Hiring in Indonesia

The terms set out role, salary in IDR, working time, leave, notice and any restrictive covenants. The EOR is the counterparty to the employee, which is what removes the need for your own entity.

A bilingual Indonesian and English version is standard for commercial roles, but the Indonesian text prevails if the two conflict.

Fixed-term contracts (PKWT) are capped at five years including extensions, must be registered and carry a compensation payment at the end, so most EORs default to indefinite terms. A new manpower protection law passed by parliament in October 2026 cuts the cap to four years once it takes effect.

Set probation from day one. It cannot be extended, and a probation clause in a fixed-term contract is void.

Some EORs start new hires on a fixed-term contract instead, which rules out probation altogether. Ask before you agree a start date.

Overtime is paid at 1.5 times the hourly rate for the first hour and twice the rate after that, with the hourly rate set at 1/173 of monthly pay. It is capped at 4 hours a day and 18 hours a week.

Senior roles can be exempt, but only where the position carries higher pay and the exemption is written into the contract or company regulations. Put the position in writing either way.

Market practice for professional roles is 12 to 15 days, often granted from day one. The government also sets collective leave days (cuti bersama), 8 in 2026, which are normally deducted from annual leave, so check how the EOR treats them when you budget.

Sick leave is paid in full for the first four months, then steps down to 75%, 50% and 25%. Maternity leave is three months at full pay, extendable to six in specific circumstances, and is employer funded, so confirm how the EOR bills it.

Dismissal needs a reason recognised by law, and an employee who objects in writing triggers bipartite negotiation, then mediation and the industrial relations court. Most exits end in a mutual termination agreement rather than a contested dismissal.

The EOR runs the process as the legal employer and will want the paperwork in order, including severance, service pay, compensation for rights and unused leave. The new manpower protection law removes the half-rate severance multiplier once in force, so confirm which rules apply at exit.

Private medical cover, dental and group life are standard for professional roles even though they are not mandatory, because BPJS health cover runs through a slow public referral system.

EORs often bundle benefits through a group scheme. Ask what is included in the fee and what is billed on top.

Employer BPJS contributions add 10.24% to 11.74% on top of gross salary, with caps on the pension and health elements. That is before THR and the EOR fee.

THR is the trap. It is a statutory extra month's salary, paid in cash at least seven days before each employee's own religious holiday, so accrue it monthly rather than finding it at Eid.

Ask whether the EOR sponsors directly or refers to a partner. A partner-model EOR often cannot sponsor at all, and the Indonesian counterpart requirement and the roles closed to foreigners, such as HR, apply to the sponsor, not to you. Expect the USD 100 monthly levy to be passed through, usually prepaid for the permit period.

A new integrated permit system under the Ministry of Investment targets around six days, but treat that as a target until it is proven. Set start dates after approval, not before.

Get the data processing terms in the service agreement, not just the privacy notice. Cross-border transfers need an adequate destination, binding safeguards or, failing both, consent, and the implementing regulation (GR 33/2026) must be complied with by 16 January 2027.

Ask where payroll data is hosted and who in the partner chain can see it.

Foreign owners must incorporate a PT PMA, and the capital is the point: at least IDR 2.5 billion paid up, which must stay in the company for 12 months, against an investment plan above IDR 10 billion per business line. Quarterly investment reporting, accounting and payroll then set an annual floor.

Permanent establishment risk is about what people do, not where payroll sits. Revenue-generating activity can create exposure regardless of the employment route.