EOR for Indonesia and Southeast Asia
Employer of Record in Indonesia
Employ specialists and project staff in Indonesia without setting up an Indonesian company. Work authorisation, BPJS registrations, monthly payroll with PPh 21 withholding and the statutory severance position, run by a named account team.
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The short answer
A company can employ staff in Indonesia without setting up an Indonesian company by using an Employer of Record. The Employer of Record becomes the legal employer, holds the foreign worker plan that authorises the person to work and carries the payroll and social security registrations that go with it.
An employer already established in Indonesia carries the sequence: the validated foreign worker plan and the compensation fund payment that is a condition of it, the visa and stay permit that validation recommends, the Indonesian companion worker and the training behind it, Indonesian-language training for the foreign worker, the manpower report, the social security registrations, monthly payroll with income tax withheld at source, the statutory religious holiday allowance, repatriation at the end of the contract and the severance position at the end of the engagement.
Aspirock provides compliant Employer of Record services in Indonesia for imported specialist and project roles, coordinating the work authorisation and stay permit sequence, running monthly payroll and the statutory contributions and pricing deployments against the lines below before an agreement is signed.
Worth knowing
Three things worth knowing
The foreign worker levy is a precondition of the permit, not a bill that follows it
Employers of foreign workers pay a compensation fund at US$100 per position per person per month and the mechanics behind that headline are what govern deployment planning. Payment is a requirement of the foreign worker plan being validated and it is paid up front, so it is spent before anyone can work. An engagement running under a month still pays a full month. And the refund route that once existed for a worker who never came to Indonesia was repealed in 2022, so a deployment cancelled after payment does not recover it. A budget built from the headline rate alone carries none of that.
End-of-contract compensation on a fixed-term contract does not reach a foreign worker
Indonesian employers owe a separate compensation payment at the end of a fixed-term contract, to a worker with at least a month's continuous service, at one month's wage for twelve months and pro rata below that, calculated on basic wage plus fixed allowances. Article 15(5) of the 2021 regulation states in terms that the payment does not apply to a foreign worker employed under a fixed-term contract. For a company importing specialists on defined project terms, that is a recurring end-of-engagement cost that simply does not arise.
The pension contribution ceiling moved on 1 March 2026 and the published figure lags it
Employer pension contributions stop at a capped monthly wage rather than running on the whole salary, which matters for exactly the senior and technical packages this market is used for. That cap rose to Rp 11,086,300 a month from March 2026, from Rp 10,547,400. It is not a policy decision but an annual indexation: the 2015 pension regulation multiplies the previous ceiling by one plus the prior year's GDP growth, which the statistics agency published at 5.11% for 2025. The scheme's own public explainer page still publishes Rp 10,547,000, so a model built from it understates the capped band.
Reference
Employment terms in Indonesia
What does an employer in Indonesia actually carry?
An employer established in Indonesia carries the work authorisation, the registrations behind it, monthly payroll with income tax withheld at source, a statutory thirteenth month and a severance position that settles at the end of the engagement.
The starting point is standing. The regulation defines the employer of a foreign worker as a legal entity established under Indonesian law, or another body, that employs the worker for wages and it is that employer which holds the foreign worker plan the Ministry of Manpower validates for a named position and period. The compensation fund is paid before the foreign worker plan is validated and the validated plan is what the work visa and the stay permit are then issued on.
Around that sit duties that attach to the person rather than to the payroll. The employer appoints an Indonesian companion worker for technology and skills transfer, trains that worker to the qualification level of the foreign worker's position and facilitates Indonesian-language training for the foreign worker. Those three do not apply to directors and commissioners, heads of representative offices, foundation officers, or foreign workers employed for temporary work. The duty to repatriate the worker to their country of origin when the contract ends applies whatever the category.
The registrations follow the same employer. Where a foreign worker will be working for more than six months, the employer registers them in the national social security programme; where the work runs for less than six months, it covers them under an insurance policy with an insurance company instead. Payroll runs monthly with income tax withheld from the employee at source rather than added on top and the religious holiday allowance is a statutory payment of one month's wage a year rather than a discretionary bonus.
The last of it is settled at the end rather than monthly. Severance pay is a statutory minimum that rises with service. Long-service pay is a second entitlement that begins at three years. Compensation for rights covers untaken annual leave, the cost of returning the worker and their family to the place where they were recruited and anything further set in the employment contract, company regulation or collective agreement. Deployment and work authorisation works through the sequence in the order it actually runs and the cost breakdown prices each line.
How is each employer cost line charged in Indonesia?
Employer cost in Indonesia is not charged in one shape and a model that treats every line as a percentage of pay can misprice an engagement in both directions.
Employment social security and health insurance are monthly percentages of wage. The religious holiday allowance is one month's wage, once a year. The foreign worker levy is a fixed sum per position per person per month. Severance accrues against service and settles when the engagement ends. Income tax is withheld from the employee rather than paid on top by the employer.
| Cost line | How it is charged | What bounds it |
|---|---|---|
| Employment social security | A monthly percentage of wage, 6.24% to 7.74% | The pension line stops at a monthly wage of Rp 11,086,300; old age, death and work accident run on the whole wage |
| Health insurance | A monthly percentage of wage, 4% from the employer | The wage basis is capped at Rp 12,000,000 a month and floored at the local minimum wage |
| Religious holiday allowance | One month's wage, once a year | Due in full at twelve months' continuous service, pro rata from one month |
| Foreign worker levy | US$100 per position per person per month | A full month is due even where the engagement runs under a month |
| Severance | Settled at the end of the engagement, not monthly | The scale rises with service and the multiplier turns on the ground of termination |
| Income tax | Withheld from the employee each month | Not an employer cost on top of salary |
Two caps do real work above a certain salary and neither of them caps the whole stack. The pension ceiling sits at a monthly wage of Rp 11,086,300 and caps the pension line only, not old age, death or work accident, so an employer total quoted as 6.24% to 7.74% holds up to that wage and the effective percentage falls above it. Health insurance is capped separately, on a wage basis of Rp 12,000,000 a month and floored at the local minimum wage. Both bounds matter for exactly the senior and technical packages this market is used for.
What did the Constitutional Court settle in 2024 and what did it not?
A decision of 31 October 2024 confirmed the five-year ceiling on fixed-term contracts, made long-service leave mandatory for certain companies and read the severance pay scale as a floor without changing a figure in it.
What it settled about fixed-term contracts. The five-year ceiling, including extensions, was already in the 2021 government regulation and had been in force since then. What the decision did was lift it into the statute itself, holding the previous statutory wording unconstitutional unless read that way and settle that a fixed-term contract has to be made in writing, in Indonesian and Latin script. It also brought the completion-based form of fixed-term contract, which the regulation had left without an outer limit, inside the same five years. The value did not move. The authority behind it did.
What it settled about leave and severance. Long-service leave stopped being optional: the word "may" was struck out of the provision, so certain companies must give it and only its terms sit in the employment contract, company regulation or collective agreement. Which companies is left to a government regulation that has not been made and the Court recorded that the existing one does not settle it. On severance pay, the decision read that scale as a statutory minimum rather than a fixed amount. The amounts did not change and the employer's statutory exposure did not change: the effect is to leave room above the scale, not to raise it.
What that leaves for an employer is unchanged in substance. A fixed-term contract runs to five years including extensions, cannot stipulate a probation period and has to be registered with the Ministry of Manpower within three working days of signature. What moved is where those rules are written and how firmly they hold.
Cost transparency
What does it cost to employ someone in Indonesia?
Key statutory employer costs in Indonesia. Employer of Record pricing sits on top of them and is confirmed after a short discovery call, once the role, location and timeline are known.
- Income tax on salary
- Progressive, 5% to 35%, withheld by the employer
- Employer social security
- 6.24% to 7.74% of wage
- Employer health insurance
- 4% of wage
- Religious holiday allowance
- One month's wage a year
- Foreign worker levy
- US$100 per position per person per month
- Severance on termination
- Statutory and paid in more than one part
The provider
About Aspirock
Aspirock is an Employer of Record and payroll provider operating across 70+ countries from six global offices, founded on more than 22 years of operational EOR experience and supporting more than 5,000 workers. Every client works with a named account team that owns the deployment end to end, so contracts, payroll, visas, and compliance filings in each market are handled by people accountable for the outcome.
In Indonesia, Aspirock provides Employer of Record and payroll services for imported specialist and project roles, coordinating work authorisation and stay permits, monthly payroll with income tax withheld at source, social security and health insurance registrations, the statutory religious holiday allowance and the severance position at the end of an engagement. Deployments elsewhere in Southeast Asia are coordinated by the same account team.
Common questions
Frequently asked questions
Last reviewed
Yes, through an Employer of Record. The plan that authorises a foreign national to work in Indonesia is validated to the employer, and the payroll, social security and severance obligations attach to that same employer. An EOR that already holds that standing becomes the legal employer, issues the employment contract, carries the work authorisation and stay permit sequence, runs payroll with income tax withheld at source and pays the statutory contributions, while the client directs the work day to day. Aspirock employs imported specialist and project staff in Indonesia compliantly, with a named account team owning the deployment end to end.
An Employer of Record is a company already established in Indonesia that becomes the legal employer of a worker on another company's behalf. It signs the employment contract, holds the work authorisation where the worker is a foreign national, registers the worker for social security and health insurance, runs monthly payroll with income tax withheld at source, pays the religious holiday allowance and carries the statutory severance position at the end. The client company directs the work and decides who is hired, but is not the employer in Indonesian law and does not need an Indonesian company of its own.
Not without standing of its own in Indonesia. The regulation defines the employer of a foreign worker as a legal entity established under Indonesian law, or another body, and requires that employer to hold a validated foreign worker plan before anyone starts. Acquiring that standing, for example by establishing an Indonesian legal entity, is another lawful route. For a company placing a small number of specialists or a project team, an Employer of Record that already holds it is a route that does not require one and Aspirock provides that route for deployments into Indonesia.
The supply of worker services to a company that hands over part of its work is governed by ministerial regulation 7 of 2026, in force from 30 April 2026 and made after a Constitutional Court ruling of October 2024. It treats the work concerned as supporting activity and article 3(2) names these fields: cleaning; the provision of food and drink; security; drivers and worker transport; operational support services; and supporting work in the mining, petroleum, gas and electricity fields. The regulation requires a written agreement carrying the minimum content it sets out, filed for registration with the district manpower office within three working days of signature and it puts the obligations of a holder of the outsourcing business licence on that company. Arrangements already running have until 30 April 2028 to align.
Five years at most, including any extension. That ceiling has applied since 2021 under the government regulation on fixed-term contracts and the Constitutional Court lifted it into the statute itself in a decision of 31 October 2024, holding the previous statutory wording unconstitutional unless understood that way. The contract has to be made in writing, in Indonesian and Latin script and registered with the Ministry of Manpower within three working days of signature. A fixed-term contract cannot stipulate a probation period and where one is written in it is void by law while the service still counts from the start.
Aspirock provides Employer of Record services in Indonesia as part of a footprint of more than 70 countries and supports imported specialist and project roles rather than volume local hiring, because that is where the economics of the model work. Aspirock coordinates the work authorisation and stay permit sequence, runs monthly payroll and the statutory contributions, prices the deployment against the statutory cost lines before an agreement is signed and gives every client a named account team that owns the deployment end to end. Deployments elsewhere in Southeast Asia are coordinated by the same team.
General guidance on Indonesia employment rules, reviewed 6 August 2026. Rates and rules change. This is not legal or tax advice for a specific situation.
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