IndonesiaIndonesia is Southeast Asia's largest talent market, and US startups increasingly hire there for engineering, design, and operations roles at strong value. It's also one of the most structured employment regimes in Asia: a mandatory religious holiday bonus, a national social security system with multiple programs, a contract that must be written in Bahasa Indonesia, and severance formulas that reward getting things right the first time.
Here's what you actually need to know.
Quick facts
| Indonesia | |
|---|---|
| Currency | Indonesian Rupiah (IDR) |
| Standard work week | 40 hours, 5 days |
| Payroll frequency | Monthly |
| Employer statutory cost | ~11-13% on top of gross salary |
| Minimum wage | Regional; Jakarta is IDR 5,729,876/month in 2026 |
| Probation | Up to 3 months (permanent contracts only) |
| Notice period | 14 days (7 during probation) |
| 13th month pay | Mandatory (THR, the religious holiday allowance) |
| Employees paid in | IDR, required by law |
First decision: contractor or employee?
Contractors are the fast path in Indonesia, and for genuinely independent professionals with multiple clients, they work fine. The misclassification line is the same as everywhere: fixed hours, exclusivity, and day-to-day management make someone an employee regardless of the label, and Indonesia's severance formulas mean the downside of getting this wrong is larger than in most countries.
There's a second trap specific to Indonesia: contract type. Employment contracts are either fixed-term (PKWT, capped at 24 months and only permitted for certain kinds of work) or indefinite (PKWTT). Misusing a fixed-term contract can convert the worker to permanent status with full severance protection. When someone becomes core to the team, convert them properly through an employer of record (EOR) that gets the contract type right.
Paying contractors in Indonesia
The basics:
- Collect a W-8BEN before the first payment. It certifies the contractor is a non-US person, so you generally don't issue a 1099. Confirm with your accountant.
- Sign a real contract with scope, rate, IP assignment, and termination terms. For agreements involving Indonesian parties, Indonesian law requires a Bahasa Indonesia version; English-only contracts have been voided by Indonesian courts. Use a bilingual contract, not your US template.
- Pay in USD or IDR, their choice. Contractors can invoice in either. Bank wires cost $25-45 each plus an FX spread hidden in the rate.
Shor pays Indonesian contractors over local rails at a flat disclosed 2% FX margin, for $19/month per contractor. Bilingual contracts, W-8BEN collection, and invoicing are built in.
Hiring full-time employees
Employer-side statutory contributions on top of gross salary:
| Contribution | Rate (employer side) | Notes |
|---|---|---|
| BPJS Kesehatan (health) | 4% | Employee adds 1% |
| BPJS Ketenagakerjaan: JHT (old-age) | 3.7% | Employee adds 2% |
| BPJS Ketenagakerjaan: JP (pension) | 2% | Employee adds 1%; salary ceiling IDR 11,086,300/month from March 2026 |
| BPJS Ketenagakerjaan: JKK + JKM | ~0.54-2.04% | Work accident (risk-class dependent) and death benefit programs |
Headline employer load: ~11-13% on top of gross, plus one full month of salary per year for THR (Tunjangan Hari Raya), the mandatory religious holiday allowance paid before the employee's major religious holiday (Eid for most of the workforce). Budget THR as a thirteenth month; it is not optional and it has a statutory deadline.
Two 2026 items to have on your radar: the BPJS pension program's salary ceiling rose to IDR 11,086,300/month effective March 2026 (capping the contribution on higher salaries), and Tapera, a public housing savings program adding 0.5% employer and 2.5% employee contributions, is mandatory by law with private-sector enrollment required by May 2027. Statutory rates change; confirm current figures with your payroll provider.
Employees must be paid in IDR, monthly. Minimum wage varies significantly by province and city, so the compliant floor depends on where your hire actually lives.
Leave and benefits
- Annual leave: 12 days
- Sick leave: paid, with medical certification; employer obligations scale with duration
- Maternity leave: 3 months at full pay, employer-funded
- Paternity leave: 2 days, paid
- Public holidays: ~16 days
Beyond statute, competitive Indonesian offers commonly add private health top-ups, meal and transport allowances, housing and mobile/internet allowances, and performance bonuses.
Ending employment
Indonesia is a high-severance jurisdiction, and termination is where EOR fees earn themselves:
- Notice: 14 days (7 days during probation)
- Severance (uang pesangon): up to 9 months' salary depending on tenure and the reason for termination
- Long service pay (uang penghargaan): up to 10 additional months for long-tenured employees
- Compensation for entitlements (uang penggantian hak): unused leave and other accrued rights
- Fixed-term (PKWT) contracts that end on schedule owe contract-completion compensation instead of severance
Due process is required, documentation matters, and errors in the contract type or the severance formula create direct liability. Get advice before terminating anyone in Indonesia.
Documents we'll collect from your employee at onboarding
KTP (national ID card), NPWP (tax number, registrable during onboarding if missing), BPJS membership numbers where they exist, and an Indonesian bank account for salary. EOR onboarding typically takes 10-18 business days, driven by BPJS enrollment and contract registration.
What it costs through Shor
- Contractors: $19/month each
- Full-time employees (EOR): $299/month each, with BPJS enrollment, PPh 21 tax withholding, THR administration, and filings handled
No setup fees, and the FX margin is a flat disclosed 2%. The pricing calculator shows the full Indonesia math including THR.
Next steps, depending on where you are: the EOR pricing comparison puts published provider prices side by side, and EOR vs. your own entity has the breakeven math for when a local entity starts to win. To see Indonesia against the rest of our coverage, the reference tables compare employer costs, notice periods, and public holidays across every country here. Already with another provider? Switching EOR providers covers the traps worth planning around.
FAQ
What is THR and do I really have to pay it? THR is the mandatory religious holiday allowance: one month's salary paid before the employee's major religious holiday, with a statutory deadline. Yes, you really have to pay it. Budget compensation as 13 monthly payments per year.
Can I pay Indonesian employees in USD? No. Salary must be paid in IDR. Contractors can invoice in USD or IDR.
Can I use a fixed-term contract to avoid severance? Only within the rules. PKWT fixed-term contracts are capped at 24 months, permitted only for certain work types, and must be registered. Misused, they convert to permanent contracts with full severance protection. Most ongoing startup roles belong on indefinite contracts.
What does an employer of record in Indonesia cost? With Shor, $299/month per employee, plus the statutory employer contributions (roughly 11-13% of gross, plus one month of THR per year). Deel and Remote charge $599-699/month for the same coverage.