Religious Holiday Allowance in Indonesia (THR): A Comprehensive Guide

In Indonesia, celebrating religious holidays is a joyous and significant time. To ease the financial burden of festivities, employers in the country are legally required to provide their employees with a religious holiday allowance, commonly known as Tunjangan Hari Raya (THR).

THR is a special bonus, separate from regular salaries, that employers must provide their employees before major religious holidays. This allowance ensures Indonesian workers can comfortably celebrate important religious festivals with their families.

In this comprehensive article, we will navigate you through all the essential aspects of THR in Indonesia. Let's explore what it means, who is entitled to receive it, how it is calculated, and the implications for businesses.

What is THR?

THR, or the religious holiday allowance in Indonesia, is a mandatory non-wage financial benefit provided by employers to their employees before significant religious holidays like Idul Fitri for Muslims, Christmas for Christians, Nyepi for Hindus, Vesak Day for Buddhists, and Chinese New Year for Confucians. This serves as a form of appreciation for the employee's dedication and hard work throughout the year.

All employers in Indonesia, regardless of whether they are individuals or institutions, must pay THR to their employees. THR regulations are outlined in the Minister of Manpower Regulation No. 6 of 2016 concerning Religious Holiday Allowances for Workers/Laborers in Companies.

The purpose of THR is to enable employees to cover additional expenses that often arise during these festive periods. From gifts and travel to food and family gatherings, the religious holiday allowance helps relieve financial burdens and enhances the celebration experience. So, it must be paid and received in cash.

Who is Eligible to Receive THR?

According to the Minister of Manpower, Ida Fauziyah, workers who are entitled to receive a bonus (THR) must have worked for at least one month continuously. They should have a contract based on a Permanent Employment Agreement (PKWTT), Fixed-Term Employment Agreement (PKWT), or daily casual workers who meet the requirements according to the regulations.

THR is a benefit paid annually that equals one month's salary for employees who have completed a year of service. For new hires who haven't been there for a full year yet, the THR amount is proportionally reduced based on their employment duration.

For daily casual workers, one month's salary calculation varies based on their employment duration. Those with 12 months or more of service have their one month's salary determined by the average wage received over the preceding 12 months leading up to the religious holiday.

On the other hand, for workers with less than 12 months of service, one month's salary is calculated based on the average monthly wage earned during their period of employment.

This system ensures that workers are fairly compensated based on their duration of employment, aligning with the principle of proportional entitlement to THR.

It is important to note that companies can provide THR to their employees in an amount greater than what is mandated by law. In such cases, the THR paid to the employee will follow the employment contract, company regulations, collective bargaining agreement, or customary practices.

Also Read: The Ultimate Guide to BPJS in Indonesia: Complete and Up-to-Date Information

How to Calculate THR?

As mentioned above, the amount of THR employees receive depends on how long they have worked for the company and their salary. Let's run some simulations to understand how to calculate THR comprehensively.

1. Calculating Proportional THR

Workers who have worked for less than a year will receive a prorated THR. The formula for calculating proportional THR is as follows:

Let's understand this better with an example:

Sarah has worked at Company Y for 9 months and earns IDR 7,000,000 monthly.

Then, her proportional THR would be calculated as follows:

Sarah's THR = 9 / 12 x 7,000,000 = 5,250,000

Therefore, Sarah would receive a THR of IDR 5,250,000.

2. Calculating THR for Employees with One Year or More of Service

Regulations state that employees who have worked for 12 months or more are entitled to their monthly salary as THR.

Let's see how this works in practice:

Michael earns IDR 12,000,000 per month and has worked for his company for 20 months.

Since Michael has worked there for over a year, he is entitled to his entire monthly salary as THR. Therefore, Michael would receive Rp12,000,000 in THR.

When is THR Paid Out?

According to the Minister of Manpower's Circular Letter regarding Implementing Religious Holiday Allowance Payment in 2024 for Workers/Laborers in Companies, religious holiday allowances in Indonesia should be distributed to employees no later than 7 days before the employee’s religious holiday. This allows workers enough time to prepare and manage the expenses associated with these celebrations.

The significance of this seven-day window extends beyond mere convenience for employees. Religious holidays in Indonesia often involve travel for family reunions (commonly known as “mudik”) and purchasing gifts, making donations, special foods, and new clothes.

Early disbursement of THR empowers workers to make necessary arrangements without facing undue financial stress. Additionally, the timely injection of THR into the economy contributes to a boost in spending during festive seasons.

Also Read: The Comprehensive Guide of Payroll Tax in Indonesia: Based on Latest Regulations

Sanctions for Employer that Do Not Pay THR in Indonesia

THR is a mandatory benefit that employers must provide to their employees. However, there are some cases where the company may not pay THR or delay payment. In this case, the company will receive sanctions based on Government Regulation (PP) Number 36 of 2021 concerning Wages and Ministerial Regulation of Manpower Number 6 of 2016 concerning Religious Holiday Allowance for Workers/Laborers in Companies in the form of:

• A 5% penalty will be imposed for late payment of THR. However, this does not eliminate the company's obligation to pay bonus.
• Employers who neglect their obligation to provide THR face escalating consequences.  Warnings serve as the initial step, but continued non-compliance leads to increasingly severe restrictions on business operations, including potential suspension of production capabilities. A complete freeze on business activities may be enforced in severe cases. These graduated sanctions emphasize the importance of fulfilling THR obligations and deter employers from violating these regulations.

Understanding and adhering to THR regulations is crucial for businesses operating in Indonesia.  By ensuring timely and accurate THR payments, you comply with the law and foster positive employee relations.

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