COUNTRY

Written Agreements

Indefinite work agreements can be made either orally or in writing. However, a work agreement for a fixed period must be concluded in writing in the Indonesian language (with the Latin alphabet). The Indonesian wording will prevail if the contract is bilingual.

The Indonesia labor law requires the written employment contract to include at least the following information:

• The name, address, and line of business
• The name, age, sex and address of the employee
• The occupation or the type of job
• The place where the job will be carried out
• The amount of wages and how they shall be paid
• Job requirements stating the rights and obligations of the employer and the employee
• The date at which the work agreement starts and the period during which it is effective
• The date and the place where the work contract is made
• The signatures of the parties of the work agreement

Oral Agreements

The labor code in Indonesia recognizes oral contracts only for employment for an unspecified term, based on an agreement between both the parties. The employer is required to provide a letter of employment to the employee, which must contain the following information:

• The name and address of the employee
• The date of commencement of employment
• The type of job or work that the employee is supposed to do
• The amount of wage that the employee is entitled to

Implied Agreements

Contracts arise by agreement or by law. Usually, for the conclusion of a contract, all that is required are the consent, capacity, and object of the parties. However, a party's actions can create a contract by force of law. A person can become an employee by acting as one so long as the employer does not object once it is known to them. If the employer benefits from the labor of another, without an agreement, the employer must compensate the employee and an employment contract will be implied.

The regular workweek is 40 hours, and employees who work over 40 hours a week are eligible for overtime. Employers can distribute the 40 working hours in a week in the following ways:

• No more than 7 hours a day for 6 working days in a week, or
• No more than 8 hours per day for a 5-day week

The employee can work overtime if they agree to do so. This agreement must be made in writing. The maximum amount of overtime the employee is allowed to make is 4 hours a day and 18 hours a week. The employee is entitled to a rest of 1 day after 6-day working week and 2 days after a 5-day working week.

The following holidays are recognized as public holidays in Indonesia in 2025:

• New Year’s Day - January 1
• Chinese New Year - date subject to change annually
• Isra Miraj - date subject to change annually
• Day of Silence (Hari Raya Nyepi) - date subject to change annually
• Good Friday - date subject to change annually
• Labor Day - May 1
• Waisak Day - date subject to change annually
• Ascension Day of Jesus Christ - date subject to change annually
• Pancasila Day - June 1
• Lebaran Holiday - date varies annually
• Hari Raya Id-ul-Fitri - date varies annually
• Independence Day - August 17
• Id-ul-Adha - date subject to change annually
• Islamic New Year - date subject to change annually
• Christmas Day - December 25

Employers may require their employees to work during formal public holidays if the nature of their job calls for continuous, uninterrupted operation or if it is stipulated in their employment contract. Employees who work on formal public holidays are entitled to overtime pay.

Employees who have worked for 12 consecutive months are entitled to annual paid leave of 12 days.

Employees who have been working consecutively for 6 years at the same enterprise are entitled to a long service leave of at least 2 months provided in the seventh and eighth year of employment for 1 month each year. In these cases, the employees are not entitled to their annual leave in addition to their long service leave. The long service leave is granted after every 6 consecutive years of work for the same enterprise. The employee is entitled to half of their monthly earnings during the leave for the eighth year.

Employers are obliged to pay an employee's wages if the employee cannot perform work because of an illness. Employees must provide a letter from a physician who treats them, stating that they are sick. The amount of wages payable to an employee who cannot perform work because of an illness is determined as follows:

• For the first 4 months of illness, employees are entitled to receive 100% of their wages.
• For the next 4 months of illness, employees are entitled to receive 75% of their wages.
• For the following 4 months, employees are entitled to receive 50% of their wages.
• For the subsequent months until termination, employees are entitled to receive 25% of their wages.

Under Indonesia's Maternal and Child Welfare law, female employees are entitled to at least 3 months of maternity leave following birth. Maternity leave may be extended with a doctor's certificate. An employee who suffers a miscarriage has a right to a paid period of rest of 1.5 months or the period stated in the letter issued by the treating medical professional. Employees are entitled to 100% of their normal wage during the first 4 months of leave and 75% for the last 2 months.

Working mothers are entitled to receive their full wages during maternity leave. Employers are prohibited from terminating an employee because they are pregnant, giving birth, or miscarrying.

Under Indonesia's Maternal and Child Welfare Law, an employee is entitled to 2 days of paid leave during delivery and up to 3 additional upon agreement with the employer. Employees are also entitled to 2 days of paid leave for miscarriages and sufficient time to accompany the mother and/or children on various grounds, such as health complications or death.

Minimum Wage

Per labor regulations on wages, the governor of each province stipulates a Provincial Minimum Wage. In 2024, 38 provinces have established a Provincial Minimum Wage. Wage levels range from IDR 2,169,348.55 (Indonesian rupiah) in Jawa Tengah to IDR 5,396,760.77 in Jakarta. Provincial Minimum Wage only applies if the Regency/City Minimum Wage is not established.

In Indonesia, the minimum wage is the lowest monthly wage, consisting of the basic wage and fixed allowance. It is calculated according to the formula stipulated in Government Regulation (GR) No. 78/2015: new minimum wage = current minimum wage + (current minimum wage x (inflation + % GDP annual increase during the year)).

Minimum wage only applies to:

• Single employee
• Employees who have a working period of up to 1 year
• Employees with permanent contract employment status and/or in a probation period

Employers are required to apply the pay scale structure for employees who are married and/or have more than a 1-year working period.

Overtime, Holiday & Vacation Pay

In Indonesia, any employee working more than 40 hours a week is entitled to be paid overtime. The employee must agree to work more than 40 hours a week and cannot be made to do so by the employer. Overtime hours cannot exceed 4 hours a day or 18 hours a week.

Employees working overtime on regular working days should be paid 1.5 times the hourly pay for the first hour of overtime worked, and 2 times the hourly pay for each additional hour work. Hourly wages are calculated by multiplying 1/173 by the monthly salary.

Employers must also pay overtime rates for overtime hours worked on weekly rest days and national holidays. If 40 hours of regular weekly work are implemented in five workdays, employers must pay the following overtime rates on weekly rest days and national holidays:

• For the first to the eighth hours of overtime worked twice the hourly rate of pay
• For the ninth hour of overtime worked, 3 times the hourly pay rate
• For the tenth to the eleventh hour worked, 4 times the hourly rate of pay

Employees are entitled to their regular salary during their annual paid leave. While taking long service leave, employees receive compensation equal to half of their monthly salary.

Notice Period

Indonesian labor regulations require employers, workers and laborers, trade and labor unions, and the government to make every effort to prevent the termination of an employment relationship.

An employer wishing to terminate an employee must give at least 14 days' written notice. This period is shortened to 7 days if the employee works under an indefinite employment contract during the probationary period. An employee who wishes to terminate the employment relationship must give 30 days notice in writing to the employer.

Severance Benefits

Severance benefit entitlements in Indonesia vary according to any applicable employment agreement provisions, applicable company regulations, applicable collective bargaining agreement, time of service, and the situation regarding the termination.

Statutory severance pay is determined as follows:

• 1 months' wage for less than 1 year of employment
• 2 months' wage for 1 to 2 years of employment
• 3 months' wage for 2 to 3 years of employment
• 4 months' wage for 3 to 4 years of employment
• 5 months' wage for 4 to 5 years of employment
• 6 months' wage for 5 to 6 years of employment
• 7 months' wage for 6 to 7 years of employment
• 8 months' wage for 7 to 8 years of employment
• 9 months' wage for 8 or more years of employment

The calculation of the sum of money paid as the long-term service benefit is determined by the number of years of employment. It ranges from 2 months of wages for individuals with 3 to 6 years of services to 10 months of wages for employees who worked 24 years or more.

The wage components to be used for calculating the severance benefits and the service reward pay include the basic wage that the employee received and all forms of fixed allowances provided to employees and their families.

Pension

The social insurance system covers public and private sector employees but excludes self-employed individuals (they can still contribute to provident fund schemes). The contributions of an insured person and the employer are 1% of gross monthly covered earnings and 2% of gross monthly covered payroll, respectively.

Insured persons can qualify for an old-age pension (manfaat pensiun hari tua) at age 57 with at least 180 months of contributions. Insured persons aged 57 with less than 180 months of contributions qualify for an old-age settlement.

Insured persons who qualify for the old-age pension will receive 1% of their average adjusted annual earnings divided by 12 and multiplied by the number of years of contributions is paid. The maximum and minimum pension amounts are adjusted every 2 years.

Dependents/Survivors Benefits

In Indonesia, employers must pay severance entitlements to the heirs of an employee when the employment relationship terminates because of the employee's death. The payment must be 2 times the amount of severance pay and the ordinary amount for any entitlement compensations or long-service benefits.

Eligible survivors can also qualify for a survivors pension if the deceased received or was entitled to a social insurance old-age or disability pension, had at least one year of contributions and had a contribution payment compliance rate of at least 80% (calculated as the deceased's years of contributions divided by his or her years of membership).

Eligible survivors include a widow(er) (until death or remarriage), children (until they are 23 years old, working, or married) and parents (if there is no eligible spouse or child).

Eligible survivors of deceased insured persons whose death was related to an occupational injury are entitled to a lump sum of 60% of 80 months of the deceased's earnings in the month before death, plus INR 200,000 (Indonesian rupiahs) a month for 24 months.

Invalidity Benefits

In Indonesia, the social insurance system provides for disability benefits and mandatory life insurance for workers. All employed persons working in the formal and informal sectors, including foreign employees who have worked at least 6 months in Indonesia, are eligible for life insurance benefits.

Contributions for work injury benefits are entirely covered by the employer. The amount of contribution for employers varies with work environment risk (expressed as classes I-V).