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Southeast Asia consists of a myriad of diverse, complex, and evolving labour laws, making it challenging to
remain compliant. For the last 10 years, Axpara Solutions has operated as a regional Employer of Record
and payroll partner for our Clients across the region. To do this successfully, we manage each country
with a localized employment model to provide our Clients with the flexibility of at-will employment while
achieving legal and statutory compliance
Employment Model
Axpara Solutions acts as the legal employer under an Employer of Record arrangement through our
Indonesian entity. Typically, our Client(s) retain full day-to-day operational control over the
talent(s) hired, including task assignment, performance management, and working schedules.
Employment contracts are issued in Bahasa Indonesia as required by law and structured in
compliance with Indonesian manpower regulations. Contract type, either fixed-term or permanent,
is determined based on role scope, duration, and regulatory eligibility under Indonesian labor law.
Our general approach is to use fixed-term contracts that are renewable every 1 or 2 years. This
provides flexibility while ensuring compliance with labour laws.
Axpara Solutions is legally and operationally responsible for employee onboarding, employment
documentation, statutory registrations, payroll processing, and termination administration, where
applicable.
Statutory Contributions and Cost Structure
BPJS Kesehatan Health Insurance
Mandatory national health insurance covering outpatient and inpatient medical care.
Contribution structure
- Total contribution: 5 percent of monthly salary
- Employer contribution: 4 percent
- Employee contribution: 1 percent
- Monthly salary subject to government-mandated cap
Axpara registers each employee with BPJS Kesehatan, processes monthly contributions, and
ensures ongoing compliance with contribution caps and reporting requirements.
Staff Quality
Mandatory employment social security covering retirement savings, workplace accidents,
death benefits, and pension.
JHT Old Age Security
- Total contribution: 5.7 percent
- Employer: 3.7 percent
- Employee: 2 percent
JKK Work Accident Insurance
- Employer only
- Contribution rate ranges from 0.24 percent to 1.74 percent
- Rate determined by government-assigned industry risk classification
JKM Death Benefit
- Employer only
- Contribution rate: 0.3 percent
JP Pension
- Total contribution: 3 percent
- Employer: 2 percent
- Employee: 1 percent
- Monthly salary subject to statutory cap
Axpara calculates, withholds, remits, and reports all BPJS Ketenagakerjaan contributions on a
monthly basis.
Income Tax PPh 21
Personal income tax is applied progressively based on the employee's taxable income.
- Tax is legally borne by the employee
- Axpara computes monthly tax liabilities, withholds tax at source, and remits payments to the
tax authority - Where applicable, tax allowances are structured and included in payroll to ensure accurate net
pay outcomes - Annual tax reporting and employee tax documentation are administered by Axpara
Withholding Article 21 Tax | Direktorat Jenderal Pajak
Mandatory Bonus
Tunjangan Hari Raya THR
Statutory religious holiday allowance.
- Equivalent to one month of base salary
- Paid annually prior to the employee's primary religious holiday
- Prorated for employees with less than twelve months of service
Axpara tracks eligibility, computes THR obligations, and executes payment in compliance with
statutory timelines. For more information on THR obligations, see: Religious Holiday Allowances in
Indonesia: Obligations for Businesses
Leave Administration
Under Indonesian labor law, employees are entitled to the following leave benefits:
- Annual leave: 12 days of paid leave per year
- Medical leave: For permanent employees, a graduated salary scheme applies for long-term
medical leave, based on the duration of continuous inability to work, supported by certified
medical documentation:- 100% of salary for the first 4 months,
- 75% for the next 4 months
- 50% for the following 4 months
- 25% thereafter until recovery or termination.
- Eligibility: After 6 consecutive years with the same employer
- Maternity leave: 3 months total (full pay), split before and after birth
- Paternity: 2 days for the birth/circumcision of a child
- Menstrual: 2 days per month for the first two days of the cycle
- Marriage: 3 days for the talent's marriage
- Death: 2 days for the death of a spouse, parent-in-law, child, or child-in-law
- Religious: Paid leave for major pilgrimages
Axpara Solutions operates through a contract employment model. While statutory minimums
apply, Axpara provides enhanced leave entitlements. Including:
- Annual leave: 12 paid days per year
- Medical leave: 14 days per year, subject to valid medical documentation
Axpara manages leave balances, approvals, payroll impact, and statutory reporting through its
payroll and HR administration systems, ensuring compliance with Indonesian law while giving
clients flexibility to align leave policies with market standards.
Public Holiday
- Talents are entitled to observe public holidays in accordance with Indonesia's official national
holiday calendar. These holidays are designated as "red dates" (tanggal merah) and typically
involve the closure of government offices, banks, schools, and most businesses. - If a Talent is required to work on an official public holiday, compensation is governed by
Indonesian labor regulations. The Talent is entitled to double their regular hourly wage for the
first seven hours worked and triple their regular hourly wage for any additional hours. As an
alternative, compensatory time off may be granted in accordance with applicable labor rules
and company policy. - In addition to official public holidays, the Indonesian government designates joint leave days
(collective leave). These days primarily apply to public sector employees. Observance of joint
leave days in the private sector is not mandatory unless expressly stated in a collective labor
agreement or company policy. Joint leave days are intended to support domestic travel and
tourism and do not constitute statutory public holidays.
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