Hiring in Indonesia through an EOR (2026)

Indonesia's 13th-month salary is mandatory, and that single obligation reshapes how you budget for every employee from day one. It is not a bonus you can withhold based on performance; it is a statutory entitlement that arrives once a year, effectively adding a full extra month of gross salary to your annual payroll cost per person. Plan for it upfront or it will catch your finance team off guard.

Beyond that, you are looking at a 10.24% employer social security contribution on top of gross salary, a 40-hour statutory work week, and 12 days of paid annual leave plus 14 public holidays. Indonesia also has one of the more significant severance obligations in the region, averaging around 33 weeks under the post-Omnibus Law formula and climbing past 56 weeks at long tenure, so the cost of ending an employment relationship here is something to factor in well before you hire.

The 10.24% employer social security burden in Indonesia is spread across five separate schemes: Old Age Security (JHT) at 3.7%, Pension Guarantee (JP) at 2%, Work Accident Insurance (JKK) at 0.24%, Death Benefit (JKM) at 0.3%, and National Health Insurance (JKN) at 4%. Each scheme has its own registration and remittance process, so the administrative load is not trivial even though the individual rates look modest.

A few things deserve extra attention when hiring in Indonesia.

• Mandatory 13th-month salary. This is not discretionary. Budget for an additional full month of gross salary per employee each year from the moment you sign the contract.
• Severance exposure averaging 33 weeks. Indonesian law ties severance to length of service under the Omnibus Law formula, and long-tenured employees can exceed 56 weeks. For longer-tenured employees, the cost of termination can be substantial, so workforce planning decisions carry real financial weight.
• Zero statutory notice period. The notice period is recorded as zero weeks, which sounds simple but means your contractual and procedural obligations around termination need to be carefully documented to avoid disputes.
• Union density is low but labour law is strict. At 5.3% union density, collective bargaining is not the main compliance driver here. The statutory rules themselves, including work accident insurance, pension contributions, and health cover, are what you need to follow closely.