You must have a written employment contract, report to the Manpower Office, and register employees in BPJS.
Hiring employees in Indonesia isn’t just about choosing the right talent. It’s about doing it legally and correctly. Why? Because labor law in Indonesia is strictly regulated, and non-compliance—whether intentional or accidental—can lead to serious consequences including fines, business license revocations, and even criminal charges. Whether you’re a multinational setting up a local entity, or a domestic company scaling up your team, knowing how to hire employees legally in Indonesia can make or break your business.
Indonesia’s employment law framework is governed primarily by:
These laws ensure that all employment relationships are governed by fair terms and clearly define employer and employee obligations. Understanding this framework is crucial to hire employees legally in Indonesia and protect your business from potential legal disputes.
Permanent employees are hired under an indefinite term contract. They are entitled to benefits like severance pay, annual leave, health insurance, and retirement benefits.
PKWT (Perjanjian Kerja Waktu Tertentu) is used for temporary roles or project-based employment. This contract must be in writing and registered with the local Manpower Office to be valid.
These workers are not directly employed by the company but by third-party service providers. However, companies must ensure the outsourcing relationship follows Indonesian outsourcing laws to avoid being deemed as direct employers.
A written employment agreement is mandatory. It should include:
For PKWT employees, the maximum duration is five years (including extensions) under the latest regulation.
Once employment contracts are signed, companies must report new hires to the local Manpower Office (Dinas Ketenagakerjaan) within 30 days. Failure to report may expose the company to administrative sanctions.
Under Law No. 24 of 2011, employers are required to enroll employees in:
Contributions must be made monthly and failure to comply may result in penalties and employee claims.
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To ensure you hire employees legally in Indonesia, contracts must contain the following:
All employment contracts must be drafted in Bahasa Indonesia (or bilingual for foreign companies).
Foreigners working in Indonesia must have the following:
Employers must ensure these are obtained before the foreign employee starts work. Also, companies are required to assign an Indonesian counterpart for knowledge transfer.
Employers must:
Filing and payment must comply with Indonesia’s tax calendar.
Employee rights under Indonesian law include:
Employers have the obligation to provide a safe work environment, pay timely wages, and avoid unlawful dismissals.
Termination must follow due process, including:
Severance, long service pay, and compensation must be paid as required by Government Regulation No. 35 of 2021.
At Kusuma & Partners, we’ve assisted numerous clients—local and international—in hiring employees legally in Indonesia. One common pitfall is overlooking proper employment contract, documentation and social security registration. Our practical advice? Always prepare the draft employment contract terms in writing, register everything with the authorities, and get legal review before hiring employees. It saves time, money, and headaches later.
Successfully hiring employees legally in Indonesia is not just about signing a contract—it’s about aligning with a robust legal framework that protects both employers and employees. This guide provides the essentials, but given the complexity of labor law in Indonesia, professional legal assistance ensures compliance and peace of mind.
Need help navigating employment laws in Indonesia? Kusuma & Partners Law Firm is here to support you. From drafting and reviewing employment contracts to foreign employment permits. Fill in the form below to get legal expert guidance from Kusuma & Partners Law Firm.
“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”
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