Projected to be the seventh largest economy in the world by 2030, Indonesia is becoming a popular destination for businesses to setup a company in the Asia-Pacific region. However, navigating payroll and tax in a foreign country can present significant challenges to businesses that aren’t familiar with relevant laws and regulations. In particular, in Indonesia, payroll management involves adhering to various steps and deadline submissions to ensure that calculations comply with government regulations. As a payroll provider in Indonesia, INS Global can handle your payroll calculations, payments and filings on your behalf.
Understanding Payroll in Indonesia
Employers in Indonesia must follow a series of monthly procedures when administering payroll for both local and foreign employees to ensure complete compliance with the Indonesian tax authorities. This includes making tax payments and social security contributions (Jamsostek) which must be withheld by employers each pay cycle.
Social Security Contributions
Indonesia’s Social Security system is called Jamsostek. Companies operating in Indonesia must register with Jamsostek and obtain certificates and other relevant documentation for their employees. Employers must deduct insurance from an employee’s earnings every month and remit it to the Indonesia social insurance authorities on the employee’s behalf.
Depending on the scope of business, the rate payable ranges from 6.24% to 7.74% of the employee’s full salary, of which 2% is paid through employee contribution. The breakdown is as follows:
|Type of Insurance||Employer contribution||Employee Contribution||Total|
|Work accident||0.24% – 1.74%*||0%||0.24% – 1.74%|
|Total Percentage of Full Salary||4.24% – 5.74%||2.00%||6.24% – 7.74%|
Contribution to Jamsostek Health Insurance is not required, provided that the company can provide a better health insurance choice than Jamsostek. If opting for Jamsostek, employers contribute 4% and employees contribute 1%.
Income Tax in Indonesia
Individual resident tax payers are taxed progressively on income according to the following income tax rates:
|Income Per Year||Income Tax Rate|
|Up to IDR 50 million||5%|
|Over IDR 50 million to IDR 250 million||15%|
|Over IDR 250 million to IDR 500 million||25%|
|Over IDR 500 million||30%|
INS Global – Your payroll provider in Indonesia
Having a partner with knowledge of the Indonesian HR landscape is invaluable when doing business in Indonesia. The payroll system can be complex and its ever changing laws, regulations and submission requirements make it tricky for foreign investors to remain compliant. As a full service HR company present in Indonesia, INS Global can manage your payroll for you and give you peace of mind while operating in a new market. Contact us today to learn more.