Employer of Record in Indonesia: A Comprehensive Guide for 2026

Introduction

An Employer of Record (EOR) in Indonesia is a local entity that hires employees on behalf of a foreign company, managing employment contracts, payroll, BPJS contributions, tax withholding, and compliance with Indonesian labor law. The EOR acts as the legal employer, while the client company directs the employee's day-to-day work.

Hiring in Indonesia involves navigating several statutory requirements:

• PPh 21 income tax withholding from employee salaries on a monthly basis
• Mandatory BPJS Kesehatan and BPJS Ketenagakerjaan contributions for health insurance and employment social security
• THR (religious holiday allowance), equivalent to one month's salary paid annually before the employee's religious holiday
• Severance obligations under PP 35/2021, including termination multipliers and long-service pay

Skuad's EOR solution supports hiring in Indonesia from $199/month per employee, with onboarding completed in weeks.

Key Takeaways

• Skuad's Indonesia EOR starts at $199/month per employee, with no PT PMA setup required
• Onboarding is completed in weeks, covering employment contracts, BPJS enrolment, and payroll setup
• Skuad manages BPJS Kesehatan, BPJS Ketenagakerjaan, PPh 21 withholding, and THR obligations
• Full compliance with Indonesia's Manpower Law and PP 35/2021 severance requirements
• Support for both full-time EOR employees and independent contractors through a single platform

Book a demo to see how Skuad gets your first Indonesia hire onboarded in weeks.

Indonesia at a glance

Estimated population: 287.8 million

Currency: Indonesian Rupiah (IDR, Rp) 

Capital: Jakarta

Languages spoken: Indonesian, Javanese‍

GDP: USD 1.4 trillion

Hire employees in Indonesia

Businesses can hire employees in Indonesia either through a local entity or by working with an Employer of Record (EOR). While direct hiring often involves entity setup and ongoing administrative requirements, an EOR enables businesses to hire employees without establishing a local presence while supporting payroll, compliance, and workforce administration.

The following sections outline the two main approaches to hiring employees in Indonesia.

Direct hiring: Setting up a subsidiary

Businesses that choose to hire employees directly in Indonesia generally need to establish a local legal entity before onboarding talent. This process may involve:

• Incorporating a local business entity
• Obtaining the required registrations and approvals
• Registering with the relevant government authorities
• Setting up local payroll and employment processes
• Completing applicable tax and social security registrations

Once established, the company is responsible for managing recruitment, onboarding, payroll administration, employee benefits, and ongoing compliance with Indonesian employment requirements.

Online job portals

Employer of Record (EOR)

An Employer of Record (EOR) enables businesses to hire employees in Indonesia without establishing a local entity. The EOR serves as the legal employer and manages key employment responsibilities in accordance with local requirements.

This typically includes onboarding, employment contracts, payroll administration, statutory contributions, benefits administration, and ongoing compliance support.

Benefits:

• Hire employees without establishing a local entity
• Support compliance with Indonesian employment requirements
• Simplify payroll and workforce administration
• Accelerate employee onboarding
• Reduce the administrative burden associated with local employment management

For businesses looking to expand into Indonesia, Skuad supports hiring and workforce management through established local infrastructure. This allows companies to focus on growth while employment administration and compliance requirements are managed through a single platform.

Here is what Skuad helps with:

• Employment contract generation across 160+ countries, aligned with local labor laws and statutory requirements
• Statutory contribution management across supported markets, covering applicable employer and employee obligations
• Payroll processing in 70+ currencies with accurate tax withholding and statutory deductions
• Termination and offboarding support aligned with local employment requirements across supported markets
• Work permit and visa support for eligible international hires

Book a demo to see how Skuad gets your first Indonesia hire onboarded in weeks.

How does an EOR work in Indonesia?

An EOR in Indonesia operates through a registered local entity that serves as the worker's legal employer. The EOR signs the employment contract, registers the employee with BPJS Kesehatan and BPJS Ketenagakerjaan, withholds PPh 21 income tax, calculates and pays THR, and handles statutory reporting. The client company manages the employee's daily responsibilities, performance, and work output.

Key responsibilities an EOR handles in Indonesia:

Why use an EOR in Indonesia?

Setting up a PT PMA in Indonesia requires a minimum capital commitment of IDR 10 billion, multiple government registrations, and months of processing before the first employee can be onboarded. An EOR removes that barrier by employing workers through its own registered Indonesian entity.

An EOR is the more practical route when a business:

The EOR carries the legal employer liability, which means the client company is not directly exposed to compliance risk from missed BPJS contributions, late THR payments, or incorrect severance calculations.

EOR vs PT PMA: Which is right for your Business?

An EOR is the better fit for businesses hiring 1 to 20 employees in Indonesia, entering the market for the first time, or needing to onboard quickly without capital investment. A PT PMA makes more sense for companies planning long-term operations with a large headcount and local revenue. The table below breaks down six factors side by side so you can see exactly where each option saves time, money, or administrative effort.

Onboarding and agreements

Employee onboarding in Indonesia involves introducing new hires to the organization and familiarizing them with their role, workplace policies, reporting structure, and key responsibilities. An effective onboarding process helps employees integrate smoothly into the workplace and become productive more quickly. 

Employment relationships in Indonesia are generally governed by a written employment agreement. The contract typically outlines key terms and conditions of employment, including compensation, working hours, benefits, leave entitlements, job responsibilities, and other relevant provisions.

The two primary types of employment agreements used in Indonesia are:

Definite contracts

Definite contracts are used for employment relationships that have a specified duration or are linked to the completion of a particular project or assignment. These agreements generally include a defined term and conclude upon reaching the agreed end date or project completion.

Indefinite contracts

Indefinite contracts are intended for ongoing employment relationships and do not have a predetermined end date. The employment arrangement remains in effect until it is terminated in accordance with applicable employment requirements.

After the employment agreement has been finalized, employers typically complete a series of onboarding activities to help employees transition into their new role.

To support employee onboarding in Indonesia, Skuad helps businesses manage compliant employment contracts, onboarding workflows, and workforce administration through a single platform. 

Case study: How Microsense Networks onboarded contractors across Southeast Asia with Skuad

Microsense Networks, a telecommunications company specializing in high-speed internet solutions for the hospitality sector, needed to onboard contractors across Indonesia, Sri Lanka, and Thailand while meeting local employment and compliance requirements.

Using Skuad's Agent of Record platform, the company managed localized contracts, country-specific documentation, and payments in multiple currencies for nine contractors across three markets without establishing separate legal entities.

Read the full case study

Taxes

Employers in Indonesia are responsible for withholding applicable income taxes, making statutory contributions, and meeting local reporting requirements. Below is an overview of the key tax obligations for employers and employees in Indonesia.

Employer taxation

Employee taxation

What are the mandatory BPJS contributions in Indonesia?

Indonesia's social security system operates through two separate bodies: BPJS Kesehatan for national health insurance and BPJS Ketenagakerjaan for employment social security. Both require mandatory employer and employee contributions, calculated as a percentage of the employee's monthly salary.

BPJS Kesehatan (health insurance)

BPJS Kesehatan is Indonesia's national health insurance programme. Employers contribute 4% of the employee's monthly salary, and employees contribute 1%, both subject to a salary cap of IDR 12,000,000 per month. Coverage extends to the employee, their spouse, and up to three children.

Note: Coverage includes the employee, their spouse, and up to three children.

BPJS Ketenagakerjaan (employment social security)

BPJS Ketenagakerjaan covers four programmes: work accident insurance (JKK), death benefit (JKM), old-age savings (JHT), and pension (JP). Employer rates across these programmes total between 6.24% and 7.74% of salary, while employees contribute 3% combined. The JP programme has a monthly wage cap of IDR 11,086,300, effective from March 2026.

Note: Total employer BPJS contributions range from approximately 10.24% to 11.74% of salary, depending on the industry's JKK risk classification.

What does it cost to employ someone in Indonesia through an EOR?

The total monthly cost of employing someone in Indonesia through an EOR includes the employee's gross salary, mandatory BPJS contributions, a monthly THR accrual, and the EOR platform fee. The example below uses the 2026 Jakarta provincial minimum wage (UMP) as the base salary.

What is THR and how is it calculated in Indonesia?

THR (Tunjangan Hari Raya) is a mandatory religious holiday allowance that every employer in Indonesia must pay to employees before their religious holiday. It is equivalent to one month's salary for employees with 12 or more months of continuous service and is pro-rated for employees with less than 12 months of service.

Key THR rules:

• HR must be paid no later than 7 days before the employee's religious holiday (e.g., Eid al-Fitr, Christmas, Nyepi, Vesak, or Lunar New Year)
• THR is calculated on basic salary plus fixed monthly allowances
• THR cannot be paid in instalments
• Both PKWT and PKWTT employees are entitled to THR as long as their contract is active at the time of the religious holiday
• Employers who fail to pay THR on time face administrative sanctions and potential penalties

For an employee earning the 2026 Jakarta UMP of IDR 5,729,876 with 12 or more months of service, the THR payment is IDR 5,729,876. For an employee with 6 months of service, the pro-rated THR is IDR 2,864,938.

Compliance

Labor and employment laws in Indonesia are generally considered to favor employees.

These laws broadly define employment and ensure that provisions such as social security are extended to all employees.

Indonesian employment laws apply to all Indonesian nationals working in the country, but not to foreign nationals.

In Indonesia, it is generally considered hard to terminate employment, and several types of employment are defined under Indonesian law.

Some provisions of the employment laws to note before hiring in Indonesia are as follows.

Fines/penalties for worker misclassification

If an employer fails to comply with the distinction between an employee and an independent contractor, it can lead to worker misclassification.

The Indonesian authorities are strict regarding such events and impose hefty fines and penalties, such as the following.

• Penalty for failure to submit a tax return - IDR 100,000 for the monthly income tax return.
• Administrative penalties for late payments, with the tariff based on the current interest rate determined by the Ministry of Finance, for 24 months.
• Denial of receiving public service for violation of social security requirements
• Imprisonment for up to eight years or a fine of up to IDR one billion.

IP protection

The Directorate General of Intellectual Property (DGIP) is a government agency overseeing IP protection rights in Indonesia.

Here, we have highlighted some key information related to the main IP rights.

Contractors and full-time employees

Businesses hiring in Indonesia can engage workers as either independent contractors or full-time employees. The most suitable option depends on factors such as the nature of the role, the expected duration of the engagement, and broader workforce objectives.

Each engagement model carries different legal and compliance obligations. Full-time employees are generally covered by statutory employment protections and social security requirements, while contractors operate under separate commercial agreements and are responsible for managing their own obligations.

Skuad supports both hiring models through a unified platform:

EOR for full-time employees

• Employ talent in Indonesia without establishing a local entity through Skuad's EOR infrastructure across 160+ countries
• Generate employment contracts aligned with local labor laws and statutory requirements
• Support statutory contribution administration covering applicable employer and employee obligations
• Process payroll in 70+ currencies with accurate tax withholding and statutory deductions
• Help administer mandatory benefits, leave entitlements, and other employment-related requirements
• Support employee offboarding processes in accordance with local employment requirements

Contractor management

Whether you are hiring full-time employees or contractors in Indonesia, Skuad supports both workforce models through a single platform.

Full-time employee or contractor? Skuad supports both. See pricing.

Types of visas in Indonesia

The type of visa or stay permit required in Indonesia depends on the purpose of the visit and the length of time the individual intends to remain in the country.

Work permits

Payroll management in Indonesia

Employers in Indonesia generally pay employee salaries through bank transfers in accordance with the agreed payroll schedule and employment terms. In addition to salary payments, employers are responsible for managing applicable tax withholdings, statutory contributions, and payroll-related compliance requirements.

As payroll obligations can involve multiple administrative and reporting requirements, many businesses use an Employer of Record (EOR) to support payroll processing and workforce administration.

Key payroll considerations

• Maintain accurate employee and payroll records
• Process payroll in accordance with agreed compensation terms and pay schedules
• Calculate and remit applicable taxes and statutory contributions
• Keep payroll documentation updated and organized
• Meet local payroll reporting and compliance requirements

Managing payroll obligations

Managing payroll in Indonesia involves more than issuing salary payments. Employers must administer payroll accurately, manage statutory obligations, maintain employee records, and comply with local employment and tax requirements. As teams grow, payroll administration can become increasingly complex and time-consuming.

Benefits and compensation

When hiring in Indonesia, you need to disburse all mandatory insurance and health benefits to employees under the Social Security program. They include the following,

• Health security: Members of the National Social Security System receive healthcare and protection benefits, including promotional, preventive, curative, and rehabilitative services.
• Employment injury security: Any worker who suffers from an employment injury or occupational disease is entitled to healthcare and cash benefits.
• Old-age security: It is administered to ensure that members receive cash benefits if they retire, suffer from total permanent disability, or die.
• Pension security: If employees lose or are short of income due to retirement age or suffer from total permanent disability, they become entitled to pension security in Indonesia.

Worker rights

Leave policy

Public holidays in Indonesia

Employers should consider national public holidays when planning work schedules, payroll operations, and employee leave management in Indonesia. The following are the public holidays observed in Indonesia.

Alongside public holidays, Indonesian employment regulations also provide employees with various statutory leave entitlements.

Background checks

Background checks are commonly used in Indonesia to verify candidate information and support informed hiring decisions. Common checks include:

• Employment verification: Confirms previous employment details, including job titles, dates of employment, and work experience.
• Education verification: Verifies academic qualifications, degrees, certifications, and other credentials provided by the candidate.
• Identity verification: Confirms the candidate's identity using relevant identification documents.
• Reference checks: Validate a candidate's professional experience and suitability for the role through references or previous employers.

Termination and offboarding

Termination of employment in Indonesia must comply with the Manpower Law and Government Regulation No. 35 of 2021. Employers are generally required to provide written notice of termination and follow the applicable dispute resolution process if the termination is contested.

Employees may be terminated for reasons such as redundancy, misconduct, or breaches of company policies and employment contracts. Severance pay is generally required, and employees are protected from termination on certain grounds, including pregnancy, illness, and union membership.

What are the termination and severance requirements in Indonesia?

Termination of employment in Indonesia is governed by the Manpower Law and PP 35/2021 (Government Regulation No. 35 of 2021), which require employers to provide written notice, follow a notification-based process, and pay a statutory severance package.

Indonesia does not allow at-will dismissal. Employers can only terminate employment for specific reasons recognised under PP 35/2021, including redundancy, misconduct, company closure, or breach of contract. Employees are protected from termination on grounds of pregnancy, illness, and union membership.

Severance pay structure under PP 35/2021

The severance package consists of three components: severance pay (Uang Pesangon), long-service pay (UPMK), and compensation of rights (UPH). The amount for each component is determined by the employee's length of service, and PP 35/2021 applies a multiplier based on the reason for termination.

Severance Pay (Uang Pesangon):

Severance pay starts at one month's salary for employees with less than one year of service and caps at nine months' salary for employees with eight or more years of service.

Long-Service Pay (UPMK):

Long-service pay applies to employees with three or more years of continuous service. It starts at two months' salary and caps at ten months' salary for employees with 24 or more years of service. UPMK is paid in addition to severance pay, not instead of it.

Compensation of Rights (UPH) covers unpaid annual leave, relocation costs (if applicable), and any other entitlements specified in the employment contract.

PP 35/2021 applies a multiplier to the severance pay and UPMK amounts depending on the reason for termination. Common multipliers include:

• Company closure or redundancy: 1x severance pay + 1x UPMK
• Gross misconduct: 0.5x severance pay + 1x UPMK
• Company losses for 2+ years: 0.5x severance pay + 1x UPMK
• Force majeure: 0.75x severance pay + 1x UPMK

Book a demo to see how Skuad manages compliant terminations and severance in Indonesia.

What is the difference between a PEO and an EOR in Indonesia?

A PEO (Professional Employer Organization) and an EOR (Employer of Record) both support workforce management in Indonesia, but they differ in legal structure, compliance ownership, and entity requirements.

For businesses without a PT PMA, an EOR is the more practical option. Learn more about PEO services.

Ready to expand your team in Indonesia?

At this point, you should have a better understanding of the key considerations for hiring in Indonesia, from employment regulations and payroll requirements to benefits, compliance obligations, and workforce management. With the right approach, businesses can navigate local requirements while focusing on growth and expansion.

For companies looking to hire in Indonesia without establishing a local entity, Skuad's Employer of Record solution provides a streamlined way to onboard employees, manage payroll, administer benefits, and support ongoing compliance through a single platform.

Book a demo to see how Skuad gets your first Indonesia hire onboarded in weeks.

How to choose an EOR provider in Indonesia?

Choosing an EOR provider for Indonesia requires evaluating entity ownership, BPJS enrolment capability, pricing transparency, and local compliance expertise. The right provider should demonstrate a registered presence in Indonesia and a clear process for onboarding, payroll, and termination.

Key factors to evaluate:

Entity model: Does the provider own its Indonesian entity, or does it outsource to a third-party partner?

BPJS capability: Can the provider register employees with both BPJS Kesehatan and BPJS Ketenagakerjaan directly?

Pricing transparency: Is the per-employee monthly fee published, or quote-only?

Onboarding speed: How quickly can the provider generate contracts and complete BPJS registration?

Severance and termination support: Does the provider manage PP 35/2021 calculations and documentation?

EOR pricing for Indonesia varies significantly between providers, and published rates alone don't tell the full story. Entity ownership, BPJS enrolment capability, onboarding speed, and severance support all differ. The table below compares three providers with publicly available pricing so you can evaluate cost alongside coverage before requesting a quote.

How to hire employees in Indonesia with an EOR ?

Hiring through an EOR in Indonesia follows a structured process from provider selection to employee onboarding. The EOR handles the legal and administrative steps, while the client company manages candidate selection and day-to-day work.

FAQs

1. What is an Employer of Record in Indonesia?

An Employer of Record (EOR) in Indonesia is a local entity that hires employees on behalf of another company. The EOR manages employment contracts, payroll, BPJS contributions, PPh 21 withholding, THR, and compliance with local employment requirements, while the client company oversees the employee's day-to-day work.

2. How much does an Employer of Record in Indonesia cost?

Skuad's EOR service in Indonesia starts at $199 per employee per month. Deel starts at $599 per employee per month, and G-P (Globalization Partners) starts at $599 per employee per month. In addition to the platform fee, employers should factor in BPJS contributions (approximately 10 to 12% of salary), THR (one month's salary annually), and PPh 21 income tax withholding.

3. What are the risks of misclassifying workers in Indonesia?

Misclassifying employees as independent contractors can lead to back-payment of BPJS contributions, PPh 21 tax liabilities, administrative penalties, and imprisonment of up to eight years or fines of up to IDR one billion. Businesses should ensure worker classifications align with Indonesian employment requirements.

4. How quickly can an EOR onboard an employee in Indonesia?

Onboarding timelines depend on documentation and employment terms. With Skuad, onboarding is completed in weeks, covering employment contract generation, BPJS registration, payroll setup, and work permit processing where applicable.

5. Does an EOR in Indonesia handle BPJS enrolment and THR?

Yes. An EOR registers employees with BPJS Kesehatan and BPJS Ketenagakerjaan, calculates and remits monthly contributions, and manages THR calculations and payments before the employee's religious holiday.

6. What data security and compliance credentials should an EOR have?

An EOR handling employee data in Indonesia should maintain SOC 2 Type II certification and comply with Indonesia's data protection requirements under Government Regulation No. 71 of 2019. Employers should verify the provider's data handling practices, storage locations, and access controls before onboarding employees.