Recruiting Team Members in Indonesia

Building a skilled and competent team involves considering various factors, and in today's globalized workforce, companies are increasingly exploring the option of remote teams. Technology has made it possible to tap into talent from around the world, and one popular destination for remote hiring is Indonesia. In this guide, we will delve into the essentials of employing talent from Indonesia, covering the hiring process, local labor laws, and more. Explore the FAQs below to gain insights into hiring remote employees from this diverse and vibrant country.

1. Why Choose Remote Talent from Indonesia?

Indonesia, ranked fourth globally in population size, boasts over 275 million residents. With a relatively young workforce, where the median age is 28, the country offers a vast pool of talent. Additionally, Indonesia's favorable monthly minimum wage and low cost of living make it an attractive option for remote hiring. The average monthly minimum wage varies by location, ranging from IDR 1,765,000 (USD 127) to IDR 4,416,186 (USD 317). Companies often look for talent in programming, design, and data-entry roles, with many locals providing tech support for international corporations.

2. Where to Find Remote Talent in Indonesia?

Key regions for hiring remote talent in Indonesia include Medan, Palembang, Jakarta, Bandung, Yogyakarta, Surabaya, and Makassar, which have higher economic activity and larger talent pools. Graduates from top universities like the University of Indonesia, Gadjah Madah University, Bandung Institute of Technology, and Airlangga University are highly sought after. Posting job listings on popular job sites, portals, or engaging with trusted recruitment agencies are effective ways to connect with talent.

3. Average Salary of Indonesian Remote Employees

The average salary for remote employees in Indonesia depends on the nature of the job. While monthly minimum wages range from IDR 1,765,000 to IDR 4,416,186, yearly salaries for various positions can differ. Here's an estimate of the annual salary for seven different roles:

The World Bank classifies Indonesians into income groups based on monthly income.

It is revealing that even the upper class can be considered exportable talent for remote teams. Higher educational attainment and possibly better English proficiency are common among the upper class.

4. Income Tax Computations in Indonesia

With a growing number of freelancers and part-time workers in Indonesia, compliance with local tax laws is crucial. Professional Employer Organizations (PEOs) can assist in ensuring proper tax withholding for freelancers, avoiding risks associated with non-compliance.

5. Working Hours in Indonesia

Indonesian employees typically work 40 hours per week, with two common distribution options: 8 hours a day, 5 days a week, or 7 hours a day, 6 days a week. Overtime is limited to a maximum of three hours per day and 14 hours per week, with specific regulations regarding overtime pay. Special considerations apply to the employment of females under 18 and pregnant women during certain hours.

The formula for calculating overtime pay is as outlined below:

6. Mandatory Benefits for Indonesian Employees

Employers are legally required to provide certain benefits to Indonesian employees, including:

- 13th-month pay (Tunjangan Hari Raya or THR)

- Annual leave (12 days per year)

- Sick leave with payment details

- Maternity leave (3 months fully paid) and paternity leave (2 days paid)

Additionally, employers must contribute to Social Security Management Board programs, covering manpower or labor social security and health security.

Employer Payroll Tax:

Employee Payroll Tax:

7. Other Allowances for Indonesian Remote Employees

While not mandated by law, providing non-taxable allowances for remote employees is common and expected. These may include stipends for business expenses, internet and telecom allowances, and transportation allowances for those working from co-working spaces.

8. Regulations on Working During Holidays in Indonesia

Indonesia observes numerous holidays, including public, religious, national, and international holidays. "Cuti Bersama," or collective leave, can extend holidays falling near the end of the week. Employers should be aware of increased pay rates for employees working on weekends, rest days, or holidays.

9. Hiring Remote Employees in Indonesia

For businesses registered in other countries, hiring Indonesian remote talent is streamlined through Professional Employer Organizations (PEOs). PEOs facilitate compliance with local labor laws, making the hiring process efficient and legally sound.

10. Probation Periods in Indonesia

While probation periods are not mandatory, a three-month probation period can be agreed upon in writing for employees on indefinite contracts.

11. Payment Methods for Indonesian Remote Employees

PEOs simplify payroll and compliance with local taxes and labor laws, making them a preferred option for paying Indonesian remote talent. For freelancers or independent contractors, various platforms like PayPal, Xoom, Transferwise, Payoneer, and bank transfers can be used. Payment cycles (weekly, bi-weekly, or monthly) should be agreed upon between employers and employees.

12. Currency for Payments

Paying remote employees in foreign currencies is not feasible in Indonesia. It is recommended to pay employees in their local currency to simplify tax calculations and benefit contributions.

13. Termination Procedures for Indonesian Employees

Terminating employees in Indonesia involves obtaining approval from the Industrial Relations Court or signing a Mutual Termination Agreement. Specific reasons for termination and notice periods should be considered, and standard severance, long service pay, compensation pay, and/or separation pay may apply based on the circumstances.