In today's globalized era, more companies are expanding their businesses overseas. However, differences exist between countries in laws, culture, compensation systems, etc. Understanding local compensation is important for recruiting foreign employees. This article uses Indonesia as an example to explain pay cycles overseas employers should understand there.
1. Pay Structure in Indonesia
The structure usually includes basic pay, allowances and bonuses. Basic pay is the mandatory monthly amount while allowances pay for special services or costs. Bonuses reward performance or company results.
2. Pay Cycles in Indonesia
Indonesian law mandates monthly wages. Employers typically pay on the last day or last working day of the month. There are also two special cycles - "double pay" (13 months) and"triple pay" (14 months), usually distributed at year-end and mid-year.
3. Individual Income Tax in Indonesia
Tax is calculated based on wages, ranging from 5% to 30%. Tax-exempt thresholds apply, e.g. salaries under 2 million Rupiah (≈$140) per month.
4. Social Insurance in Indonesia
All companies must purchase insurance for employees including healthcare, retirement and occupational accident. Employers pay a portion of premiums. Employees also buy some insurances like life and accident covers.
5. Conclusion
Understanding local compensation is key for foreign employers. Indonesian employees are usually paid monthly with double/triple pay near year-end. Companies must buy social insurances and employees their own. Employers recruiting in Indonesia need to fully comprehend applicable laws and pay systems to operate and compensate legally.