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Hiring employees in Indonesia, made easy.

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hiring employees in Indonesia

Hire Employees in Indonesia - Overview

The Southeast Asian nation of Indonesia is made up of multiple islands, around 276 million people, and a hugely varied set of cultures, languages, religions, and customs. It also possesses a rapidly growing economy, which is already the largest in Southeast Asia and the third-largest in Asia, making it an attractive place to do business.

However, Indonesia’s variety can also make it a challenging place to expand and hire employees for organizations that are new to the region. At Horizons, we support your business through the process of expansion into Indonesia, including sourcing and hiring talent quickly and compliantly.

Read on for our comprehensive guide to hiring in Indonesia.

Facts & Stats

Population

276M (144M labor force)

Capital City

Jakarta

Languages Spoken

Indonesian (11th worldwide)

Currency

Indonesian rupiah (IDR)

GDP per capita

$4,292

Ease of Doing Business

73rd in the world

Minimum Wage

4.64M IDR/month

Average Wage

8M IDR/month

Paid Leave

12 days

 

Indonesia: Business Environment

Business outlook in Indonesia

Indonesia’s economic growth was in line with global trends across 2020, and the country has begun to rebound well. A gradual return to normal levels of tourism, a strong export sector, and improvements to the public health situation have all contributed to economic growth, and the rate is expected to increase to 4.7% across 2022 and 2023 according to OECD predictions.

This growth, combined with the country’s large, young population and relatively low wages, makes Indonesia a very attractive place to do business and build a workforce.

Business regulation in Indonesia

Indonesia has a range of labor laws and employee protections. These laws cover important things such as annual leave, sick leave, parental leave, working hours, discrimination in the workplace, and more.

As an employer, it’s crucial that you understand the relevant laws when hiring in Indonesia. At Horizons, our Indonesia expansion experts can guide you through every step of the hiring process, ensuring you can operate in compliance with the regulations every step of the way.

Business culture in Indonesia

Indonesian business culture is built around strong hierarchies, with the oldest and most senior members of staff usually leading discussions and decision-making. This culture extends to greetings, where you will be expected to greet the senior people in the room first, and to address them when speaking.

Personal relationships are also very central to doing business in Indonesia, so it is usually important to get to know potential business partners, clients, and colleagues on a personal level before talking serious business.

Foreigners are generally well respected in business contexts, but you should always try to follow local customs and etiquette, avoiding confrontation wherever possible and showing respect to others.

Recruiting employees in Indonesia

Recruiting employees in Indonesia – Overview

The internet is the primary recruitment tool in Indonesia, with most workers and employers using one or more of the country’s various online job boards to search for and post jobs respectively. Social media platforms such as LinkedIn and Facebook are also used for recruitment. It can be a good approach to work with a recruiter when hiring in Indonesia, such as the dedicated Horizons recruitment team.

Most important recruitment tools in Indonesia

There are several local job boards you can use when conducting your candidate search in Indonesia. The most popular recruitment tools in Indonesia include:

If you need specialist support for your candidate search in Indonesia, you might also consider a specialist recruitment firm. Horizons provides such support to over 180 countries worldwide. Contact us for a free consultation and demo.

Interviewing candidates in Indonesia – Overview

When interviewing candidates in Indonesia, keep in mind how diverse the nation is. With over 275M people, over 300 ethnicities, and over 700 unique languages spoken (not to mention the religious diversity of Indonesia), there is a significant range of cultural identities present in the country.

When interviewing candidates it is important to not enter the situation with any specific expectation of what the candidate should be like. 

Indonesia’s internet penetration rate (people with access to the internet) is over 70% of the total population; average internet speeds are considered slow, but in the office and residential areas of metro locations, the internet is seen as fast enough to efficiently conduct business. Still, during the interview there may be some slight connectivity problems – but don’t let this turn you off of a good candidate.

Can I ask the candidate’s previous salary in Indonesia?

It is permitted to ask the candidate’s salary history in Indonesia. This is common practice when recruiting candidates in Indonesia.

What is the typical salary increase at a new job in Indonesia?

Many candidates in Indonesia will target a 10%-20% increase from their previous salary as standard; however, depending on the industry and demand for roles, this expected increase can balloon to a much higher amount. We would advise that when recruiting in Indonesia, or in any developing economy where hiring practices can change fast, to meet with several candidates to get a feel for candidate expectations for the specific role you’re hiring for.

Onboarding employees in Indonesia

Onboarding employees in Indonesia – Overview

The process of onboarding new employees in Indonesia will vary from business to business, but it’s good to follow a few basic principles regardless of the industry or role in question. The most important considerations are to provide adequate time for training and orientation, communicating your expectations for the position clearly, as well as the specifics of the employee’s employment contract. As personal relationships carry a lot of weight in Indonesian society, you should also factor in time for introductions and for new employees to socialize with their colleagues.

Best remote working tools to use in Indonesia

For now, companies are able to continue using their standard remote working loadout for their employees based in Indonesia. That might include tools such as Slack, WhatsApp, Microsoft Teams, Jira, Trello, WeChat, and others.

Indonesia passed an internet censorship law in 2021 that survived court challenges to be implemented in 2022. At its implementation, large websites and services such as Yahoo, PayPal, and several online gaming companies were blocked from the Indonesian internet for failure to register (which would include personal information reporting obligations).

While this has not impacted popular remote working tools at this point, it is important to keep in mind for the future that the situation surrounding censorship and data privacy laws could impact them in the future.

Holiday season in Indonesia – 2022

01 January: New Year’s Day

01 February: Lunar New Year’s Day

28 February: Ascension of the Prophet Muhammad

03 March: Bali’s Day of Silence and Hindu New Year (Nyepi)

15 April: Good Friday

01 May: International Labor Day

02 May: Idul Fitri

03 May: Idul Fitri Holiday

16 May: Waisak Day (Buddha’s Anniversary)

26 May: Ascension Day of Jesus Christ

10 July: Idul Adha

30 July: Muharram / Islamic New Year

17 August: Indonesian Independence Day

09 October: Maulid Nabi Muhammad (The Prophet Muhammad’s Birthday) (Tentative Date)

25 December: Christmas Day

What is the typical salary increase employees in Indonesia expect?

Workers in Indonesia typically expect at least a 5% salary increase; in 2022, the salary increase was 6.5% on average, not including companies that implemented a hiring or salary freeze in 2022.

Employee salaries in certain in-demand industries like tech and internet companies have seen the highest upside in recent years with those industries commanding wage hikes of over 7% per year on average.

Frequently asked questions (FAQ):

Whether you should hire freelancers or employees in Indonesia is a decision that is deeply personal to the strategy of your business.

Not just in Indonesia, but anywhere, hiring an employee comes with far fewer risks related to employee misclassification, IP loss, or the employee taking on too much work and letting your tasks slide. 

Hiring employees in Indonesia compliantly is not out of your grasp, even if you don’t have or don’t want an established entity in the country. Contact us for a free consultation and we can go over your options for hiring in Indonesia.

Yes, it is possible to hire foreigners in Indonesia. The best city to target for hiring foreigners in Indonesia is Jakarta.

Branch offices in Indonesia are typically not permitted.

Companies that want to have a physical presence in Indonesia can choose one of the following options:

  1. Open a representative office (RO)
  2. Open a fully-owned foreign enterprise (a Limited Liability Company, or LLC)
  3. Open a joint venture (JV)

The most common of these is opening an LLC . To open an LLC in Indonesia, the following requirements must be met:

  • Prepare and notarize the Articles of Association by drafting in Indonesian language;
  • Provide all relevant information about the owners of the company, including their names, addresses, and nationalities
  • Appoint the board of directors. At least one board member should be an Indonesia national;
  • Name a commissioner for the company. The commissioner can be any nationality
  • Notarize the owners’ signatures and submit them to the Companies Registrar;
  • Pay the registration fee. Be sure to keep the receipt and include it with the registrtion documents
  • Register for VAT and other tax purposes. Receive the business registration number upon successful registration
  • Give all relevant notarized documents to the Ministry of Law and Human Rights.

After all above requirements are met, and the Indonesia LLC exists, it must register with the Ministry of Manpower and apply for all licenses and permits specific to the indusry of the LLC. These permits vary from industry to industry, and so does the price. Once the employment registration is complete the LLC is ready to begin legally operating

Note that the Indonesia company commissioner is a required appointment that comes withs several legal responsibilities, including supervising the company, providing analysis, annual reports, and approving any budget plans passed by the board of directors. 

Please also note that, like any LLC, there must be an in-country company director to oversee company operations. This is a mandatory requirement, and can be either an Indonesian national or a foreigner. 

The cost of opening an LLC in Indonesia vary with an abosolute minimum of USD $7,000 in fees. Opening and LLC in Indonesia requires local knowledge and a minimum of 10 weeks with a local partner.

There are usually two options for hiring employees in Indonesia.

Option 1: Open a subsidiary

The above process outlines what it takes to open a subsidiary. Companies choosing this option should be working with experienced Indonesian partners on the ground to mitigate the risks involved and increase the changes of a return on investment.

Option 2: Hire through a partner such as an EOR like Horizons

This option is by far the best option for companies looking to get started in Indonesia as soon as possible. The speed, ease to end the engagement, and affordable price make it a clear option for small or large companies who want to try the Indonesian market or scale up their Indonesian team incrementally. Contact us and get started in less than 24h.

Hiring in Indonesia, Made Easy

Your business can easily hire employees in Indonesia without opening a local entity. We handle local employment law, complex tax regulations, and international payroll in 150+ countries worldwide. All you need to do is focus on your business.

$290/month

Per employee

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