of Record (EOR) Service Provider in Indonesia
- Visa Types in Indonesia and Work Permit Requirements
- Risks or Drawbacks of EOR Indonesia
- How Does Employer of Record Indonesia (EOR) Differ From HR Software?
- How Much Does It Cost to Avail Services Under EOR Indonesia?
- Conclusion
- FAQs
Overview About Indonesia
Indonesia, Southeast Asia’s largest economy, has a population exceeding 275 million and a workforce characterized by youth, digital skills, and adaptability. Global employers increasingly view Indonesia as a hub for remote and hybrid hiring.
Key highlights include:
- Fast-growing technology, manufacturing, and services sectors
- Strong government focus on digital transformation and upskilling
- Competitive labor costs compared to regional peers
- Dynamic labor laws governed by the Manpower Law (No. 13/2003, amended by the Omnibus Law)
For companies expanding into Asia, hiring employees in Indonesia through an EOR offers cost efficiency and ensures full compliance with local employment laws.
What is an Employer of Record in Indonesia?
An Employer of Record (EOR) in Indonesia legally employs workers on behalf of a foreign company. The EOR handles employment contracts, payroll, BPJS contributions, tax compliance (PPh21), and mandatory THR payments, while the client company manages day-to-day operations.
Key responsibilities managed by an EOR include:
- Drafting and maintaining compliant employment contracts
- Processing monthly payroll and payslips
- Withholding and filing PPh21 income tax
- Registering employees for BPJS Ketenagakerjaan and BPJS Kesehatan
- Managing leave, attendance, and THR compliance
This model enables international businesses to operate in Indonesia quickly and compliantly without setting up a local entity.
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Employer of Record vs Legal Entity in Indonesia
| Criteria | Employer of Record (EOR) | Legal Entity (PT/PT PMA) |
| Setup Time | 1–2 weeks | 3–6 months |
| Initial Cost | Low | High (registration, legal, and tax costs) |
| Payroll & Tax Compliance | Managed by EOR | Managed internally |
| Legal Employer | EOR partner | The company itself |
| Ideal Use | Market testing, remote hiring | Long-term operations |
For companies seeking to hire quickly and test the Indonesian market, the EOR model offers a faster, lower-risk solution than establishing a PT PMA.
What are the Use Cases for Availing of Services Under Employer of Record Indonesia?
EOR services suit businesses of all sizes. Typical use cases include:
- Hiring full-time remote employees without entity setup
- Onboarding contractors under compliant employment terms
- Managing cross-border payroll for distributed teams
- Entering the Indonesian market for short-term projects
- Supporting global expansion before establishing a local subsidiary
Startups, tech firms, and multinational corporations use EORs to ensure legal employment and payroll accuracy while focusing on growth.
Laws and Compliance Best Practices to Hire Employees in Indonesia
Foreign companies must comply with Indonesian labor laws to avoid penalties and disputes. Key regulations include:
- Manpower Law (Law No. 13/2003, amended by the Omnibus Law)
- BPJS Law on social security for health and employment
- Ministry of Manpower regulations on working hours, overtime, and termination
- PPh21 income tax obligations
Best practices:
- Maintain written contracts in Bahasa Indonesia
- Register employees for BPJS within 30 days of hiring
- Pay THR (Tunjangan Hari Raya) annually before major religious holidays
- Ensure compliance with 40-hour workweek and overtime compensation rules
An EOR like Asanify helps employers stay compliant through automated payroll and HR systems aligned with Indonesian regulations.
Best EOR Companies in Indonesia
Top providers offering Employer of Record solutions in Indonesia include:
- Asanify – localized payroll, BPJS, THR, and PPh21 compliance with global HR integration
- Deel – global EOR platform with coverage in 100+ countries
- Remote – offers EOR and contractor management globally
- Multiplier – Asia-focused EOR provider
- Papaya Global – multinational HR and payroll solutions
Asanify stands out for its local compliance expertise, Indonesian payroll precision, and dedicated onboarding support for distributed teams.
What are EOR Services in Indonesia?
EOR services in Indonesia typically cover:
- Employment contract drafting and maintenance
- Monthly payroll processing and payslips
- PPh21 income tax withholding and remittance
- BPJS registration and ongoing contributions
- THR calculation and payment
- Leave and attendance management
- Employee onboarding and offboarding documentation
These services ensure that both employer and employee meet all legal obligations under Indonesian law.
How to Hire Employees Through an EOR Indonesia Partner
Hiring through an EOR involves a straightforward process:
- Identify roles and salaries for Indonesian employees
- Partner with an EOR service provider such as Asanify
- The EOR drafts legally compliant employment contracts
- Employees are onboarded and registered for BPJS
- Monthly payroll, tax deductions, and THR are processed automatically
This process allows companies to expand within weeks while maintaining full legal compliance.
Taxes in Indonesia (PPh21 Overview)
PPh21 is the employee income tax applied to salaries, bonuses, and benefits. Employers must withhold and remit PPh21 to the tax authority monthly.
General overview:
- Tax rates are progressive from 5% to 35%
- Employers calculate, withhold, and pay the tax
- Annual filing must be completed by March of the following year
Example calculation (simplified):
| Annual Income (IDR) | Tax Rate | Tax Amount |
| Up to 60 million | 5% | 3 million |
| 60–250 million | 15% | 28.5 million |
| 250–500 million | 25% | 62.5 million |
| Above 500 million | 35% | Variable |
EOR providers handle all calculations, filings, and remittances to ensure payroll tax accuracy.
Total Compensation Calculator for Hiring Employees in Indonesia
Employers must account for additional statutory costs beyond salary, including BPJS, THR, and tax.
Example structure for monthly total cost:
| Component | Employer Contribution (%) | Notes |
| BPJS Ketenagakerjaan | 3.7% | Social security for employment |
| BPJS Kesehatan | 4% | Health insurance |
| THR | 8.3% (1/12 salary) | Religious holiday bonus |
| Income Tax (PPh21) | Variable | Employee-specific |
EOR partners provide full transparency into gross-to-net and total employer costs before hiring.
Key Considerations While Hiring Employees Through EOR in Indonesia
When hiring through an EOR, companies should consider:
- Ensuring the EOR’s compliance track record and experience in Indonesia
- Confirming local payroll accuracy and transparent billing
- Reviewing contract terms and SLAs
- Verifying inclusion of mandatory benefits (BPJS, THR, annual leave)
- Maintaining open communication for onboarding and performance feedback
These measures protect both the employer and employee from potential compliance or payroll disputes.
Employee Benefits in Indonesia (BPJS, THR, and Leave Policies)
Mandatory employee benefits in Indonesia include:
- BPJS Ketenagakerjaan: social security covering old-age, work accident, and death benefits
- BPJS Kesehatan: national health insurance program
- THR (Tunjangan Hari Raya): annual religious holiday allowance equal to one month’s salary
- Annual Leave: minimum 12 days after one year of service
- Maternity Leave: 3 months paid leave
Employers must register workers with BPJS within 30 days of hiring and ensure timely monthly contributions.
Terminations in Indonesia
Employee terminations are regulated by the Manpower Law, requiring clear cause and proper compensation.
Grounds for termination include resignation, redundancy, misconduct, or contract expiry.
Employers must pay severance and notice pay based on tenure and cause of termination.
Key Steps Involved in Terminating Employees in Indonesia
- Provide written notice to the employee
- Document reasons and follow due process
- Calculate severance as per Article 156 (basic pay + allowances)
- Settle all dues, including unused leave and THR
- Submit termination report to the Ministry of Manpower if required
Using an EOR ensures every step aligns with Indonesian labor law and reduces legal exposure.
How to Choose the Right EOR Indonesia Services
Key factors to evaluate:
- Proven expertise in Indonesian payroll and HR compliance
- Transparent pricing with no hidden costs
- Technology integration with HR systems
- Local legal and tax support
- Employee onboarding speed and service quality
Asanify’s EOR solution offers all these features, simplifying compliance and payroll for global teams.
Benefits of Working With an Employer of Record (EOR) Service Provider in Indonesia
- Hire employees quickly without entity setup
- Full compliance with BPJS, THR, and PPh21 regulations
- Payroll accuracy and on-time salary disbursement
- Reduced legal risk and administrative overhead
- Seamless HR and tax reporting
EOR solutions help companies stay compliant while scaling operations efficiently.
Visa Types in Indonesia and Work Permit Requirements
Foreign employees require the following:
- KITAS (Temporary Stay Permit)
- IMTA (Work Permit)
- VITAS (Limited Stay Visa)
The EOR manages visa sponsorship, documentation, and renewals, ensuring compliance with immigration laws.
Risks or Drawbacks of EOR Indonesia
- Limited control over certain HR policies
- Co-employment perception in rare cases
- Dependency on EOR for contract and compliance management
However, a reputable EOR like Asanify mitigates these risks through transparent processes and strong local compliance frameworks.
How Does Employer of Record Indonesia (EOR) Differ From HR Software?
- EOR acts as the legal employer; HR software is only a management tool
- EOR handles compliance, payroll, and contracts; HR software tracks attendance and data
- Asanify integrates both functions providing a unified HR and payroll compliance platform
How Much Does It Cost to Avail Services Under EOR Indonesia?
EOR pricing depends on role type, headcount, and payroll complexity. Typical cost components include:
- Base salary and statutory contributions
- Monthly EOR administrative fee (flat or percentage-based)
- Additional costs for visa or work permit management
On average, employers can expect to pay between 10–15% above gross salary for full EOR coverage in Indonesia.
Suggetsed Read: What Is Staffing in Management? Types, Steps, and Importance Explained
Conclusion
Using an Employer of Record in Indonesia allows global businesses to hire talent confidently while meeting every local employment, tax, and benefit requirement. From payroll and BPJS to THR and PPh21 compliance, EOR solutions simplify expansion into Indonesia.
Asanify helps global companies hire and manage employees in Indonesia without setting up a local entity. From payroll processing and BPJS registration to THR and PPh21 compliance, our Employer of Record solutions in Indonesia make expansion seamless. Book a demo today.
FAQs
An Employer of Record (EOR) in Indonesia legally employs workers for foreign companies, managing payroll, BPJS, PPh21, and compliance. It lets global businesses hire locally without setting up a legal entity.
PPh21 is Indonesia’s income tax, calculated on employee earnings after deductions. Rates range from 5% to 35%, and employers must withhold and remit the tax monthly.
Employers contribute 3.7% to BPJS Ketenagakerjaan and 4% to BPJS Kesehatan, while employees contribute 2% and 1% respectively. These ensure social and health security coverage.
THR (Tunjangan Hari Raya) must be paid at least seven days before the employee’s religious holiday. It equals one month’s salary or is prorated for shorter tenure.
EOR services typically cost 10–15% above gross salary, covering payroll, BPJS, THR, and tax compliance. Exact fees vary by role and employee count.
Yes, through an EOR in Indonesia. The EOR becomes the legal employer while the company directs daily work, ensuring full compliance without entity setup.
Severance pay depends on tenure and reason for termination, generally ranging from one to nine months of salary plus unused leave and THR.
Asanify automates payroll, PPh21 tax, BPJS registration, and THR payments, ensuring accurate and timely compliance under Indonesian labor laws.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.
