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With a huge young population and a growing economy, Indonesia is quickly becoming a popular place for businesses to find a qualified talent pool. However, Indonesian employment rules and cultural differences can be hard to understand for those who are new to the area. This complete guide is meant to enlighten companies on the most important parts of hiring people in Indonesia so that employers can make smart choices and build a strong team in this fast-growing market.
Why Hire Employees from Indonesia?
Indonesia's job market is one of a kind due to the size, diversity, and fullness of energetic young people. With over 130 million employees and a median age of 30, it's a great place for companies to find high-agility employees. Below are more detailed reasons why hiring an employee from Indonesia can be an employer's best choice:
1. A Wide Range of Talent
Indonesia has a huge population, indicating that there are many talented people there as well. These qualified people from a wide range of businesses are ready to join a top team.
2. Cost-effective Business Practices
Indonesia's labor market is competitive, which helps companies keep costs down while keeping standards high. This can be especially helpful for new businesses and growing companies that want to make the most of their resources.
3. Key Access Point to Southeast Asia
Indonesia is in the middle of Southeast Asia, making it easy to reach a growing regional market. If the company hires employees from this country, their business can also make additional connections here.
4. Government’s Support
The Indonesian government has been working hard to make the country more business-friendly and help them grow. This can make it easier for employers to tap into the Indonesian market and run their business smoothly.
5. Local Culture Understanding
When hiring locals, employers can benefit from their deep understanding of both the culture and the business. This can help employers ensure that their products and services appeal to Indonesian customers and help them get around the local market.
Now that we've learned about the advantages of hiring Indonesians, let's examine the laws that govern job contracts employers have to fully understand before hiring employees in Indonesia.
Types of Employment Contracts
Indonesia has two main types of work contracts: PKWT (Fixed-Term Working Contract) and PKWTT (Indefinite Time Working Contract). Both are fundamentally different in ways that employers and employees need to know.
1. Fixed-Term Working Contract (PKWT)
A PKWT is a job contract that has a set length of time and ends when the work is done or on a date that was agreed upon. Most of the time, this kind of contract is used for short-term jobs or special projects. PKWTs don't have to go through a trial time, and if they are fired, the company doesn't have to pay them severance pay. Instead, they get compensation pay after completing a contract period. PKWT employees must be registered to labor officials by their employers.
2. Indefinite Time Working Contract (PKWTT)
A PKWTT is a job contract that doesn't have an end date. It ends when the employee retires or dies. This contract is usually used for jobs that last a long time at a company. PKWTTs have a trial time to see how well employees do their jobs. In line with labor rules, if an employee is fired, the company has to pay them severance pay. Agreements for PKWTT can be spoken or written, and employers are not needed to register PKWTT employees with the labor official.
Working Hours and Overtime
Both employers and employees in Indonesia must be aware of working hours and overtime rules. Let's investigate these further.
1. Working Hours
In Indonesia, most employees work 40 hours a week. Employees who work six days a week get seven hours each day, while those who work five days a week get eight hours. Different businesses and jobs may have different rules about working hours regulations.
2. Overtime
In Indonesia, working overtime is allowed if supervisors give written permission and agreed by the employees. Overtime is limited to 18 hours per week or 4 hours per day.
Companies must use this formula when figuring out how much to pay for extra: The first hour will pay 1.5 times the hourly wage, and each hour after that will pay 2 times the hourly wage.
If overtime is worked on holidays, the calculation is different. The multiplier is bigger, and it can be anywhere from 2 to 4 times the hourly wage, based on the hours worked and the work schedule (5-day or 6-day workweek).
Holidays and Time Off
In Indonesia, employees are allowed different kinds of time off, such as annual leave, sick leave, maternity leave, and religious holidays. Employers must comply with the law regarding employee leave rights.
1. Public Holidays
Indonesia has several national and religious holidays that are observed as public holidays. Most employees are eligible for paid time off during these times.
Also Read: Indonesia Public Holidays + Joint Leaves 2024
2. Annual Leave
After working for the same company for a year, most employees are eligible for 12 days of paid annual leave. If they work longer, they may get more days off.
3. Sick Leave
If an employee is sick or injured and is unable to work, they are eligible for paid sick leave. Medical papers may be needed to back up requests for sick leave.
4. Maternity Leave
Women employees are entitled to three months of paid maternity leave, and men employees are entitled to a few days of paid paternity leave.
5. Special Leave
Employees can get special leave for many reasons, like getting married, bereavement, having a family emergency, or going on a religious journey. Company policies and labor agreements can change the length and terms of special leave.
6. Unpaid Leave
With supervisors' approval, employees can ask for personal leave without pay.
Termination of Employment Procedure
In Indonesia, specific steps must be undertaken to end an employment relationship, which depends on the reason for termination. Here's how it works:
1. Due to Dismissal
When an employer decides to fire an individual, this is known as dismissal. This could happen for a number of reasons, such as poor performance, a reorganization at work, or bad behavior by an employee. Usually, the following steps are taken:
If a company wants to fire an employee in Indonesia, they have to give them written warning at least 14 days in advance, explaining why they are being fired and what their rights are. Then, both sides negotiate with each other to come to a deal.
If this doesn't work, the case can go to settlement at the Manpower Department. If that doesn't work either, the parties can go to court in the Industrial Relations Court. If the firing is legal, the employee is eligible to severance pay, service pay, and other benefits based on how long they worked for the company.
2. Due to Resignation
In Indonesia, employees who want to resign voluntarily must give written notice at least 30 days in advance and finish any handover tasks that need to be done. After that, the employer has to settle all outstanding payments, including salary and unused leave compensation. Employers may also give separation pay as a nice gesture, even though it’s not required by law. Knowing these steps will ensure that the layoff process goes smoothly and fairly for everyone involved.
Employee Benefits
To attract and maintain top talent, employers need to know what the mandatory benefits are and consider what other benefits that might be appealing to them. To help get started, here is a list:
1. Mandatory Benefits
The law in Indonesia has a regulation regarding benefits to protect employees’ health and funds. These include health insurance (BPJS Kesehatan), which pays for medical care; social security (BPJS Ketenagakerjaan), which protects employees financially in case of work-related accidents or old age; and Tunjangan Hari Raya (THR), which pays for religious holidays. All companies must ensure they follow these rules.
Also Read: The Ultimate Guide to BPJS in Indonesia: Complete and Up-to-Date Information
2. Additional Benefits
Employers can do more than what the law requires to improve the health and happiness of their employees. These include meal and transportation allowances, performance bonuses, better health insurance with wider coverage, benefits based on role and specific positions, performance-based incentives, and meals for employees who work odd hours.
Also Read: Employee Benefits in Indonesia: What You Need to Know
Attracting Top Talent in Indonesia
Companies must make sure their hiring processes are in line with cultural norms and values in order to get the best Indonesian professionals for remote jobs.
- Work-Life Balance: The most important thing is to offer flexible work schedules so that employees can balance their work obligations with family and faith obligations. For example, this could mean having flexible plans or core working hours that let employees go to Friday prayers.
- Respecting Cultures: Respecting ethnic diversity means recognizing and celebrating important Indonesian holidays and festivals. Giving employees time off for these holidays and planning virtual team-building activities based on traditional practices helps them connect with each other and stay engaged.
- Respectful Communication: Most employees in Indonesia prefer to talk to each other in a friendly, indirect way. Companies should create a helpful and team-oriented remote space where regular check-ins encourage honest conversation and understanding are valued. This method fits with the Indonesian idea of "gotong-royong," which means helping each other and being part of a community.
By using these three key tactics, businesses can make themselves more appealing to top-level Indonesian employees.
Simplify The Hiring Process
Businesses looking for skilled and driven employees can find great opportunities by hiring employees in Indonesia. However, it can be hard to navigate the complicated Indonesian labor rules, different cultural norms, and effective onboarding procedures.
Talentport is a complete solution that connects you with the best Indonesian remote employees and makes the whole hiring process easier. We give you access to a huge pool of pre-screened employees, make sure you follow all local laws, and promote a welcoming workplace for people of all backgrounds.
You can save time and money by streamlining the hire process with Talentport. Our knowledge of Indonesian labor rules and cultural differences makes the whole process, from finding candidates to training new remote employees, quick and easy. When you work with Talentport, you can focus on your main business goals while we take care of the details of building your dream team in Indonesia. Spend less time sourcing the right talent with us, inquire now!
