Professional Employer Organization (PEO) in Indonesia

What is a PEO? 

A PEO, or professional employer organization, is a company that provides human resources functions, such as employment law compliance, payroll processing, benefits administration, and compensation, for entrepreneurs, small businesses, SMEs, and startup companies. Investing in a PEO not only streamlines your operations and processes but also enables you to expand globally, while saving time and being cost-effective. 

When you work with a PEO, the company will have an entity set up in Indonesia so you can hire employees through the PEO. PEOs handle a wide range of human resources services, including: 

• Payroll
• Benefits
• Compensation
• Employment laws
• Payroll taxes
• Administrative functions
• Employee recordkeeping
• Recruiting and hiring
• Employee onboarding

A PEO has workflows and processes in place to make doing international business in Indonesia a breeze. If your business isn’t set up to handle human resources internally, or you’re interested in scaling your operations and that isn’t a viable option right now, consider working with a PEO. 

Do you want to learn more about if a PEO is right for your organization? Contact Skuad today for information on how we can help your organization achieve business expansion in Indonesia. 

What are the benefits of using a PEO provider in Indonesia? 

When an SME or startup company works with a PEO, they gain access to many benefits available to large corporations. At the same time, they maintain the flexibility, autonomy, and agility of a small business. 

Working with a PEO is a partnership — the PEO works alongside you to operate your business seamlessly. The benefits include:

• Effortless payroll - Your PEO partner in Indonesia will take the lead on all payroll-related tasks for full-time and part-time employees, plus contractors. That’s a big weight off your shoulders.
• Squeaky-clean compliance - It’s not easy doing business in a foreign country. Your PEO will know all the essentials about labor law and compliance in Indonesia so that you don’t have to worry.
• Risk mitigation - PEOs work on a co-employment model, which means they agree to share the risk of compliance 50/50. 
• Benefits and employee retention - By partnering with a PEO, you gain access to many benefits for your employees that you may not be able to offer otherwise. This not only attracts top talent but also keeps employees satisfied.

Book a Skuad demo today to see the service in action for yourself.

Considerations for hiring in Indonesia 

Indonesia has a fast-growing economy worth trillions of USD. Indonesia has several employment laws in place, have distinct definitions about the types of workers you can hire, and offer many protections for nationals. Before you consider company registration in Indonesia for foreign businesses, you should learn more about these topics: 

• Employment laws
• Probation
• Termination
• Income tax
• Payroll
• Company incorporation

Each topic is broken down below to help you understand how hiring in Indonesia works. 

Employment laws in Indonesia 

Most laws in Indonesia lean in favor of the employee. Employment terms are very broadly defined but they ensure all employees are eligible for certain benefits and protections, such as social security. 

Indonesia recognizes part-time, indefinite, and fixed-term employment contracts. For a fixed-term contract, the length cannot be longer than 3 years. Part-time work is allowed but employees are treated as full-time employees with all related benefits and protections. An employment contract is a legal agreement between the company and the employee. It must outline: 

• Remuneration
• Scope of work
• Hours of work
• Benefits
• Employment type/term

Each aspect must be clearly defined for it to be considered a legal agreement. In Indonesia, salaries are set and standardized, so negotiating terms is not applicable. 

Probation and termination in Indonesia 

Probation periods in Indonesia are limited to 3 months. Termination is much more complicated in Indonesia, with the employer required to obtain approval from the Industrial Relation Court (IRC) before terminating an employee. This is true for all terminations, even those where it’s mutually agreed upon. 

A 30-day notice is generally given before terminating an employee, but it is not required. Employees can be terminated due to redundancy only if parts of the organization are no longer in operation. Failure to follow the employee code is also an acceptable reason to terminate an employee. 

Employees cannot be terminated for pregnancy, joining a union, or illness. All terminated employees must receive severance pay, which is equal to 1 month of pay for every year they’ve worked with the company for up to 9 years. 

Indonesia income tax and payroll 

Employers must submit monthly tax payments to the Indonesian government. Foreign companies generally adopt the same guidelines as resident companies for Indonesia’s corporate tax rates. 

Indonesia has a progressive income tax structure based on how much an employee makes. It’ operates as follows: 

• 5% tax on 50M IDR or less (50M is roughly $3,467)
• 15% tax on incomes between 50M and 250M IDR (250M is roughly $17,335)
• 25% tax on incomes between 250M and 500M IDR (500M is roughly $34,670)
• 30% tax on incomes over 500M IDR

Payroll taxes for employees include 2% tax for old age, 1% tax for the pension plan, and 1% tax for the health insurance plan. Employers can expect to pay 0.24 to 1.74% taxes for work accidents, 3.7% tax for old age, 0.3% tax for death, 2% tax for the pension plan, and 4% tax for the health insurance plan. 

Contact Skuad today to learn more about how we can help your business grow and scale globally without setting up a new entity in Indonesia.

How much does it cost to build a team in Indonesia?

As we touched on before, working with a PEO takes away the need to open a legal entity of your own in Indonesia. And that’s no small benefit when you consider the cost of setting up a foreign-owned trading LLC in the country…

Cost of company incorporation in Indonesia

Believe it or not, foreign businesses can expect to pay up to $20,000 USD to open a business in Indonesia! The process of starting up can also take between 1 to 3 months: you must register with the bank and government agencies, apply for certificates from government agencies, and obtain taxation, social security, and health insurance numbers to submit necessary payments. 

And if that wasn’t enough, businesses also need to invest $680,000+ in paid-up capital to incorporate in Indonesia.

Some small organizations will have the money for this. But most fast-growing organizations won’t. When you want to expand your business, you want to do so now — whether in Indonesia or anywhere else in the world.

That’s where a PEO comes in so handy. It’s a faster way of doing business in Indonesia and for a fraction of the cost, as well. 

Cost of a PEO in Indonesia

At Skuad, we have three packages available: one for hiring contractors, one for hiring employees, and an enterprise solution. Pricing depends on what type of workers you plan to hire. 

For contractors, you can get a solution to handle payments, maintain compliance, and manage employment contracts in Indonesia starting at $19 per month, per contractor. You’ll have live chat support available to help with any issues that arise. With our easy-to-use platform, you can securely manage documents, approve invoices, and onboard new contractors seamlessly. 

To hire employees, the package rate is $199 per month, per employee. When hiring employees, Skuad gives you a dedicated account manager to help every step of the way. We offer competitive salary and benefits packages, process payroll while managing Indonesia tax rate submissions, and maintain confidential and compliant employee documents. 

For those interested in enterprise packages, it’s best to get in touch with a sales representative to understand how Skuad can help your organization grow.

Get started with PEO in Indonesia today 

Is your business ready to partner with a PEO in Indonesia? Do you want a cost-effective, simple solution to global expansion without completing entity registration in Indonesia? Are you ready to position your company for growth by partnering with an organization that can help your business grow in several areas? 

Skuad is here to help! With our PEO in Indonesia services, we can have you onboarding Indonesian employees in days with our secure, simple, and easy-to-use platform. Don’t face the challenges of attracting and hiring global talent alone, let Skuad provide our expertise in hiring in more than 160 countries. 

Ready to get started? Schedule a free demo today and we’ll walk you through our platform!