Indonesia is southeast Asia's largest economy and a key market for global businesses looking to access a skilled talent pool. The country’s GDP is over USD 1.4T. Indonesia’s domestic consumer market and manufacturing sector are major economic pillars. This includes exports like automotive parts, electronics, and textiles.
The government processes mineral resources like nickel and copper to target the global electric vehicle battery supply chain.
Before expanding into Indonesia, you’ll need to understand contracts, taxes, wages, benefits, and other employment laws. Our guide will tell you everything you need to know about hiring in Indonesia.
What to know before hiring in Indonesia
If you’re expanding your business into Indonesia for the first time, there are important legal requirements to be aware of. These norms and laws influence hiring practices in Indonesia and many aspects of the employer-employee relationship, including compensation and benefits.
G-P Gia™, our AI-powered global HR agent, can answer your toughest compliance questions across 50 countries — including Indonesia — and all 50 U.S. states. Reduce your reliance on outside counsel and cut the time and cost of compliance by up to 95% with Gia.
Here are five things to know about hiring in Indonesia.
1. Contracts and terminations in Indonesia
All employment relationships need an indefinite contract (PKWTT) or fixed-term contract (PKWT). Fixed-term contracts can run for a maximum total of five years, including extensions. Indefinite-term contracts have no set end date. All fixed-term contracts have to be written in Indonesian. Bilingual contracts are allowed, but if there is any inconsistency, the Indonesian version prevails. Contracts have to mention job duties, compensation, benefits, and termination requirements.
Probation is only allowed for indefinite-term contracts. The maximum probation period is three months.
2. Payroll and taxes in Indonesia
Employers have to register employees and remit contributions to Indonesia’s social security systems: BPJS Kesehatan (health insurance) and BPJS Ketenagakerjaan (occupational injury, old-age/retirement savings, pension, and death benefits). The contribution rates are:
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Health insurance: 1% from the employee and 4% from the employer (on salary up to IDR 12M per month)
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Occupational injuries: 0.24%–1.74% from the employer, depending on risk classification
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Retirement savings (JHT): 2% from the employee and 3.7% from the employer
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Pension benefits (JP): 1% from the employee and 2% from the employer (on salary up to IDR 10.5M+ per month)
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Death benefits: 0.3% from the employer
Employees are subject to annual income tax on a progressive scale. For payroll, the average effective tax rate (TER) is used for monthly withholdings (January–November). A final annual calculation uses progressive rates in December. The progressive rates for 2025 are:
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5% for annual income up to IDR 60M
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15% for IDR 60–250M
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25% for IDR 250–500M
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30% for IDR 500M–5B
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35% for income above IDR 5B
3. Wages and working hours in Indonesia
The workweek is 40 hours. This is either seven hours per day for six days or eight hours per day for five days. Overtime is allowed up to four hours per day and 18 hours per week. Overtime pay is 150% of the regular hourly wage for the first hour and 200% for subsequent hours. Written consent from employees is required for overtime.
Employees get a minimum of 12 paid annual leave days after 12 months of service. Holidays in Indonesia are set by the government each year. In 2025, there were 17 national public holidays.
There’s no cap on sick days. Employees get:
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100% of their salary for the first four months of illness
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75% for the next four months
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50% for the following four months
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25% after that until employment is terminated
Maternity leave is three months fully paid, with the possibility of extension up to six months if medically required. The first three months are at 100% pay and the final three months are at 75% pay. Fathers get two days of paid paternity leave, with up to three extra days by agreement with the employer.
Paid leave for family events such as marriage or baptism isn’t a requirement but can be provided by company policy.
4. Job market and workforce in Indonesia
Indonesia’s labor force is one of the largest in the world. Recent estimates put it at 140 million people out of a total population of 277 million. This makes Indonesia the fourth-largest workforce globally, after China, India, and the U.S.
Indonesia is an active member of the G20, participating in international economic discussions and initiatives.
About 16–18% of young adults in Indonesia have a postsecondary degree.
5. Ongoing labor law reforms in Indonesia
The omnibus law on job creation was passed in 2020 and amended in 2023. The law introduced labor reforms to make Indonesia more attractive for investment. It streamlined hiring, increased flexibility in overtime, and eased restrictions on outsourcing and expatriate hiring.
Government regulation No. 35/2021 (GR35) set up many of the omnibus law’s changes. It requires employers to pay compensation to employees on fixed-term contracts when the contract ends or is extended, but not for voluntary resignation.
Top hiring hubs in Indonesia
Some cities in Indonesia are known for particular industries. Knowing what each region has to offer allows you to focus your hiring efforts in the right place and fill roles faster.
The top talent hubs in Indonesia are:
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Jakarta is the capital and largest city. It’s the world’s most populous city. Jakarta is the country’s main business, financial, and technology center, hosting the headquarters of many multinational and local companies.
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Surabaya is home to the Port of Tanjung Perak. The city is Indonesia's second busiest seaport and handles over 3 million TEUs (the standardized unit of measurement in global shipping and logistics, based on the volume of a standard 20-foot shipping container) annually. It’s the main gateway for Eastern Java and the wider Eastern Indonesia region.
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Bandung is known for its universities and creative industries. It’s been called the Paris of Java. Around 56% of Bandung’s economic activity is design-related.
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Medan is the largest city in Sumatra. It’s a key gateway to the Malacca Strait. Medan is a center for agribusiness, trade, and manufacturing. It’s an export hub for Indonesia's palm oil and rubber.
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Bekasi is a large industrial and manufacturing area with many factories and logistics companies. It hosts over 10,000 manufacturing companies.
Key industries in Indonesia
Understanding Indonesia’s top industries allows you to benchmark salaries and benefits. You can use this insight to make smart choices about where to invest and grow your talent pool.
The top industries in Indonesia include:
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Manufacturing: Indonesia has a strong manufacturing sector, particularly in automotive, electronics, textiles, footwear, and consumer goods. Many multinational companies have set up factories and supply chains here. Manufacturing contributes 20% of Indonesia's GDP. This is the highest share among ASEAN nations.
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IT and digital services: The country’s tech sector is growing, with a booming startup ecosystem in Jakarta and Bandung. Their digital economy is driven by ecommerce and fintech.
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Banking and financial services: Indonesia’s financial sector is expanding, with opportunities in banking, insurance, fintech, and investment services. Digital payments are the main source of fintech revenue in the country (73.44% in 2024).
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Agriculture and agribusiness: Indonesia is one of the world’s largest producers of palm oil, rubber, coffee, and cocoa. The country’s agriculture sector offers expertise in production, processing, and export.
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Energy and mining: Indonesia is rich in natural resources, including oil, gas, coal, and minerals. The country holds the world's largest nickel reserves and is a top global producer of tin, bauxite, and cobalt. There are opportunities in extraction, processing, and supporting services.
The cost of hiring an employee in Indonesia
Whether you’re hiring one employee or an entire team in Indonesia, expenses are inevitable. Budget for the following:
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Setting up an entity (unless you partner with an employer of record)
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Advertising job positions
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Paying referral bonuses to employees with connections in Indonesia
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Paying an in-house hiring committee
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Traveling to and from Indonesia, including hotel stays, meals, and transportation
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Partnering with a translator to draft documents or facilitate conversations (if applicable)
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Using a background check service for screening candidates
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Drafting employment contracts, legal review, and consultation with HR and legal experts
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Costs for providing computers, phones, and software licenses
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Onboarding materials and initial training
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Costs for maintaining required tax and payroll records and documentation
According to G-P Verified Sources from Gia, the employer burden rate in Indonesia, which includes costs triggered on top of salaries, is about 10–12%, excluding accident insurance that can vary.
What does a company need to hire employees in Indonesia?
Make sure you cover these essentials before expanding your team in Indonesia:
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Get a deed of establishment, approval from the ministry of law and human rights, and a company registration certificate.
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Register for a corporate tax ID with the Indonesian tax office.
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Get a NIB through the OSS, which serves as a unique business registration code.
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Open a local bank account in your company’s name for payroll and statutory payments.
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Enroll your company and employees with BPJS Kesehatan and BPJS Ketenagakerjaan.
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Prepare employment contracts in Indonesian.
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Ensure compliance with minimum wage, working hours, and benefits.
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Depending on the business sector, extra licenses or permits can be required.
Setting up a subsidiary in Indonesia can take weeks or months. Use G-P EOR to hire full-time employees in Indonesia without setting up your own entity. Build your team at a lower cost and with peace of mind that you’re doing so compliantly.
The steps to hiring employees in Indonesia
The hiring process in Indonesia is similar to the one you’re likely familiar with in your own country. The hiring process follows five basic steps: advertising the job, evaluating applications, interviewing candidates, sending job offers, and onboarding new employees.
1. Advertising job vacancies in Indonesia
Prepare a clear job description outlining responsibilities, qualifications, and compensation. Post the job on local and international job boards.
Jobstreet, Indeed Indonesia, Glints, KitaLulus, and Karir are popular job boards in Indonesia.
2. Evaluating job applications in Indonesia
Review CVs and cover letters to shortlist candidates who meet the requirements.
3. Interviewing candidates in Indonesia
Conduct initial interviews via phone, video, or in-person. Gia can help you create questions that follow anti-discrimination laws in Thailand, so you can find the best fit for the role while complying with local regulations.
Arrange further interviews or assessments as needed. Verify employment history, education, and conduct background checks if required.
4. Making job offers in Indonesia
Prepare a compliant employment contract in Indonesian (bilingual if needed). Clearly state salary, benefits, job duties, and termination terms.
5. Onboarding new employees in Indonesia
Now you can onboard new employees. Register your new hire with BPJS Kesehatan and BPJS Ketenagakerjaan. Set up payroll, provide orientation, and make sure the employee understands your company policies. Keep accurate employment records and stay compliant with Indonesian employment laws.
If you’re working with an EOR like G-P, you won’t have to worry about the administrative burden of onboarding. We’ll streamline the process, so you can focus on training your new hire and integrating them into your company culture.
Hiring contractors in Indonesia
Working with independent contractors in Indonesia can be a cost-effective way to test the market and build a presence without the commitment of full-time employees. Contractors based in Indonesia understand local consumer behavior, rules, and business practices. They’ll be ready to start working quickly with their own equipment and established work processes.
Hiring contractors allows you to easily adjust your talent pool based on your business needs, without the complexities and costs of employment.
Before you enter an agreement with an independent contractor in Indonesia, consider the following:
1. Employees vs. independent contractors in Indonesia
Employees work under the employer’s supervision and control, follow set schedules, are integrated into the organization, and get a regular salary and benefits (such as BPJS social security, paid leave, and minimum wage protections).
Contractors provide services independently, set their own schedules, use their own equipment, and are engaged for specific projects or periods. They don’t get employee benefits and serve multiple clients. Indonesian law uses a qualitative assessment based on factors such as degree of control, economic dependency, provision of resources, and the nature of the engagement. The working relationship, not just the contract, determines classification.
2. Penalties for misclassification in Indonesia
Classifying someone as a contractor when they’re not can lead to severe penalties. If misclassification occurs, you’ll have to:
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Pay back wages, overtime, social security contributions, paid leave, and other benefits that the worker should have received as an employee.
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Face administrative fines can be imposed for noncompliance with labor, tax, and social security laws.
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Pay unpaid income tax withholdings and related penalties.
3. How to pay contractors in Indonesia
G-P Contractor™ takes away the messy, time-consuming process of hiring and paying international contractors. You can create and issue contracts and pay contractors with just a few clicks, all while ensuring a compliant process.
Hire employees and contractors in Indonesia with G-P
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