How to hire in Indonesia through an EOR

Fixed-term contracts (PKWT) must be in writing in Indonesian and registered with the Ministry of Manpower. If you skip this, or use English only, courts will treat the contract as permanent (PKWTT). That means indefinite employment and full termination costs.

Contract types

Indonesia limits you to two main contract types: fixed-term (PKWT) and permanent (PKWTT). Permanent contracts are the most common. Companies use them for core, ongoing roles because they fit local hiring norms and keep things straightforward.

Fixed-term suits temporary projects or seasonal work, but total duration caps at 5 years including extensions. Part-time falls under permanent if the role is ongoing, or fixed-term if it's short-term. Daily workers count as fixed-term but can't exceed 21 days per month, or the role becomes permanent.

Foreign workers can't sign permanent contracts. They're limited to fixed-term only.

What has to be in the contract

Fixed-term contracts must be written in Indonesian. Bilingual versions are fine if you're hiring foreign workers. Register online with the Ministry within 3 days of signing, or manually within 7 days if the system is down. Miss registration entirely and the contract is invalid.

Permanent contracts can technically be verbal, but you should always put them in writing. Include job title, duties, pay, hours, and benefits. You can add a probation period of up to 3 months, but only for permanent roles. State it clearly in the contract: during probation, either side can end things early with notice and no severance. After probation, issue a confirmation letter to make the role permanent.

Both contract types need a start date, salary, and BPJS social security details. Fixed-term contracts don't allow a probation period.

Contractor vs. employee

Indonesia doesn't have a true independent contractor category like the US does. All workers are treated as employees unless you can prove otherwise. The legal test comes down to control: if you set someone's hours, provide their tools, or fold them into your team, they're an employee. Ongoing work points strongly to permanent status.

If you misclassify someone as a contractor, expect reclassification. The worker can claim back pay, benefits, THR holiday allowance, BPJS contributions, and severance. Fines can reach IDR 100 million per violation, and you'll owe back taxes and social security on top of that. Courts can also award damages equivalent to full permanent employment entitlements.

Non-competes are hard to enforce in Indonesia. They need to be reasonable in scope, limited in time (under 2 years), and tied to genuine trade secrets. Courts frequently strike down broad clauses. IP assignment does hold up, but only if it's clearly specified in the contract. Employees own their inventions by default unless you claim them explicitly and offer fair compensation.

For most hires, permanent contracts are the safer choice. If you're not ready to set up a local entity, an EOR lets you hire without the legal exposure while you figure out your longer-term setup.

Indonesia requires employers to pay a 13th-month bonus called THR: one month's salary for anyone who's worked over a year. It's a legal requirement, typically paid before major holidays. The law sets a floor, but local expectations tend to go well beyond it.

Time off

Employees get 12 days of paid annual leave after 12 months of continuous work. It accrues at one day for every 23 days worked. You're required to allow at least six consecutive days off, and unused leave expires after six months unless you agree otherwise.

Public holidays add up to around 14-15 paid days per year. Here's the 2026 list:

All leave types

Indonesian law covers the basics with pay and job protection. Here's what you're required to offer:

Job protection applies across all leave types. Employees keep their position or an equivalent role when they return. You cover pay at the rates shown above.

Mandatory benefits

You're required to enroll employees in BPJS, Indonesia's national social security system. It covers health, work accidents, old age savings, and death benefits. You'll pay the larger share of contributions.

THR is also mandatory: one month's salary paid before Lebaran, which typically falls around March or April. Pro-rate it for employees with less than a year of service. Meal vouchers and transport allowances aren't required by law, though some sectors include them through internal company policies.

What people actually expect

The 12-day leave minimum is a starting point, not a selling point. Skilled workers in Jakarta or Bali typically expect 18-20 days to match what's common in the region. If you're not offering that, you'll lose candidates to employers who are.

BPJS health coverage is basic public insurance. Most employees in tech, finance, or expat-facing roles expect private coverage on top: inpatient, outpatient, dental, and sometimes overseas evacuation. It's become a standard part of the package in those sectors.

THR isn't negotiable, but strong performers often expect performance bonuses of 1-3 months' salary on top of it, treated separately from the holiday payment. If your team works remotely or hybrid, budget around IDR 1-2 million per month as a stipend for internet and home office costs.

Meal allowances (IDR 30,000-50,000 per day) and transport support (IDR 200,000-500,000 per month) aren't legally required, but around 70% of multinationals include them. Leaving them out often means your offer gets passed over. For mid-level roles, targeting 10-15% above the legal minimums puts you in a competitive range.

Indonesia's labor law is genuinely employee-friendly, and that shapes everything about how termination works. You can't dismiss someone without solid grounds, and the severance costs can be significant. Here's what you need to know to stay compliant.

Valid grounds for termination and what counts as unfair dismissal

You can terminate an employee for legitimate reasons, but the law is strict about what qualifies. Valid grounds include violation of the employment agreement (after three written warnings), absence due to sickness exceeding 12 months, unexcused absence for five or more consecutive working days, misconduct like destruction of property or intimidation, reaching retirement age, or criminal conviction.

What you can't do: terminate based on gender, race, religion, ethnicity, or disability. You also can't dismiss someone for reporting workplace harassment, discrimination, or crimes committed by the employer. Termination during pregnancy, while on sick leave, or for getting married is prohibited. If an employee hasn't been paid wages on time for three consecutive months, they can actually terminate the contract themselves and claim severance.

The procedural requirement isn't optional. You must provide written notice at least 14 working days before termination, stating the reason and the termination payments owed. If the employee disagrees within seven days of receiving notice, you move into a formal dispute process. Skipping this exposes you to legal claims and potential criminal penalties against the company.

Notice periods

Notice periods differ depending on who's initiating the termination.

Notice must be in writing and officially conveyed to the employee or their union representative. The clock starts from when they receive it, not when you send it. In practice, employers often face delays obtaining the necessary documentation (court registration or manpower agency receipts) within the prescribed timeline. A 2024 regulatory update extended the claims submission window to six months from the effective termination date, giving you more flexibility to gather paperwork without affecting employee rights.

Severance and termination payments

This is where Indonesia gets expensive. When you terminate a permanent employee, you must pay a severance package made up of three components: severance pay, service appreciation pay, and compensation pay. The exact amounts depend on tenure and the reason for termination.

The calculation changed under the 2020 Job Creation Law (Omnibus Law). Severance pay is calculated as a multiple of monthly wages based on years of service. Service appreciation pay reflects loyalty. Compensation pay covers the notice period and related factors. The multipliers vary depending on whether the termination is for cause (employee misconduct), without cause (company restructuring), or by mutual agreement.

For voluntary resignation, you're not legally required to pay severance, though offering separation pay as a goodwill gesture is common. For fixed-term contracts, you must provide compensation at the end of the contract period if it's not renewed.

A significant change in 2024: the maximum duration of fixed-term employment agreements can now extend up to five years with multiple renewals, compared to the previous three-year maximum with only one renewal. This affects how you structure contracts and plan for severance obligations.

The government has indicated plans to revise the Labor Law further, potentially removing the severance obligation in certain conditions and lowering amounts. Keep an eye on these changes, as they could reduce your termination costs, but don't assume they're in effect yet.

Work permits and visas for foreign nationals

You can hire a foreign national through an EOR in Indonesia, but work permit requirements are strict. Foreign workers need a work permit (Izin Kerja) issued by the Ministry of Manpower, and the process typically takes 4-6 weeks. The EOR can handle sponsorship and the application, but you'll need to provide documentation including a job description, employment contract, and proof that the role requires foreign expertise.

The main visa categories for workers are the B211A visa (limited stay, up to 60 days) and the B211A extension (up to one year). For longer-term employment, foreign nationals typically need a sponsored work visa tied to a specific employer. Indonesia doesn't currently have a formal digital nomad visa. Remote workers sometimes use tourist visas, but this is a legal gray area and not recommended for actual employment.

An EOR can sponsor work permits, but the process requires the foreign national to be physically present in Indonesia or have a local representative. Processing timelines are unpredictable, so budget 6-8 weeks to be safe. The EOR will handle registration with the Manpower Agency and coordinate with immigration, but you need to provide accurate job descriptions and salary information upfront.

Other compliance matters

Indonesia has data protection regulations, though they're less prescriptive than GDPR. The Personal Data Protection Law (Law No. 27 of 2022) requires consent for processing employee data and sets standards for data security. Keep employment records secure and limit access to personnel files.

Trade unions are active in Indonesia, and collective bargaining agreements (CBAs) are common in larger companies. If your employee is union-affiliated, you must negotiate termination through the union, not just the individual. The bipartite negotiation process (employer and employee/union) must be documented and completed within 30 days. If negotiations fail, mediation through the Manpower Department follows, adding another 30-40 days to the timeline.

The 2024 Omnibus Law updates streamlined some termination procedures by removing the requirement to negotiate with unions in certain cases, but this varies by contract type and reason for termination. Get local legal advice before assuming you can bypass union involvement.

One more thing worth knowing: if you fail to pay severance or comply with a court decision on termination, the court can order executorial attachment on your company's assets. Criminal penalties including fines and imprisonment can apply to company representatives. This isn't an area where cutting corners is worth the risk.