Glints TalentHub
Switch Language
 
Everything You Need to Know About Payroll in Indonesia
Indonesia, the world's 4th most populous country, boasts Southeast Asia's largest digital economy, with over 260 million young, tech-savvy individuals. It has the region's highest number of unicorns, highlighting its vibrant tech scene. This mix of abundant talent and a thriving tech ecosystem is fostering a new generation of workers actively developing both soft and hard skills to meet market demands

How is Payroll Calculated in Indonesia?

In Indonesia, payroll is governed by three key regulations:
  1. Manpower Law No 13/2003
  2. Government Regulation: PP 36/2021
  3. Minister of Manpower Regulation No. 1 of 2017
When it comes to salaries, all employees—whether they’re on probation, regular, or working on a contract—are entitled to receive a minimum wage. While there isn’t a fixed minimum wage for every employee, you can calculate it using this simple formula:
New Minimum Wage = Current Minimum Wage + [Current Minimum Wage x (Inflation + % GDP Annual Increase)]

Important Elements of Salary Structure in Indonesia

Indonesian payroll includes a mix of fixed and variable components beyond just the basic pay.

Basic Pay

Basic pay refers to the minimum wages that employees agree to for the hours they work each day. You can calculate it using this simple formula:
Basic Pay = Hourly Wage (as agreed) × Number of Hours Worked
Keep in mind that the minimum salary can vary based on the province, district, and sector.

Allowances

Social Security

In Indonesia, employees are covered by BPJS for healthcare and BPJS for social security, which includes important benefits like work accident insurance, life insurance, and pension plans.

Leave or Allowance

If employees don’t use their paid leave, it’s reflected as an allowance on their payslip. This applies to various types of leave, including sick leave, maternity leave, annual leave, and personal leave. Additionally, employers provide a THR (Tunjangan Hari Raya) allowance for religious festivals to support employees during these special times.

Overtime Pay

The standard working hours for employees in Indonesia are typically:
  • 7 hours a day or 40 hours a week for a 6-day work week
  • 8 hours a day or 40 hours a week for a 5-day work week
If an employee works beyond these hours, that time is considered overtime. Employees are allowed up to 3 hours of overtime per day and 14 hours per week.

Overtime Rates for Regular Workdays

When employees work overtime during a regular week, here’s how their pay breaks down:
Overtime Worked
Salary Paid in %
First hour of overtime
1.5 times their hourly rate
From the second hour onward
2 times the hourly rate
Overtime Worked
Salary Paid in %
First hour of overtime
1.5 times their hourly rate
From the second hour onward
2 times the hourly rate

Holiday Overtime Compensation

For overtime worked on holidays, the pay structure is a bit different:
Overtime Worked
Salary Paid in %
5 working days and 2 days off schedule
First 8 hours
2 times their hourly rate
9th hour
3 times the hourly rate
10th to 12th hour
4 times their hourly rate
6 working days and 1 day off schedule
First 7 hours
2 times their hourly rate
8th hour
3 times the hourly rate
9th to 11th hour
4 times their hourly rate
Overtime Worked
Salary Paid in %
5 working days and 2 days off schedule
First 8 hours
2 times their hourly rate
9th hour
3 times the hourly rate
10th to 12th hour
4 times their hourly rate
6 working days and 1 day off schedule
First 7 hours
2 times their hourly rate
8th hour
3 times the hourly rate
9th to 11th hour
4 times their hourly rate

Annual Paid Holiday

Every employee who completes a year with the company is entitled to minimum 12 days of paid leave at the end of that year. If an employee hasn’t yet reached their one-year mark, they can still take paid leave, but it will be calculated on a pro-rata basis.

Tunjangan Hari Raya / Religious Holiday Allowance

After just one month of employment, employees are eligible for the 13th-month pay, commonly known as the THR (Tunjangan Hari Raya) or religious holiday allowance.
Employees in Indonesia are entitled to several types of paid leave beyond their annual leave. Here’s a quick rundown of these additional benefits:
  • Sick Leave
  • Maternity Leave: Female employees are entitled to up to 3 months of maternity leave, with 1.5 months taken before childbirth and 1.5 months after.
  • Paternity Leave: New fathers can take up to 2 days of leave to support their partners during this important time.
  • Marriage Leave: Employees can take 3 days off for their own wedding and 2 days for their child’s wedding.
  • Bereavement Leave: In the unfortunate event of a loss, employees are allowed up to 2 days off to grieve and manage their affairs.

Deductions

Individual residents can benefit from certain tax reliefs and deductions that lower their taxable income. For non-residents, a 20% withholding tax applies to their gross income from Indonesia unless a double taxation treaty states otherwise.

Calculating Income Tax (PPh 21)

When calculating your employees’ income tax, known as PPh 21, you’ll need to factor in allowances, employment costs, and social security contributions (like BPJS Ketenagakerjaan and BPJS Kesehatan). Here’s a simple way to determine their taxable income:
  1. Gross Income: Start with your employee’s total earnings.
  2. Net Income: Subtract any allowable costs from the gross income.
  3. Taxable Income: Deduct the non-taxable components (PTKP) from the net income.

Non-Taxable Income (PTKP)

The non-taxable income, or Penghasilan Tidak Kena Pajak (PTKP), depends on the employee’s marital and family status:
  • Single Individuals: Have a basic non-taxable income limit of IDR 54,000,000.
  • Married Individuals: Can claim an additional IDR 4,500,000, bringing their non-taxable limit to IDR 58,500,000.
  • Children: For each child (up to three), your employee can deduct an extra IDR 4,500,000 from their taxable income.
If both spouses are working, their incomes are combined for tax purposes, as per Article 8 of the Income Tax Law.

Occupational Cost

The occupational cost, often referred to as "office cost," allows individual taxpayers to reduce their taxable income by 5% of their gross income, with a maximum cap of IDR 6,000,000 annually. This deduction accounts for expenses related to the employee’s role, such as maintaining work conditions, hiring costs, and other employment-related expenses.

Pension Cost

The pension cost in Indonesia allows for 1% of an employee’s gross income to be deducted, with a cap at IDR 90,776 per month.

Social Security

Employees contribute 2% of their gross income towards BPJS Ketenagakerjaan, which is the social security scheme dedicated to old age savings.

Indonesian Payroll Contributions

When you hire an employee in Indonesia, you’ll sign an employment contract that provides all the essential details—written in both Indonesian and English. The contract clearly lays out key aspects such as the employee’s minimum wage or basic salary, as well as the various allowances they’ll receive.
It also covers important provisions like overtime pay and the types of leave employees are entitled to. When it comes to benefits, there are two main categories:
  1. Mandatory Benefits – These are required by law and include things like social security contributions (BPJS), paid leave, and overtime pay.
  2. Optional or Fringe Benefits – These are additional perks that a company may choose to offer, such as transportation, meal allowances, or health insurance, depending on company policies.

Mandatory Benefits

In Indonesia, apart from the THR (Religious Holiday Allowance) and paid annual leave, employers are also required to provide other mandatory benefits according to Indonesian law. These include contributions to the Badan Penyelenggara Jaminan Sosial (BPJS), which consists of two main programs:
  • BPJS Kesehatan: This is health insurance that covers medical expenses for employees and their families, up to five members, which includes the employee, their spouse, and up to three children.
  • BPJS Ketenagakerjaan: This social security program offers protection for employees against work-related injuries, death, and provides retirement benefits.

Employer and Employee Contributions

  • Work-related injury insurance: Employers cover 100% of the contributions, ranging from 0.24% to 1.74% of the employee’s salary, depending on the risk associated with the job.
  • Non-work-related accidental death insurance (JMT): Employers also fully fund this, contributing 0.3% of the employee’s salary.

BPJS Kesehatan [Health Insurance]

Benefit
Employer Contribution
Employee Contribution
Health Insurance
4%
1%
Benefit
Health Insurance
Employer Contribution
4%
Employee Contribution
1%

BPJS Ketenagakerjaan [Pension and retirement]

Benefit
Employer Contribution
Employee Contribution
Pension Plan
2%
1%
Retirement Savings
3.7%
2%
Benefit
Pension Plan
Employer Contribution
2%
Employee Contribution
1%
Benefit
Retirement Savings
Employer Contribution
3.7%
Employee Contribution
2%

Tax Payable

In Indonesia, income tax is structured progressively, meaning the higher the income, the higher the tax rate. Here’s how the tax brackets break down:
Gross Income (IDR)
Tax Rate (%)
0 to 60 Million
5%
IDR 60 Million to 250 Million
15%
IDR 250 Million to 500 Million
25%
IDR 500 Million to 5 Billion
30%
Above IDR 5 Billion
35%
Gross Income (IDR)
Tax Rate (%)
0 to 60 Million
5%
IDR 60 Million to 250 Million
15%
IDR 250 Million to 500 Million
25%
IDR 500 Million to 5 Billion
30%
Above IDR 5 Billion
35%

Payroll Cycle

In Indonesia, salaries are typically paid monthly, either on the last working day of the month or another date specified in the employment contract.

13th-month salary

One key aspect of Indonesian payroll is the 13th-month salary, known as Tunjangan Hari Raya (THR). This mandatory bonus is given during religious holidays. Employees who have worked for less than a year still receive THR, but on a prorated basis depending on their time with the company.


The THR is equivalent to 100% of the employee’s base salary plus any fixed monthly allowances.

Indonesia’s Salary Ranges for Top Roles

Job Position
Avg Monthly Salary (USD)*3-5 Years of Experiences
Tech Engineering
Software Engineer
$1,000
AI Engineer
$700
Business Development & Sales
Business Development Officer
$750
Sales Manager
$580
Product
Product Manager
$675
Data
Data Analyst
$600
Data Scientist
$650
Marketing & PR
Marketing Associate
$380
Marketing Manager
$650
Public Relations Manager
$515
Corporate Services
Human Resources Generalist
$380
Accountant
$380
Administrative Officer
$290
Job Position
Avg Monthly Salary (USD)*3-5 Years of Experiences
Tech Engineering
Software Engineer
$1,000
AI Engineer
$700
Business Development & Sales
Business Development Officer
$750
Sales Manager
$580
Product
Product Manager
$675
Data
Data Analyst
$600
Data Scientist
$650
Marketing & PR
Marketing Associate
$380
Marketing Manager
$650
Public Relations Manager
$515
Corporate Services
Human Resources Generalist
$380
Accountant
$380
Administrative Officer
$290
Managing payroll and tax compliance in Indonesia is crucial to ensure smooth operations and avoid legal issues. Keeping accurate records and timely submissions, along with regular updates, helps stay aligned with Indonesia’s tax regulations, protecting both your company and employees.

With Glints, Southeast Asia’s go-to expert, managing payroll and tax compliance becomes simpler. Our in-depth local expertise ensures that your payroll operations are handled professionally, from setting up compliant processes to managing ongoing tax obligations—allowing you to focus on growing your business.

Book a call with us today and discover how we can support your payroll needs.

Simplify Payroll & Tax in Indonesia

Pay your team accurately and stay compliant without the hassle.