When expanding your company to Indonesia, you must learn the country’s compensation and benefits best practices. This includes providing the right level of compensation that meets Indonesia’s compensation laws and helps ensure your company stays compliant.
Indonesia compensation laws
Minimum wage rules in Indonesia depend on your company’s location and the financial requirements of that province. However, after an employee works more than 1 year, the minimum wage laws no longer apply, and the employer may renegotiate compensation with the employee.
Collective Bargaining Agreements (CBAs) can also dictate compensation laws in Indonesia. One agreement will cover the entire enterprise and is valid for 2 years. Negotiations can start within 3 months of expiration, and companies should include wage growths and bonuses in those agreements. If not, they need to negotiate with employees to determine the right level of compensation for the position.
Guaranteed benefits in Indonesia
Indonesia benefits management plans must include statutory benefits required by law. This includes time off for the country’s 15 public holidays. Employees also get paid annual leave of 12 days per year.
Healthcare is part of the Workers Social Security Scheme in Indonesia funded through payroll taxes and the general budget. Employers must enroll all employees in the system, including expats.
Indonesia benefits management
Companies can consider offering additional benefits that are not mandatory to improve morale and dedication to the company.
Since much of the population of Indonesia is Muslim, companies should consider dispersing benefits differently. For example, all employees get a mandatory 13th-month bonus called THR. It’s a religious day allowance paid most commonly 1 week before a holiday — Eid al-Fitr for Muslims and anytime in December for non-Muslim employees.
Restrictions for benefits and compensation
The biggest restriction for benefits and compensation is the need to establish a subsidiary before companies can hire employees and add them to payroll. The incorporation process can take weeks or months, depending on the type of entity.
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