Employer costs in Indonesia
Last reviewed
The short answer
The employer cost of an Indonesian hire runs to the salary, social security at 6.24% to 7.74% of wage, health insurance at 4% on a wage basis capped at Rp 12,000,000, the statutory religious holiday allowance of one month's wage a year, and an accruing severance position that is settled at the end rather than paid monthly. On a fixed-term contract for an Indonesian national, end-of-contract compensation is added at one month's wage for twelve months of service.
Where the person is a foreign national, the foreign worker levy of US$100 per position per person per month sits on top and is paid before the foreign worker plan is validated. The end-of-contract compensation that applies to Indonesian fixed-term staff does not reach a foreign worker.
Aspirock prices deployments into Indonesia against those statutory lines and confirms the full cost position in writing before an agreement is signed.
What is a percentage of pay in Indonesia and what is not?
Employment social security and health insurance are charged as a percentage of monthly wage. The religious holiday allowance, the foreign worker levy and the severance position are not, and a cost model that folds them into a single loaded percentage can misprice an engagement in both directions.
The percentage lines are straightforward on their own terms. Employment social security takes 3.70% of wage for old age, 0.30% for death cover and 2.00% for pension, plus work accident cover set by the employer's own risk class. Health insurance takes 5% of wage in total, 4% from the employer and 1% from the employee, on a wage basis capped at Rp 12,000,000 a month and floored at the local minimum wage. Employees add 2% for old age and 1% for pension on top of their own health contribution.
The pension ceiling is where a headline percentage stops being accurate. Pension contributions are calculated on a monthly wage of no more than Rp 11,086,300, in force since 1 March 2026 and that ceiling caps the pension line only: old age, death cover and work accident keep running on the whole wage. So an employer total of 6.24% to 7.74% is the position up to that wage and above it the effective percentage falls as the salary rises. On the senior and technical packages this market is used for, the difference is material.
The religious holiday allowance is one month's wage, paid once a year against the worker's own religious holiday and due no later than seven days before it. A worker with twelve months' continuous service or more receives the full month; from one month of service and below twelve, it is pro rata, calculated as months of service divided by twelve, times one month's wage. Where a workforce observes different religious holidays, the parties can agree a different arrangement in the employment contract, company regulation or collective agreement, which is how one payment date is run across a whole payroll. Late payment attracts a 5% charge on the amount due and does not discharge the obligation to pay it and that charge is managed for worker welfare rather than paid to the state.
How much does work accident cover actually cost?
Between 0.24% and 1.74% of wage, set by the employer's own activity, so an energy or mining employer and a software employer paying the same salary do not pay the same rate.
| Risk class | Employer contribution |
|---|---|
| Very low | 0.24% of monthly wage |
| Low | 0.54% |
| Medium | 0.89% |
| High | 1.27% |
| Very high | 1.74% |
That spread is the whole of the difference between an employer total of 6.24% and one of 7.74% on wage up to the pension ceiling, and the rate is decided by what the employing company does rather than by what the individual is paid. Two employers can pay identical salaries and carry different social security costs on them.
The job loss programme does not add a further employer line on top of that. It is funded by government and by recomposing the accident contribution, so it appears in the scheme's own arithmetic rather than in the employer's. The employer pays the same either way.
What does a termination actually settle at?
It depends on the ground of termination as much as on the length of service, because the regulation applies a multiplier to severance pay that changes with the reason for the dismissal.
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. On the same length of service, it is the ground that moves the total.
The regulation works through the grounds one by one. Some worked examples from it:
| Ground of termination | Severance pay | Long-service pay |
|---|---|---|
| Merger, consolidation or separation where the worker will not continue, or the employer will not accept them | 1x | 1x |
| Acquisition | 1x | 1x |
| Acquisition on changed terms, where the worker is unwilling to continue | 0.5x | 1x |
| Efficiency because the company is making a loss | 0.5x | 1x |
| Efficiency to prevent a loss | 1x | 1x |
The last two rows are the pair worth reading twice, because they run the opposite way to most expectations: an efficiency dismissal taken because the company is already making a loss settles at half the severance pay multiplier of one taken to prevent a loss. The regulation sets a multiplier for further grounds as well, so a specific termination is priced against the ground it actually runs on rather than against a single average.
One provision works in the other direction and is easy to miss. Where the employer enrols the worker in a pension programme under the pension-fund legislation, its contributions to that programme can be counted towards its severance, long-service and separation-pay obligations. If the pension benefit computes to less than those amounts, the employer pays the difference. The arrangement itself is set in the employment contract, company regulation or collective agreement, which means it is a structuring decision taken at the start of an engagement rather than a discovery made at the end of one.
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
Above salary, an Indonesian employer pays social security at 6.24% to 7.74% of wage depending on the work accident risk class, health insurance at 4% of wage on a basis capped at Rp 12,000,000 a month and a religious holiday allowance of one month's wage a year. On a fixed-term contract for an Indonesian national there is also end-of-contract compensation, at one month's wage for twelve months of service. Pension contributions stop at a wage of Rp 11,086,300 a month, so the percentage cost of a senior package is lower than it looks on the headline rate. Severance is not a monthly cost but a statutory position that has to be budgeted against the end of the engagement.
Employment social security takes 3.70% of wage for old age, 0.30% for death cover and 2.00% for pension, plus work accident cover at between 0.24% and 1.74% set by the employer's own risk class, giving an employer total of 6.24% to 7.74%. The pension line is capped at a wage of Rp 11,086,300 a month, so the effective percentage falls above that point. Employees add 2% for old age and 1% for pension. Health insurance is separate at 5% of wage in total, 4% from the employer and 1% from the employee. The job loss programme is funded by government and by recomposing the accident contribution rather than by a further employer line.
Yes. The religious holiday allowance is a statutory payment rather than a discretionary bonus and it is a thirteenth-month equivalent. A worker with 12 months' continuous service or more receives one month's wage. A worker with at least one month's continuous service but under twelve receives a pro rata amount, calculated as their months of service divided by twelve, times one month's wage. It has to be paid no later than seven days before the relevant religious holiday and late payment attracts a 5% charge on the amount due without discharging the obligation to pay it.
Severance is a package rather than a single payment. Severance pay itself is a statutory minimum rising with service, from at least one month's wage under a year to at least nine months at eight years or more. Long-service pay is a second entitlement and it starts at three years, running from two months' wage to ten months at twenty-four. Compensation for rights is a third, covering 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. The multiplier applied to severance depends on the ground of termination, so an efficiency dismissal to prevent a loss and one because the business is already loss-making do not settle at the same figure.
On top of the ordinary employer costs, the employer of a foreign worker pays a compensation fund of US$100 per position per person per month, denominated in US dollars by the regulation. Payment is a condition of the foreign worker plan being validated rather than something invoiced afterwards, an engagement running less than a month still pays a full month and the amount cannot be returned once it has been paid into the treasury. Working the other way, the end-of-contract compensation payable on an Indonesian fixed-term contract does not apply to a foreign worker on one.
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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.