Proper payroll management is crucial to the success of any company. This is also true of companies which are based in Indonesia. Such companies may either choose to outsource their payroll management or use payroll software programs to make this tedious process quicker and simpler.
Many reports and financial details must be filed for inspection by and submitted to the tax authorities, no matter what country one is based in. These matters are difficult for anyone to handle, and such is true in Indonesia as well. Complying with payroll regulations can be a burden for those who choose to set up a company in Indonesia. For this reason, assistance with the payroll of a company is available for the many companies who plan to take advantage of the growing economy of Indonesia. The Investment Coordinating Board of the Republic of Indonesia (BKPM) works with both businesses and the government. BKPM is the organization which will serve as the go-between. Limited liability companies typically take between five and 10 business days to obtain an initial approval, though complete approval may take longer. Applicants will also have to get a tax number through the Tax Office. It is BKPM’s job to improve foreign relationships and workers’ conditions. Certain sectors may be closed off to foreign investments based on the economic climate. Companies do not need to set up a bank account in Indonesia but doing so is highly encouraged. Applicants will need the initial approval from BKPM, a tax number, a Deed of Establishment, and a domicile letter. Once everything has been settled with BKPM, the services and assistance which become available to the company may make management of the company’s payroll a simpler task.
Payroll Management in an Average Indonesian Company
Payroll management is one of the most important aspects of running a business. Without a proper payroll system, it is very difficult to keep a business in operation. The employees are to be paid every month according to their working hours or contracts. These payments must, of course, be of the correct value on time. Having payments done correctly and paying employees accordingly is a time-consuming task. As a business grows, the work increases; thus, business owners ensure that they are not overwhelmed by what may sometimes be an excessive workload. Payroll processing in Indonesia or anywhere else in the world needs accuracy. In Indonesia, the regulations on labor, accounting, auditing, and tax reporting are not easy as the rules are changed quite often. Therefore, finding a trustworthy firm which specializes in payroll services in Indonesia is a must at some point. While most small companies keep their payroll management in-house, some other companies choose to make the switch to outsourcing their payroll management services. They do so because outsourcing of payroll services can often save much time and money while at the same time reducing the business owner’s workload.
We at Paul Hype Page & Co provide outsourcing of payroll management and other accounting services. We will help your company save much money and time through the use of our services. They will allow you to then place more emphasis on other important aspects of the operation of your company.
Average Salaries in Indonesia
Salaries in Indonesia range between 2,124,574 rupiah per month to 69,506,253 rupiah per month. The median salary is 15,225,563 rupiah per month; this implies that half of the population earn less than 15,225,563 rupiah every month while the other half earn more than this figure. The 25th and the 75th percentiles of salaries in Indonesia also reveal some interesting information. According to the salary distribution of Indonesia, 25% of the population earn less than 7,807,562 rupiah every month while 75% of them earn more than that figure. On the other hand, 75% of the population earn less than 39,823,954 rupiah per month while 25% earn more than that amount.
Work Hours and Pay Schedule of Indonesian Employees
Employees in Indonesia usually have a 40-hour work week with a three–hour limit on the amount of overtime which can be taken every day. Overtime rates are 1/173 of an employee’s monthly salary. Breaks must be given for every four hours which an employee works. Those who have a job as a planner or controller are not subject to overtime restrictions. However, their salary is to reflect their skills and the hours which they work. Paperwork regulations in Indonesia with regard to the hiring of employees are lenient. However, all employers are required to have a registered contact with the Ministry of Manpower as long as they plan to hire an employee on a temporary basis. The minimum wage is determined by the location of the company and is usually based on the financial needs of the specific province in which the company is located. However, the minimum wage only applies to employees who work for employers for less than a year. Employees who work for a longer period are to negotiate their salary with their employer. There are collective bargaining agreements in Indonesia, but there may be only one agreement for the entire enterprise. The agreements are valid for two years, and negotiations are allowed to begin within three months of the agreements’ expiration. If wage growth and bonuses are not specifically mentioned in the agreements, the employee and employer are required to have a discussion so that they can negotiate the terms.
Payroll Software and Payroll Management
The management of accounts and maintaining of proper records for the manual preparation of a company’s is a complex process that uses up large amounts of time. However, the use of payroll software can overcome this problem. Payroll software programs developed for small businesses have made it much easier for these small businesses to complete payroll management tasks. Today, most companies prefer to use payroll software to calculate employees’ salaries. Payroll software ensures that this is done quickly and accurately.
Payroll software programs developed for small businesses in Indonesia are simple to use and affordable. These programs are used to calculate taxes and salaries according to the employees’ contracts and the the Indonesian tax system. The use of payroll software is much more efficient for calculation of payment when compared to that of a manual system. Payroll software programs make information much easier to understand, help business owners create reports, and reduce the amount of manual effort to be made. The use of payroll software programs provides many advantages to organizations. These programs allow for easy management of employees’ salaries, wages, and taxes, and other deductions. Calculating salaries accurately builds trust among employees. For this reason, payroll software programs should be used so that business owners will be able to provide accurate calculations. Payroll software programs thus settle many of a company’s payroll needs.
Features of Payroll Software Programs for Small Businesses
Small businesses’ payroll software programs tend to have many user–friendly which are typically used to provide calculations accurately and quickly. The following are several of the primary functions of a high-quality payroll software program:
- Handling of transactions between more than one company
- Accurate calculation of money to be paid in the form of monthly salary, bonuses, commissions, or advance payments
- Generation of various management, payroll and operational reports
- Maintenance of employees’ personal profiles
Payroll software usually has simple interfaces because payroll software is usually developed with the common user as the target audience. It is important to use high-quality payroll software. Payroll software programs for small companies are not complicated to use and understand by any means. The simple interfaces of such programs provide easy access to payroll data and calculations. The reports and data generated by payroll software programs assist in making decisions on important company issues. The use of payroll software also reduces the costs of hiring employees for the management of a company’s payroll. Therefore, it can be concluded that the use of payroll software programs is an ideal solution for all companies, whether they be based in Indonesia or elsewhere.
Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.
Paul Hype Page & Co. have 3 physical offices in Singapore, Malaysia and Indonesia
Our Firm Goal is to assist Foreigner and Foreign Companies to set up business in Asean.
How we can help you:
We will call you back, please click below link and make appointment with our Sales consultant:
Step 1- Listen to your Business plan and Relocation needs.
Step 2- Analysis your Tax Planning
Step 3- Recommend the most suited type of Company Incorporation, Open Bank account and Work Visa
Step 4- Arrange for your Spouse and Children Visa
Step 5- Assist as your company to hire staffs and handle all HR matters
Step 6- Every financial year end, we assist you with your yearly OSS Finanical and Tax Complianc
Step 7- Assist you to expand business to Malaysia, Indonesia, Vietnam and Thailand.
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Paul Hype Page
Indonesia Payroll Management FAQs
The laws regarding taxation in Indonesia, depend upon whether the company in question employs any foreigners. Some of the primary taxes to be paid by a foreign company operating in Indonesia are individual income tax for employees in Indonesia, capital gains tax, withholding tax, payroll tax, business tax, and sales tax.
In recent years, the value of the rupiah has declined. Over the last decade, the value of the rupiah has fallen from approximately 9,000 rupiah to the US dollar to approximately, 14,000 rupiah to the US dollar. Therefore, although the nominal value of the minimum wage has risen, the actual value of the minimum wage in Indonesia has fallen because of the decline of the rupiah’s value.
In 2019, the official minimum wage in Indonesia is 3.94 million rupiah per month. This figure represents an increase; the figure was 3.6 million rupiah per month in 2018. In general, the minimum wage in Indonesia has steadily risen.