Indonesia HR Compliance Guide – Employment Contracts, Payroll & BPJS [2026 Edition] - (Part 5)

Introduction

It is now time to hire your team! 

With your company now established and your accounting and tax systems and reporting configured we move into Part 5 of our series – Indonesia HR Compliance Guide – Employment Contracts, Payroll & BPJS.

This article provides guidelines on your mandatory employment-contract formats, payroll tax (PPh 21), BPJS registration, and the HR rules necessary to maintain your “operational” status under OSS-RBA.

If you haven't read the other articles in our series don't miss
Part 1 – How to Open a Foreign-Owned Company (PT PMA) in Indonesia – 2026 Guide,
Part 2 – Indonesia KBLI Codes & Business Licences Explained 
Part 3 – Accounting Setup for PT PMA Companies in Indonesia 
Part 4 – Financial & Tax Reporting in Indonesia

 

1. Why HR Compliance Matters for Foreign Investors

​

For foreign-owned companies (PT PMA), HR compliance is not just a payroll exercise — it is a licensing requirement under Indonesia’s OSS-RBA system. When employment data, BPJS registrations, or tax filings are missing, OSS automatically flags the company as “non-operational.”

Consequences can include:

• suspension of NIB-linked licences,
• blocked visa or RPTKA stands for “Rencana Penggunaan Tenaga Kerja Asing” or Foreign Manpower Utilization Plan renewals for expatriates, and
• ineligibility to submit quarterly LKPM (Investment Activity Reports).

Indonesia’s labour framework is designed to protect employees through written contracts, social-security enrolment, and predictable severance.

For investors, compliance creates operational stability: predictable payroll, lower regulatory risk, and a foundation for future scaling.

2. Indonesia’s Employment Law Framework

Level	Instrument	Scope	Key 2025–26 Updates
Primary Law	Law No. 13 of 2003 on Manpower	Core rights & obligations	Still in force, modified by Omnibus Law
Amending Law	Law No. 11 of 2020 (Job Creation)	Simplified contract & severance rules	Enables 5-year PKWT contracts
Government Regulations	GR 35/2021 – Contracts & Termination GR 36/2021 + GR 51/2023 – Wages	Implements Omnibus Law	Introduces new wage formula
Presidential Regulations	Perpres 64/2020 – BPJS Kesehatan Premiums	Fixes health-insurance cap	Still valid for 2026
New Regulations 2025	PP 6/2025 & PP 28/2025	Reform BPJS Ketenagakerjaan – introduce JKP	Effective 1 July 2025

Hierarchy of enforcement:

Law > Government Regulation (GR) > Presidential Regulation > Ministerial Regulation > Circular Letter.

When uncertain, always follow the highest applicable instrument.

3. Employment Contracts in Indonesia

A. Two Legal Types

Contract Type	Bahasa Term	Duration Limit	Typical Use	Termination Effect
Fixed-Term	PKWT – Perjanjian Kerja Waktu Tertentu	≤ 5 years (incl. extensions)	Project, seasonal, probationary roles	Ends automatically; no severance unless early-terminated
Permanent	PKWTT – Perjanjian Kerja Waktu Tidak Tertentu	Indefinite	Core staff, management	Entitled to severance & notice pay

Registrati​on ​ ​​: PKWT contracts must be uploaded to the SISNAKER (Sistem Informasi ​ ​ ​ ​      Ketenagakerjaan) or Manpower Information System online portal within ​ ​ ​ ​      3 working days.

Lan​guage ​ ​: Contracts must be in Bahasa Indonesia; a bilingual English version is ​ ​         ​ ​  recommended for foreign management.

Probation ​ ​: Allowed only for PKWTT contracts – maximum 3 months.

Renewal ​ ​: PKWT may be renewed once for up to 5 years total under GR 35/2021.

Example – Clause Structure

1. Position & Job Description
2. Term of Employment
3. Working Hours (40 hours / week
4. Remuneration & Allowances
5. Leave Entitlement
6. Termination Clause
7. Language & Governing Law

4. Company Regulation (Peraturan Perusahaan)

If your PT PMA employs 10 or more workers, you must prepare a formal Company Regulation outlining internal employment rules.

Contents typically include:

• Work hours and overtime calculation
• Leave and public-holiday policy
• Disciplinary and grievance procedure
• Occupational health & safety rules
• Compensation and benefits structure
• Termination procedure and severance method

Process in Bali:

1. Draft the document (bilingual Bahasa + English).
2. Submit to Disnaker Kota Denpasar or Disnaker Kabupaten Badung for review.
3. Receive approval letter (valid for two years).
4. Display summary at the workplace and provide copies to staff.

Failure to maintain an approved regulation can lead to warnings or fines under Article 108 of Law 13/2003.

5. BPJS – Indonesia’s Mandatory Social-Security System​

BPJS (Badan Penyelenggara Jaminan Sosial) is the government-run agency that manages employee health and social insurance.

It has two distinct branches:

Branch	Official Name	Coverage	Legal Basis
BPJS Kesehatan	Badan Penyelenggara Jaminan Sosial Kesehatan	National Health Insurance for all residents	Perpres 64/2020
BPJS Ketenagakerjaan	Badan Penyelenggara Jaminan Sosial Ketenagakerjaan	Employment benefits: accident, death, old-age, pension, job-loss	Law 24/2011 + PP 6/2025 & 28/2025

Who Must Register

• All employees – local and foreign – working ≥ 6 months in Indonesia.
• Employer must register company and employees within 30 days of hiring.
  
  

Why It Matters

BPJS registration numbers are now linked to your OSS-RBA business licence.

Without them:

• You cannot renew NIB or sectoral licences,
• You cannot file quarterly LKPM, and
• Expat KITAS extensions may be delayed.
  
  

6. BPJS Kesehatan (Health Insurance)

Purpose ​​: Provides universal medical coverage for employees and their dependents ​ ​ ​ ​      (spouse + up to three children).

​ ​ ​ ​Every PT PMA operating in Indonesia must register its employees with BPJS ​ ​ ​ ​    Kesehatan within 30 days of hire.

Legal Basis ​ ​: Presidential Regulation No. 82 of 2018 as amended by Perpres No. 64 of 2020

Salary Ceiling ​: IDR 12 000 000 per month (unchanged for 2026)

Category	Employer Share	Employee Share	Total Rate	Notes
Private-Sector Employee	4 %	1 %	5 % of gross salary	Calculated up to the ceiling of IDR 12 million

Example – Health Contribution Calculation

Employee salary = IDR 10 000 000

→ Employer pays 4 % = IDR 400 000
→ Employee pays 1 % = IDR 100 000
→ Total = IDR 500 000 per month

Payment Method:

• Employer registers company and staff in the e-DABU BPJS portal.
• Contributions are due by the 10th10 th of the following month.
• Delays > 30 days suspend coverage until arrears are cleared.
  
  

Local Note (Bali) : ​BPJS offices in Denpasar and Badung process most PMA registrations. Foreign ​ ​ ​ ​managers are covered once they receive KITAS and local salary records.

7. BPJS Ketenagakerjaan (Employment & Pension Programs)

Purpose ​: Protects workers against accidents, death, old age, and involuntary termination.

​ ​ ​  Since 2025, the system comprises five programs: JKK, JKM, JHT, JP, and JKP.

Legal Basis ​: Law No. 24 of 2011; Gov. Reg. No. 46 of 2015; PP No. 6/2025 and PP No. 28/2025 (Job ​ ​ ​  Loss Security reform)

Program	Name (English)	What It Covers	Employer Rate	Employee Rate	2025–26 Salary Ceiling / Notes
JKK	Work Accident Insurance	Medical care and compensation for job-related injury or disease	0.12 % – 1.74 %	0 %	Low-risk sectors (consulting, offices) cut to 0.12 % from 2025; high-risk industries up to 1.74 %
JKM	Death Benefit	Lump-sum payment to family on employee death	0.30 %	0 %	Fixed rate all sectors
JHT	Old-Age Savings	Withdrawable savings after resignation or retirement	3.70 %	2.00 %	Deposited monthly to employee BPJS account
JP	Pension Plan	Lifetime pension income after retirement	2.00 %	1.00 %	Salary ceiling IDR 10 547 400 (March 2025); indexed annually
JKP	Job Loss Security (NEW 2025)	Cash benefit + job placement + training for laid-off employees	— (funded from JKK pool)	0 %	No extra cost to employer; provides ≤ 6 months salary benefit

Combined Cost – Typical Office Company

Employer ≈ 6.12 % Employee ≈ 3 % → ≈ 9 % of gross salary

Computation Example

Employee earns IDR 10 000 000 per month:

• Employer ≈ IDR 612 000
• Employee ≈ IDR 300 000
  → Total ≈ IDR 912 000 per month

Reporting & Payment

• Pay through SIPP Online by the 10 th of the following month.
• Upload payroll report showing employee IDs and salaries.
• Late payment penalty = 2 % per month of arrears.
• BPJS numbers must appear on payslips and in OSS.

JKP – How the New Job Loss Security Works

Employees terminated without fault receive:

1. Cash benefit (up to six months of salary, capped by JKP limit).
2. Access to government re-employment services.
3. Vocational training and certification.
   This program strengthens labour protection without adding cost to employers.

Combined BPJS Example (IDR 10 m Salary)

Scheme	Employer %	Employee %	Monthly Employer	Monthly Employee	Total Monthly
BPJS Kesehatan	4 %	1 %	IDR 400 000	IDR 100 000	IDR 500 000
BPJS Ketenagakerjaan	6.12 %	3 %	IDR 612 000	IDR 300 000	IDR 912 000
Total	≈ 10.12 %	≈ 4 %	IDR 1 012 000	IDR 400 000	≈ IDR 1.41 m (14 % of gross)

8. Payroll Tax (PPh 21)

PPh 21 is the monthly income tax withheld by the employer on behalf of each employee.

It is mandatory for all salary payments and verified in audits by the Directorate General of Taxes (DJP).

A. How to Calculate

1. Determine Gross Income (salary + allowances + benefits in kind).
2. Deduct:
3. • Employee’s BPJS Kesehatan (1 %) and BPJS Ketenagakerjaan (≈ 3 %).
   • Non-taxable income (PTKP) – currently IDR 54 000 000 per year for single status (+ allowances for dependents).
4. Apply progressive tax rates:

Annual Taxable Income	Rate
≤ IDR 60 000 000	5 %
60 – 250 million	15 %
250 – 500 million	25 %
500 million – 5 billion	30 %
> 5 billion	35 %

1. File monthly through e-Bupot Unifikasi and pay via DJP Online.
2. Issue Form 1721-A1 to each employee by February of the following year.
   
   

Example

Employee monthly salary ​= IDR 10 000 000
Annual ​ ​ ​ ​= IDR 120 000 000
Taxable ​ ​ ​ ​= 120 – 54 = IDR 66 000 000
​ ​ ​ ​ ​ ​→ 5 % × 60 = 3 000 000 + 15 % × 6 = 900 000
​ ​ ​ ​ ​ ​→ Total tax = IDR 3.9 million/year ≈ IDR 325 000/month

9. Expatriate Employment (Working in Indonesia Legally)

Foreigners can be employed by a PT PMA under strict conditions.

A. RPTKA – Foreign Manpower Utilisation Plan

• Approved by the Ministry of Manpower before any work begins.
• Specifies position, duration, and local counterpart for knowledge transfer.
• Valid 1 year (renewable).
  
  

B. Notification & Work Permit (KITAS)

• Once RPTKA is approved, a Notification Letter is issued and forwarded to Immigration.
• Expat enters Indonesia on a VITAS, then receives a Limited Stay Permit (KITAS).
  
  

C. DKPTKA – Skill Development Fund

Employers must pay IDR 1 200 000 per month per expatriate to the Ministry of Manpower. Funds support national training programs.

D. BPJS Requirement for Expats

• Mandatory if contract > 6 months.
• BPJS Kesehatan may require local salary basis for premium calculation.
• Registration processed through the Denpasar BPJS office.
  
  

Local Note (Bali): For hospitality and F&B businesses with foreign chefs or managers, ensure the job title matches the RPTKA approval exactly; mis-matches trigger inspection by Disnaker Provinsi Bali.

​
10. Termination & Severance (2026 Standard)

Indonesian law requires employers to justify terminations and pay statutory severance under GR 35/2021.

A. Permissible Grounds

• Redundancy / efficiency
• Company closure or merger
• Poor performance (after three warnings)
• Violation of employment terms
• Employee resignation (not entitled to severance)
  
  

B. Severance Formula

Service Tenure	Severance (Months of Salary)	Long-Service Allowance (Additional)
< 1 year	1	–
1 – 2 years	2	2
2 – 3 years	3	3
3 – 4 years	4	4
4 – 5 years	5	5
5 – 6 years	6	6
6 – 7 years	7	7
7 – 8 years	8	8
≥ 8 years	9	10 (max)

Compensation of Rights ​: add unused annual leave, transport allowance, and housing ​ ​ ​ ​ ​ ​ ​     compensation (15 % of severance in practice).

Example:

Employee 5 years service,
monthly salary IDR 10 m → Severance 5 × 10 = 50 m + Long-Service 5 × 10
​ ​ ​ ​ ​ ​ ​ ​         = 50 m + Housing/Transport (15 %) = 15 m
​ ​ ​ ​ ​ ​ ​ ​         → Total = ≈ IDR 115 million

C. Procedure

1. Written notice and negotiation (Bipartite Meeting).
2. If no agreement, mediate via Disnaker Kota Denpasar.
3. Final termination registered with Industrial Relations Court if disputed.
   
   

11. Integration with OSS and LKPM Reporting

Indonesia links corporate licences, manpower records, and investment reporting through the OSS-RBA platform.

Once you begin employing staff, HR compliance becomes visible to the same regulators who oversee your business licences.

A. Disnaker Registration

Every operating company must obtain a Company Manpower Registration Number (Nomor Pendaftaran Perusahaan Ketenagakerjaan – NPPK) from the local Disnaker office (in Bali: Denpasar City or Badung Regency).

This registration lists:

• number of local and expatriate employees,
• workplace address,
• approved working hours scheme and wage range.
  
  

B. OSS–BPJS Linkage

BPJS Kesehatan and BPJS Ketenagakerjaan memberships are synchronised with your NIB on OSS.

When BKPM audits licence renewals, the system checks whether BPJS data = the employee count reported in LKPM.

If records don’t match, your OSS profile is marked “non-compliant”, which can delay licence extensions, visa approvals, and even bank-account updates.

C. Quarterly LKPM Workforce Report

All PT PMAs must submit a Laporan Kegiatan Penanaman Modal (LKPM) every quarter.

Section C of the form records:

• total employees by category (local vs expat),
• average monthly wage expense, and
• any changes in manpower structure since the previous period.

Failing to include HR data can trigger a BKPM clarification letter and temporary licence freeze.

D. Why Integration Matters

For foreign investors, HR compliance isn’t just about labour law – it is a component of your investment licence.

Companies with clean BPJS and tax records can expect:

• faster visa approvals for foreign staff,
• smoother tax clearance letters (SKD), and
• stronger credibility with banks and auditors.
  
  

12. Common Compliance Mistakes (And How to Avoid Them)

Mistake	Why It Happens	Risk or Penalty	Preventive Action
1. English-Only Contracts	Drafted by foreign managers without Bahasa translation	Contract void; defaults to permanent (PKWTT) status	Always prepare bilingual (Bahasa + English) contracts
2. Delayed BPJS Registration	Payroll set up before BPJS portal access	Fines + OSS flag + suspended coverage	Register within 30 days of hire; use temporary numbers if needed
3. Paying Net Salary Only	Employer absorbs tax without filing PPh 21	Under-reporting; audit penalties + 5% interest per month	Implement automated PPh 21 withholding and e-Bupot filing
4. Missing Company Regulation	HR policy never approved by Disnaker	Labour inspection fine up to IDR 100 million	Submit Peraturan Perusahaan every 2 years
5. Freelancers Used Long-Term	Avoid payroll costs / BPJS	Courts may declare them employees → retroactive severance	Use proper PKWT contracts and BPJS enrolment
6. Mismatched Job Titles for Expats	Title differs from RPTKA approval	Work-permit revocation	Ensure RPTKA, KITAS and employment contract match
7. Incorrect JKK Rate	Didn’t update after 2025 policy cut	Overpayment or audit rejection	Confirm industry classification in BPJS portal (0.12 – 1.74 %)

13. HR Compliance Checklist (PT PMA Employers)

Pre-Hiring Stage

• Define positions and check RPTKA requirement (for expats).
• Prepare bilingual employment contracts (PKWT or PKWTT).
• Confirm minimum wage per province (Bali 2026 estimate ≈ IDR 2.83 million).
  
  

Onboarding Stage

• Register company and employees with BPJS Kesehatan and BPJS Ketenagakerjaan.
• Obtain Manpower Registration Number from Disnaker.
• Configure payroll system to calculate BPJS + PPh 21 automatically.
• Submit employment data to OSS for licence integration.
  
  

Ongoing Operations

• Pay BPJS premiums by 10 th each month (e-DABU / SIPP Online).
• File PPh 21 monthly and issue Form 1721-A1 annually.
• Maintain attendance and leave records (min. 5 years).
• Keep Company Regulation valid and displayed.
• Include headcount and salary data in quarterly LKPM.
  
  

Termination / Off-Boarding

• Conduct bipartite negotiation and Disnaker notification.
• Pay severance and compensation of rights as per GR 35/2021.
• De-register from BPJS after final salary payment.
• Retain termination documents for five years for audit.
  
  

14. Regulatory References (Updated to Oct 2025)

Category	Regulation	Description
Primary Manpower Law	Law No. 13 of 2003	Core labour framework
Amending Law	Law No. 11 of 2020 (Job Creation)	Modernises contracts and severance
Employment Implementation	GR No. 35 of 2021	Fixed-term contracts, outsourcing, termination
Wage Regulation	GR No. 36 of 2021 as amended by GR 51 of 2023	Wage formula and minimum wage updates
Social Security Framework	Law No. 24 of 2011	Establishes BPJS system
BPJS Ketenagakerjaan Reform	PP No. 6 of 2025 and PP No. 28 of 2025	Introduces Job Loss Security (JKP) & reduces JKK rates
Health Insurance Premiums	Perpres No. 64 of 2020	Fixes BPJS Kesehatan ceiling (IDR 12 m)
Expat Employment	MoM Reg. No. 8 of 2021	RPTKA and foreign-manpower procedures
Tax Withholding	PER-16/PJ/2016 (DGT)	PPh 21 implementation guidelines

15. How SatuSolusi Can Help (With Bali Local Support)

Establishing or running a PT PMA in Indonesia means navigating layers of employment law and administration.

At SatuSolusi Consultancy, our HR and Compliance team supports foreign businesses across Indonesia – with special expertise in Bali’s tourism, F&B, real estate, and consulting sectors.

Our Services Include

• Bilingual contract drafting (PKWT & PKWTT)
• Company Regulation submission to Denpasar / Badung Disnaker
• BPJS Kesehatan & Ketenagakerjaan registration and monthly processing
• Payroll system setup (PPh 21 integration in Odoo or stand-alone)
• Expat RPTKA and KITAS permits
• HR compliance audit & training for management teams
  
  

Conclusion

​Getting HR compliance right — from employment contracts to payroll tax and BPJS registration — keeps your PT PMA fully operational under OSS-RBA and protects both your employees and your investment. A strong HR foundation also ensures your payroll, SPT filings, and LKPM submissions stay consistent across government systems.

For context, the earlier parts — Part 1, Part 2, Part 3, and Part 4 — explain how to legally establish your PT PMA, secure the right licences, build an accounting system, and prepare statutory financial and tax reports.

In Part 6 – Local Registrations in Indonesia – NPWPD & Regional Compliance [2026 Guide], we complete the compliance framework by covering regional obligations such as NPWPD, municipal taxes, and local reporting requirements.

Need tailored assistance aligning your HR setup with Indonesian regulations?

Book your 30-Minute HR Compliance Consultation today.