How to Hire Employees in Indonesia: A 2026 Guide for Foreign Companies
To hire an employee in Indonesia you need an Indonesian employer: either your own company (a PT PMA for a foreign-owned business) or an employer of record that employs the person for you. You then set pay against the minimum wage for the work location, sign a contract in Bahasa Indonesia, register the employee with BPJS and the tax system, and run payroll in rupiah every month, including the annual THR. This guide walks through each step for companies hiring from abroad.
Step 1: Decide who will employ the person
An overseas company cannot simply add an Indonesian resident to its home payroll. Someone in Indonesia has to be the employer: sign the contract, register BPJS, withhold PPh 21 income tax and pay in rupiah.
| Option | When it fits |
|---|---|
| Your own PT PMA | You plan a growing team, local sales, imports or a licensed activity, and can carry the capital and the ongoing filings |
| An employer of record | You want to hire one or a few Indonesian employees soon, in supporting roles, without an entity |
| An independent contractor | The work is a defined project by a professional who runs their own business and invoices you |
| Expat employment | The person is a foreign national who needs a sponsored work permit and KITAS |
| A representative office (KPPA) | You only need liaison, promotion or market research. It can employ local staff but cannot sell, sign sales contracts or invoice |
For a closer comparison of the models, read EOR vs PEO vs GEO in Indonesia. If you are also weighing how to sell without a local company, see doing business in Indonesia without a company.
Step 2: Check the candidate’s identity and right to work
Indonesian citizens can work for any employer. You will need the candidate’s identity card (KTP), which carries the national identity number (NIK) that now also serves as the tax number, plus the family card (Kartu Keluarga) used for BPJS registration and a rupiah bank account.
Foreign nationals need an Indonesian sponsor, an approved foreign-worker plan (RPTKA), payment of the foreign-worker levy (DKPTKA, US$100 a month) and a work visa leading to a KITAS. They cannot hold HR or personnel roles. See Expat Employment in Indonesia.
NNRoad’s Indonesia EOR service covers Indonesian citizens. Foreign nationals are assessed through our separate Expat Employment service.
Step 3: Set the pay for the work location
Indonesia has no single national minimum wage. Each province sets a provincial minimum wage (UMP), and many cities and regencies set a higher one (UMK). The floor that applies is the one for the place the employee works, and it applies to employees with less than one year of service. After that, pay should follow the employer’s wage structure and scale.
| Work location | 2026 minimum wage per month |
|---|---|
| DKI Jakarta (UMP) | Rp5,729,876 |
| Kota Bekasi (UMK) | Rp5,999,443 |
| Karawang (UMK) | Rp5,886,853 |
| Surabaya (UMK) | Rp5,288,796 |
| Kota Bandung (UMK) | Rp4,737,678 |
| Denpasar, Bali (UMK) | Rp3,499,879 |
Professional salaries are usually well above these floors, but the floor still matters for junior roles and for the probation salary. Salaries must be paid in rupiah, even if you benchmark them in US dollars. The 2027 minimum wages are expected to be announced late in 2026, under a formula that may change with the new manpower law.
Step 4: Budget for the costs on top of salary
| Cost | Rate in 2026 | Notes |
|---|---|---|
| BPJS Ketenagakerjaan | Employer 6.24%–7.74% (JHT 3.7%, JKK 0.24%–1.74%, JKM 0.3%, JP 2%) | Pension (JP) is calculated on a capped wage |
| BPJS Kesehatan | Employer 4% | Calculated on wages up to Rp12,000,000 a month |
| THR | One month’s wage a year | Pro rata from one month of service; paid at least 7 days before the employee’s religious holiday |
| PKWT compensation | One month’s wage per 12 months | Only for fixed-term contracts, paid when the contract ends |
| Employee contributions and PPh 21 | Withheld from pay | Employee BPJS is 4% in total (JHT 2%, JP 1%, health 1%); not an extra cost to you |
For most office roles, employer BPJS and THR add roughly 15%–19% to twelve months of salary. Overtime, private medical insurance and end-of-employment costs come on top. See the Indonesia EOR cost guide for worked examples, or use the Indonesia employer cost calculator for a quick estimate.
Step 5: Write the contract
Indonesian law recognises two kinds of employment contract. A permanent contract (PKWTT) is the default. A fixed-term contract (PKWT) is allowed only for work that is temporary by nature or will be completed within a set time; it can run up to five years in total, cannot include probation and must be registered with the Ministry of Manpower within 3 working days of signing. A PKWT used for permanent work can be treated as a PKWTT.
The contract must be written in Bahasa Indonesia in Latin script; a bilingual version with English is common. It should state:
- Job title, duties and the place of work
- Start date, contract type and, for a PKWTT, any probation of up to three months
- Salary, fixed allowances and how bonuses work
- Working hours, rest days and overtime arrangements
- Confidentiality, intellectual property and data protection
The House of Representatives passed a new Manpower Protection Law on 6 October 2026. Reported drafts cap fixed-term contracts at four years. Until it is published and in force, the current rules apply; check contracts again once the final text is out.
Step 6: Register the employee and run payroll
Before the first payroll the employer registers the employee with BPJS Ketenagakerjaan (employment programmes) and BPJS Kesehatan (health), and sets up the employee in the tax system. Each month it then calculates gross-to-net pay, withholds employee contributions and PPh 21, issues a payslip and pays the authorities.
| Monthly obligation | Deadline |
|---|---|
| BPJS Kesehatan contributions | By the 10th of the following month |
| BPJS Ketenagakerjaan contributions | By the 15th of the following month |
| PPh 21 payment | By the 15th of the following month |
| PPh 21 monthly return | Within 20 days after the end of the month |
PPh 21 is withheld each month at the effective average rates (TER) from January to November, then recalculated in December at the annual progressive rates. Employees receive an annual withholding slip by the end of January. More on rates and allowances in our guide to individual income tax in Indonesia.
Step 7: Working hours, leave and holidays
| Topic | The rule |
|---|---|
| Hours | 40 hours a week: 7 hours a day over 6 days, or 8 hours a day over 5 days |
| Overtime | Up to 4 hours a day and 18 hours a week, paid on an hourly rate of 1/173 of the monthly wage with higher multiples after the first hour and on rest days |
| Annual leave | 12 working days after 12 months of continuous service; collective leave days are usually taken from this balance |
| Public holidays | 17 national holidays and 8 collective leave days in 2026; 18 and 8 announced for 2027 |
| Sick leave | Paid when supported by a doctor’s certificate, on a reducing scale for long absences |
| Maternity and paternity | At least three months of maternity leave, extendable by up to three more with a medical certificate; paid paternity leave of two days, with more by agreement |
Managing a team across time zones? Our guide to Indonesian work culture covers communication, hierarchy and meetings.
Step 8: If the employee works remotely
Remote employees in Indonesia are employed under Indonesian law like anyone else. The minimum wage, BPJS and tax rules follow the place where they actually work, so record the home city in the contract and update it if the employee moves, for example from Jakarta to Bali. Put equipment, internet costs, working hours and data security in writing.
Indonesia spans three time zones (UTC+7 to UTC+9). Jakarta is on UTC+7, which overlaps well with the rest of Asia and Australia and gives a few shared hours with Europe in the afternoon.
Step 9: Ending the employment
An employee who resigns must give written notice at least 30 days before leaving. An employer that wants to end the employment must give written notice at least 14 working days in advance, or 7 working days during probation. The employee can object in writing within 7 working days. If talks do not settle it, the case goes through mediation and, if needed, the Industrial Relations Court, and the termination takes effect only after a binding decision.
What is payable depends on the reason and the length of service: severance pay of up to nine months’ wages, service appreciation pay of two to ten months for service of three years or more, and compensation for rights such as unused leave. A fixed-term contract that ends on schedule pays the PKWT compensation instead. The employer also closes BPJS and issues an employment certificate. The new manpower law is expected to raise severance, so check the rules in force at the time.
Hiring checklist for Indonesia
- Decide who the employer is: your own PT PMA or an employer of record
- If you use an EOR, confirm the role fits the 2026 outsourcing rules
- Collect the KTP, family card and bank details, or plan the work permit for a foreign national
- Check the minimum wage for the work location and set the salary in rupiah
- Budget BPJS, THR and, for fixed-term contracts, the end-of-contract compensation
- Sign a contract in Bahasa Indonesia; register a PKWT within 3 working days
- Register BPJS and tax before the first payroll
- Agree remote-work terms, equipment and intellectual property in writing
Questions about hiring in Indonesia
Can a foreign company hire employees in Indonesia without a local entity?
Not as a direct employer. Without a PT or PT PMA, an employer of record can employ the person for you while you direct the work, as long as the role fits Indonesia’s outsourcing rules. See how NNRoad’s Indonesia EOR works.
How long does it take to hire someone in Indonesia?
With an employer of record, a local hire can usually start once the role has been reviewed, the contract is signed and BPJS registration is done. Setting up your own PT PMA first takes considerably longer, typically months.
What is the probation period in Indonesia?
Up to three months, and only for permanent contracts (PKWTT). A probation clause in a fixed-term contract is void, and the time counts as normal service.
Do I have to pay a 13th month salary in Indonesia?
Indonesia has THR, a religious holiday allowance of one month’s wage for employees with 12 months or more of service, pro rata from one month. It must be paid at least 7 days before the holiday.
Can I hire an Indonesian employee as a contractor?
Only if the work is genuinely independent: a defined result, the person’s own business and tools, and no direction like an employee. Otherwise the relationship can be treated as employment, with BPJS and tax due.
Can I pay an Indonesian employee in US dollars?
No. Wages paid in Indonesia must be paid in rupiah. You can agree the salary with reference to US dollars, but the payment itself is in rupiah.
Hiring your first employee in Indonesia?
If you do not have an Indonesian company yet, NNRoad can employ your hire through our Indonesian employing partner, after checking the role against the 2026 outsourcing rules. We handle the contract, BPJS, PPh 21, THR and payroll.