Payroll System in Indonesia

•••••
Facebook
Twitter
LinkedIn

As one of the fastest-growing economies in the world, Indonesia is a popular destination for businesses looking to expand their operations. As businesses grow, one of the critical tasks they need to manage is their payroll system. In Indonesia, managing payroll can be a complex process due to the country’s labour laws and regulations. In this article, we will explore the mandatory rights of employees in Indonesia, discuss the things to include on a payroll system, provide an example of Indonesian payroll process calculation, and highlight how our team can help manage your payroll system in Indonesia.

Mandatory Rights of Employees in Indonesia

The Indonesian government has implemented various labor laws to protect the rights of employees. These laws cover a wide range of topics, including minimum wage, overtime pay, and severance pay. Employers in Indonesia are required to comply with these laws, or they may face penalties and legal action. Here are some data-backed mandatory rights of employees in Indonesia:

Minimum Wage: The Indonesian government sets minimum wages for each province and city in the country. According to data from Trading Economics, the average minimum wage in Indonesia was IDR 2.9 million per month in 2020.

Overtime Pay: Indonesian labour laws require employers to pay their employees overtime for any work done beyond the standard working hours. Overtime pay is usually calculated at a rate of 1.5 times the regular hourly rate. According to data from the International Labour Organization (ILO), the average weekly hours worked in Indonesia in 2019 was 47.4 hours.

Severance Pay: Indonesian labour laws require employers to pay severance to employees who have been terminated due to reasons beyond their control, such as downsizing or closure of the business. The amount of severance pay varies depending on the length of service. According to data from the World Bank, the minimum length of service required for severance pay in Indonesia is one year.

Things to Include on Payroll Indonesia System

A payroll system in Indonesia needs to include various elements to comply with the country’s labour laws and regulations. Here are some of the data-backed things that should be included on an Indonesian payroll system:

  1. Basic Salary: The basic salary is the amount paid to employees for their standard working hours. According to data from Trading Economics, the average wage in Indonesia was IDR 4.67 million per month in 2020.
  2. Allowances: Allowances are payments made to employees for additional expenses related to their job, such as transportation, meals, and housing. According to data from Mercer, the average housing allowance for expatriates in Jakarta, Indonesia was USD 1,914 per month in 2020.
  3. Overtime Pay: Overtime pay is calculated based on the number of hours worked beyond the standard working hours. According to data from the ILO, the average hourly wage in Indonesia in 2019 was IDR 18,150.
  4. Taxes: Employers are required to deduct taxes from their employees’ salaries and pay them to the government. According to data from the World Bank, the corporate income tax rate in Indonesia is 22%.
  5. Social Security Contributions: Employers are also required to deduct social security contributions from their employees’ salaries and pay them to the government. According to data from Trading Economics, the social security rate in Indonesia is 5.7%.

Example of Indonesian Payroll Process Calculation

To help illustrate how payroll is calculated in Indonesia, let’s take a look at an example. Suppose an employee has a basic salary of IDR 5,000,000 per month and worked 10 hours of overtime in a month. Here’s how their salary would be calculated:

Basic Salary: IDR 5,000,000

Overtime Pay: The overtime pay would be calculated as follows:

Hourly rate: IDR 5,000,000 / 173 (standard working hours per month) = IDR 28,902.32 per hour

Overtime pay: IDR 28,902.32 * 1.5 * 10 (number of overtime hours) = IDR 433,534.80

Allowances: Let’s say the employee is entitled to a transportation allowance of IDR 1,000,000 per month.

Taxes: Assuming a corporate income tax rate of 22%, the tax deducted from the employee’s salary would be:

Total earnings: IDR 5,433,534.80 (basic salary + overtime pay + allowance)

Tax: IDR 5,433,534.80 * 22% = IDR 1,195,977.66

Social Security Contributions: Assuming a social security rate of 5.7%, the social security contribution deducted from the employee’s salary would be:

Total earnings: IDR 5,433,534.80

Social security contribution: IDR 5,433,534.80 * 5.7% = IDR 309,132.18

The employee’s net salary would be calculated as follows:

Gross earnings: IDR 5,433,534.80 (basic salary + overtime pay + allowance)

Deductions: IDR 1,195,977.66 (tax) + IDR 309,132.18 (social security contribution) = IDR 1,505,109.84

Net earnings: IDR 3,928,424.96 (gross earnings – deductions)

We Can Help Manage Your Payroll System in Indonesia

Managing payroll in Indonesia can be a complex process, but our team is here to help. We specialize in providing payroll and HR services to businesses operating in Indonesia, helping them comply with the country’s labour laws and regulations. Our payroll services include managing payroll calculations, preparing payslips, and filing tax and social security contributions. By outsourcing your payroll system to us, you can focus on growing your business while we handle administrative tasks.

In conclusion, managing payroll in Indonesia requires businesses to comply with the country’s labor laws and regulations. Employers must ensure they provide their employees with mandatory rights such as minimum wage, overtime pay, and severance pay. A comprehensive payroll system in Indonesia should include elements such as basic salary, allowances, overtime pay, taxes, and social security contributions. By partnering with our team, you can ensure your payroll system is compliant with the country’s labor laws and regulations, allowing you to focus on growing your business.

Table of Contents

Related Post

BPJS
Doing Business in Indonesia: Navigating Employment Compliance
pradamas-gifarry-RC-WKJFcmGc-unsplash
Minimum Wage Regulations Adjusted

Popular Tags

To maintain our professional standard, we have established strong presence in the center of Jakarta and Bali to serve you better. Visit us at :

Jakarta
Noble House, 9th floor unit 2B
Jl. Dr. Anak Agung Gde Agung, Kav E.4.2 no. 2
South Jakarta – 12950

Bali
Jl. Sunset Road No. 777
Seminyak, Bali – 80361 “

We’re committed to being accessible. Find our offices in Jakarta and Bali, staffed with local experts who understand your unique needs. Also we extend our reach with our collaborative partners.
Seven Stones Indonesia
Jl. Sunset Road No.777, Seminyak, Kec. Kuta, Kabupaten Badung, Bali 80361
Seven Stones Indonesia Jakarta
Noble House, 9th Floor, Jl. Mega Kuningan Barat, RT.5/RW.2, Kuningan, Jakarta 12950
Monday Co-Working
Jl. Toya Ning II, Ungasan, Kec. Kuta Sel., Kabupaten Badung, Bali 80361
B Work Bali
Jl. Nelayan No.9C, Canggu, Kec. Kuta Utara, Kabupaten Badung, Bali 80361
Show Places
Seven Stones Indonesia
Jl. Sunset Road No.777, Seminyak, Kec. Kuta, Kabupaten Badung, Bali 80361
Open in Google Map
Seven Stones Indonesia Jakarta
Noble House, 9th Floor, Jl. Mega Kuningan Barat, RT.5/RW.2, Kuningan, Jakarta 12950
Open in Google Map
Monday Co-Working
Jl. Toya Ning II, Ungasan, Kec. Kuta Sel., Kabupaten Badung, Bali 80361
Open in Google Map
B Work Bali
Jl. Nelayan No.9C, Canggu, Kec. Kuta Utara, Kabupaten Badung, Bali 80361
Open in Google Map
×

Geocoding Error Occured.

Tried to Geocode:

Error Type:

Please be sure to follow the tutorial on how to setup the Google APIs required for the Advanced Google Map Widget.

Google Map API Key Tutorial
Please enable JavaScript in your browser to complete this form.
Name

Andrzej Barski

Director of Seven Stones Indonesia

Andrzej is Co-owner/ Founder and Director of Seven Stones Indonesia. He was born in the UK to Polish parents and has been living in Indonesia for more than 33-years. He is a skilled writer, trainer and marketer with a deep understanding of Indonesia and its many cultures after spending many years travelling across the archipelago from North Sumatra to Irian Jaya.

His experience covers Marketing, Branding, Advertising, Publishing, Real Estate and Training for 5-Star Hotels and Resorts in Bali and Jakarta, which has given him a passion for the customer experience. He’s a published author and a regular contributor to local and regional publications. His interests include conservation, eco-conscious initiatives, spirituality and motorcycles. Andrzej speaks English and Indonesian.

Terje H. Nilsen

Director of Seven Stones Indonesia

Terje is from Norway and has been living in Indonesia for over 20-years. He first came to Indonesia as a child and after earning his degree in Business Administration from the University of Agder in Norway, he moved to Indonesia in 1993, where he has worked in leading positions in education and the fitness/ wellness industries all over Indonesia including Jakarta, Banjarmasin, Medan and Bali.

He was Co-owner and CEO of the Paradise Property Group for 10-years and led the company to great success. He is now Co-owner/ Founder and Director of Seven Stones Indonesia offering market entry services for foreign investors, legal advice, sourcing of investments and in particular real estate investments. He has a soft spot for eco-friendly and socially sustainable projects and investments, while his personal business strengths are in property law, tourism trends, macroeconomics, Indonesian government and regulations. His personal interests are in sport, adventure, history and spiritual experiences.

Terje’s leadership, drive and knowledge are recognised across many industries and his unrivalled network of high level contacts in government and business spans the globe. He believes you do good and do well but always in that order. Terje speaks English, Indonesian and Norwegian.