Payroll in Indonesia: Compliance & Management

Upon setting up your company in Indonesia, the next step is to hire employees to take on various aspects of the operations. This includes payroll in Indonesia for your hired employees.

No matter which country you have started your business in, owners like yourself are burdened to file numerous reports and financial details for inspection and submission to tax authorities.

Indonesia is no exception to this and one of the compliances that businesses are required to submit is payroll for their hired employees.

Complying with payroll regulations in Indonesia can be a tedious process for lean companies. For this reason, there are several firms that offer services to assist with payroll of companies that 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, thus acting as the go-between. They serve to boost investment, for both domestic and foreign direct, by creating a conducive climate.

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.

Applicants will need to submit the following:

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 in Indonesia a simpler task.

Payroll management in Indonesia is a vital aspect of running a business. Ensuring accurate payments and paying employees on a timely manner is a time-consuming task.

Payroll processing worldwide needs accuracy. In Indonesia, the rules, and regulations on numerous aspects can be overwhelming as the regulations change consistently. These include:

• Labour & HR work
• Accounting
• Auditing
• Tax reporting

Therefore, finding a trustworthy firm which specialises in payroll services in Indonesia is a must at some point. While most small companies tend to keep their payroll management in-house, some other companies choose to make the switch to outsourcing their payroll management services. This is to save time and money, while reducing the workload.

Salaries in Indonesia range between 3,070,000 rupiah per month to 54,200,000 rupiah per month. The median salary is 11,400,000 rupiah per month; this implies that half of the population earn less than 11,400,000 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 6,520,000 rupiah every month while 75% of them earn more than that figure.

On the other hand, 75% of the population earn less than 30,800,000 rupiah per month while 25% earn more than that amount.

In every country, there are laws protecting employees. Here are some details for Indonesia’s policy:

There is a 40-hour work week with an 18 hours per week, or four–hour a day limit on the amount of overtime which can be taken.

In the case that an employee exceeds the set hours, they will be entitled to overtime pay. Overtime rates are 1/173 of an employee’s monthly salary.

Employees are entitled to a minimum of 30 mins unpaid break after every four hours which an employee works.

Those who have a job as a planner or controller are not subject to overtime restrictions, instead, their salary is to reflect their skills and the hours which they work.

Paperwork regulations in Indonesia regarding 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.

Minimum wage only applies to employees who work for employers for less than a year, it 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.

As for employees who work for a longer period, they are to negotiate their salary with their employer. The agreements are valid for two years, and negotiations are allowed to begin within three months of the agreements’ expiration.

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.

Payroll software programs developed for small businesses in Indonesia are not only simple to use but also affordable. These programs are used to calculate taxes and salaries according to the employees’ contracts and 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 help to:

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.

The following are several of the primary functions of a high-quality payroll software program:

Aside from software, companies in Indonesia also often engage professional firms to handle their payroll management.

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.

If your company requires assistance with accounting or payroll functions, we at Paul Hype Page are able to assist and serve your needs in this area. Our expert accountants will work with you to ensure compliance and prompt payments. We will ensure that all the steps we take are completely legal in Indonesia and any other country involved.