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Hiring employees in Indonesia can be complex if you are not familiar with local employment rules, payroll requirements, and mandatory benefits. For many international companies, partnering with a professional employer organization (PEO) is the fastest and most reliable way to build a compliant team without setting up an Indonesian legal entity. A PEO becomes the legal employer for your local staff, handling employment contracts, payroll, tax withholding, BPJS social security programs, and statutory benefits while you manage day-to-day work.
In this article we will outline the best PEO providers in Indonesia, explain how PEO services work, and highlight what you should look for when choosing a provider.
Indonesia has a young population and a fast-growing economy that provides attractive opportunities to international companies. However, local labor regulations, payroll taxes, and mandatory social security programs can be complex for foreign businesses to manage. A PEO or EOR can assist international companies in complying with Indonesian employment law.
A PEO in Indonesia will take care of a company’s full-scope HR needs (payroll, benefits, tax, and employment law compliance) in a co-employment model. The client will remain operationally in charge of the business, while the PEO will provide the administrative and legal expertise. Note that a PEO must have an existing legal entity in Indonesia, and the company partnering with a PEO must already have a PT PMA.
An EOR, on the other hand, is used by businesses that do not yet have a local entity. The EOR will hire an employee through its own Indonesian entity, take care of payroll, employment contracts, and manage and ensure full compliance with local laws and regulations. This will allow a business to hire fast and compliantly, without the need to first establish a legal subsidiary.
The need for compliance is the main reason businesses choose to partner with a PEO or EOR. Indonesia’s current Labor law (Law No. 13/2003), as well as its recently passed Omnibus law (GR 35/2021), both present some daunting complexities to manage, even for in-house HR or legal teams. Penalties for non-compliance or accidental mistakes can be steep, which is why EOR providers familiar with the local legal and business environment can help ease the stress by taking care of payroll tax (PPh 21), severance, social security (BPJS), and other compliance obligations.
Remote People is an all-in-one service for Indonesia with PEO, EOR, contractor management, and in-house recruitment. Claiming to be a transparent, affordable, and easy-to-use platform for businesses of all sizes, Remote People manages the full employment lifecycle for companies from sourcing talent to compliant payroll.
Read our Remote People review for more information.
| Pros | Cons |
|---|---|
| This provider is unique in its very competitive pricing. Starting at $199 per employee per month, it is one of the lowest flat rates available. This provider is also very easy to use. It also offers built-in talent sourcing, so you can recruit and hire using a single system. This EOR provider also has a reputation for being very strong with local compliance and works closely with labor experts to follow all Indonesian labor laws, contracts, and wage regulations. | The platform is limited in third-party integrations when compared to the largest providers. It also has limited and basic analytics tools that are suitable for small businesses but are not as robust or customizable when compared to more advanced enterprise solutions. |
Deel is an enterprise-grade, technology-led global HR platform that provides EOR, Global Payroll, and contractor services. In Indonesia, Deel is supported by its own local legal entity, so you can rest assured that we are in direct control of all compliance, payroll and benefits, without third-party partners.
Take a look at our Deel review to learn more.
| Pros | Cons |
|---|---|
| With a direct EOR model, this provider owns its Indonesia entity to provide faster service, more reliability, and accountability with no middlemen. A one-stop platform for EOR, contractor management, and global payroll under a single dashboard simplifies workforce management, The platform also allows for speedy onboarding with an average of three days to get new hires in Indonesia up and running. The platform has proven scalability, as Telin, a Jakarta-based telecommunications company, was able to enter 15 new international markets. | However, one downside is the pricing. Small businesses may find Deel’s pricing unaffordable. |
G-P is a leading EOR company. It is an AI-powered global growth platform that offers EOR and PEO solutions across over 180 countries around the world, including Indonesia.
For more details, check our Global Partners (G-P) review.
| Pros | Cons |
|---|---|
| G-P’s AI-driven platform offers automation and analytics to simplify workforce management. It has robust integration capabilities with HCM systems, minimizing HR teams’ manual effort. G-P is widely adopted in over 180 countries, providing a scalable, consistent solution for businesses expanding to Indonesia and other regions. | G-P’s service costs can be high for small businesses. Its standardized platform may lack flexibility for Indonesia-specific payroll or HR requirements. |
Pebl is the new name for Velocity Global, a well-known EOR provider and industry “unicorn”. Velocity Global’s EOR solution enables businesses to hire, pay, and support talent in over 185 countries around the world, including Indonesia, without establishing a local entity.
If you want to learn more about Pebl, read our in-depth review.
| Pros | Cons |
|---|---|
| Pebl has served over 1,500 customers, with a presence in 185+ countries. Their instant cost calculation feature offers a simple platform to understand the true cost of hiring employees in Indonesia on their platform. | Limited benefits are available in certain regions, which may impact healthcare and other support services. Their hybrid, third-party partner approach could also result in a lack of consistent service and slower response time to requests. Country-specific fees may be incurred on top of the listed cost. Off-boarding costs may apply. |
Papaya Global is a workforce solutions platform that specializes in global payroll and cross-border payments. It offers EOR solutions to businesses in over 160 countries, including Indonesia. Papaya Global’s unique solution is built on a licensed payments arm (Azimo), removing friction and risk from the global workforce payments process.
| Pros | Cons |
|---|---|
| Papaya Global is a leading payment management company and is well-equipped to manage enterprise-level multi-country payroll. Papaya Global’s consultants are also local to Indonesia and offer cultural insight to ensure that foreign clients do not make any big mistakes while doing business in Indonesia in the long run. | Papaya Global is expensive, has less transparent fees and can have slow service in some countries where they have a third-party partner. The Papaya Global platform is also lacking HR functionality, and its customer service is inconsistent. |
Safeguard Global has been serving clients for many years in the global HR industry as an EOR and global payroll services provider. The company prides itself on its deep, local, and nuanced understanding of Indonesian law and culture to provide compliant employment management.
Safeguard Global has established a presence in Indonesia by way of its locally registered subsidiary, PT Global Consulting Services Indonesia.
Read our Safeguard Global review to learn more.
| Pros | Cons |
|---|---|
| Safeguard Global has strong local Indonesian legal, labor, and cultural expertise to drive a people-focused experience with local HR contacts and expedited onboarding, with hires made within two weeks. | The cons are its expensive cost and uneven service quality in areas where they work with third-party partners, resulting in limited agility for smaller organizations. |
A PEO will manage HR functions on behalf of an organization for the employees that are assigned to them, while they retain control and management of day-to-day operations. The primary difference between an EOR and a PEO is that a PEO only works with entities that have already established a registered legal entity in Indonesia.
The first advantage of using a PEO is a lower risk of legal issues. Indonesian labor law can be complex, and if any aspect of your company’s employment agreements, payroll, tax, or social security contributions are in violation of the law, it can be costly. The PEO handles these functions on the business owner’s behalf and ensures that they are done in a compliant manner.
The second advantage is local HR expertise. A PEO is familiar with local labor regulations and the nuances of local employment culture. This means that the business owners will have expert advice on how to properly manage their employees in Indonesia, and their team will have the support it needs to focus on its day-to-day operations and prevent issues from occurring.
PEOs also allow the business more flexibility. Since they will be handling payroll, benefits and other HR functions, the business team has more time to focus on those aspects of the business that are directly tied to its growth. Business owners have more flexibility when it comes to hiring, making adjustments, or taking other personnel actions because they are not constrained by any changes to their legal structure.
Indonesian employment law is largely regulated by Law No. 13 of 2003 on Manpower, or the “Manpower Law.”
The foundational law was amended with the Job Creation Law (Omnibus Law). This is now referred to in Law No. 11 of 2020 on Job Creation (GR 35).
The Omnibus Law was implemented to help boost foreign investment and improve the ease of doing business in Indonesia by making the labor market more flexible. As such, the new laws removed restrictions such as capping the maximum amount of overtime hours and relaxing the complex termination rules.
The new law did not remove the existing Manpower Law, but rather implemented new rules on top of the old regulations. This has resulted in a two-track system that is even more complicated for foreign employers to follow. It is critical for businesses to work with an expert local partner, such as an EOR, to ensure compliant operations.
In Indonesia, there are two types of employment contracts:
PKWT or Fixed-Term Contract can be used for work that is temporary, seasonal, or project-based. As per the Omnibus Law, the total duration of a PKWT (including extensions) cannot exceed five years in total. A PKWT should be in writing. A probation period cannot be used in PKWT. The probation period clause in a fixed-term employment contract shall be deemed void and not enforceable by law.
PKWTT or Permanent Contract can be used for permanent or continuing work. PKWTT can be made verbally, but the employer has a legal obligation to provide a letter of appointment to the employee. The letter of appointment is a formal letter from the employer to the employee that must be included with the key terms of employment. A probation period of up to three months is allowed, but only for PKWTT.
The employment contract must be made in the Indonesian language (Bahasa Indonesia). If there is a different interpretation or legal dispute, then in general, the Indonesian contract is always the valid one. If a bilingual contract is used, then the Indonesian employment contract should be prepared first.
A compliant contract should contain the name and address of the employer and employee, the job position or type of work, the location of work, the wage and method of payment, and the start date.
Regular working hours in Indonesia are 40 hours per week, whether it is eight hours per day for five days a week or seven hours per day for six days a week.
Any hours worked over these regular hours are, by law, considered overtime work. Overtime work must be subject to a written order from the employer and a written consent from the employee.
After the Omnibus Law, the maximum overtime allowed increased to 4 hours per day and 18 hours per week.
Overtime is to be closely governed. The overtime pay rate for work on a normal workday is 1.5 times the hourly rate for the first hour, and 2.0 times the regular hourly rate for all additional hours. The usual way to calculate the hourly rate is the use 1/173 of the employee’s monthly salary.
Indonesia has no national minimum wage. Minimum wage floors are set at the provincial level. Provincial Minimum Wages (UMP) are determined by the government. Employers must pay at least the UMP in the province where work is performed.
A general increase of 6.5% was announced for all UMP rates for 2025. UMP rates can vary considerably by region, in line with differences in the cost of living. For example, the UMP for Jakarta is more than double the Central Java rate.
Employers in Indonesia must register all of their employees under the national social security program BPJS (Badan Penyelenggara Jaminan Sosial). This is split into two programs:
The contributions are mandatory for all permanent (PKWTT) and fixed-term (PKWT) employees. This also applies to foreign workers (expats) who have worked in Indonesia for more than six months.
The costs of these programs are shared between employer and employee, with several different salary caps and risk levels that need to be calculated accurately.
In addition to the required BPJS contributions, the employer is required to withhold employee income tax (PPh 21).
As of 2024, Indonesia has changed to a new monthly calculation system known as “TER” (Tarif Efektif Rata-rata or Effective Average Rate).
For January through November, the employer uses a single TER rate and applies it to the employee’s gross monthly income. The TER rate is taken from a government table based on the employee’s gross income and tax status.
The TER is used for monthly calculation only. The annual tax liability is still determined using the national progressive tax rates. The December payroll calculation compares the 11 months of TER payments to the total tax due on annual income. The December payment is adjusted to a larger or smaller final deduction.
The national progressive income tax rates are:
Employee termination is one of the most legally sensitive and high-risk areas of Indonesian employment law. An employer must have a valid, lawful reason for terminating an employee under the Manpower Law and GR 35.
The employer must give a written notice of termination to the employee with reasons for termination. This should be issued at least 14 working days before the effective termination date.
The employee is then given seven working days to provide a written objection to the employer. The employer may not act unilaterally if an employee objects to termination and must resolve the termination through bipartite negotiations and, if necessary, through mediation at the local Ministry of Manpower and to the Industrial Relations Court.
The notice periods are:
On termination (except for gross misconduct or voluntary resignation), the PKWTT employees are entitled to a comprehensive statutory severance package. This is not a single payment but three distinct payments.
Employing foreign workers (expatriates) in Indonesia can be a very long, complicated, and restrictive process tightly controlled by the government.
The employer must secure an Expatriate Placement Plan (RPTKA) from the Ministry of Manpower. The RPTKA must justify the placement of a foreign national to work for the employer in Indonesia. The job, job duration, and the Indonesian counterpart to be trained in order to transfer knowledge to an Indonesian national must all be documented.
The employer can apply for a Limited Stay Visa (VITAS) on behalf of the employee after securing an RPTKA.
The employee must then use the VITAS to enter Indonesia and visit the immigration office in order to convert the VITAS to a Limited Stay Permit (KITAS). The KITAS is the actual work and residence permit. All of this complicated process must be sponsored by the Indonesian employer entity.
Indonesia’s labor regulations are complicated and nuanced; everything from employee contracts (written in Bahasa Indonesia) and BPJS contributions to rigid severance pay rules makes compliance a substantial risk.
Partner selection is key. Whether you are using a PEO for an established business or an EOR to get to market quickly, the service provider’s local knowledge is vital. This includes managing payroll and taxes, but also navigating the potential legal liabilities as per Indonesian labor laws.
RemotePad can guide you through this selection. Our global hiring and PEO experts will ensure that your Indonesia expansion is compliant, efficient, and a success.
A PEO in Indonesia acts as a co-employer with a company that already has a registered local legal entity. In this arrangement, the PEO assists in managing HR and payroll for that local legal entity. An EOR partners with companies that do not have a local legal entity. The EOR provides the service of legally hiring employees using its own licensed Indonesian entity, thereby assuming the legal obligations on behalf of the client company. This arrangement allows companies to hire in Indonesia without needing to create their own legal entity.
For BPJS Kesehatan (Health), the employer pays 4% of salary (subject to a salary cap of IDR 12 million per month). For BPJS Ketenagakerjaan (Employment), the employer pays Old-Age Security (3.7%), Pension (2%, based on a capped salary), Work Accident (0.24%-1.74%), and Death Security (0.3%).
Severance is not a single payment but a three-part formula based on years of service:
