• Skip to primary navigation
  • Skip to main content
  • Skip to footer
Cekindo Business Center

Cekindo Business Center

Business Expert in Indonesia

  • Homepage
  • About Us
    • Client’s testimonials
    • Company Profile
    • Terms & Conditions
  • Our Services
    • Virtual Office
    • Co-working and Private Office
    • Business Visa
    • Due Diligence Solutions
    • Shelf Company
    • Company Registration
    • Foreign-Owned and Local Nominee Company
    • Representative office
  • Gallery
  • Blog
  • FAQ
  • Contact
  • ENEN
    • ENEN
    • IDID

How Much Should I Pay the New Employee?

You are here: Home / Blog / How Much Should I Pay the New Employee?

Wages are and always will be a very sensitive but essential topic for both employers and employees. For those who hire, the biggest concern is the return of investment. The salary should answer the question, “Is my employee worth it of the money I pay?” For the employees, the wages must not only help them survive but also encourage them to stay in the company.

Many factors, therefore, can affect how much you actually pay your new employee. For the sake of discussion, however, we’ll focus on the basics.

1. MINIMUM WAGE

Indonesia maintains minimum wage for all workers, and no business should pay an amount lower than that, although it may file a postponement if it believes it cannot comply with the law.

How much the minimum wage is depends on the province and the result of the minimum wage formula (the new one took effect in 2015). Based on the calculations, the country’s gross domestic product (GDP) growth rate and inflation matter. However, the formula doesn’t apply to eight provinces whose minimum wage still falls below the cost of living mandated by the government. Instead, salaries can increase a minimum of 5 percent each year until 2019.

The minimum wage also varies according to what is agreed among the stakeholders, which include the trade unions, business owners, and the government. For example, in 2017, the minimum wage in Jakarta is now IDR 3.35 million (~$246), which is lower than what the employees wanted but higher than the previous wage, which was IDR 3.1 million (~$227).

Lastly, the actual salary can depend on the industry and the job. The more complex the position and the more in demand the industry is, the higher the wage can be.

Indonesia still has one of the lowest minimum wages in the world, but it’s also increasing rapidly over the last few years. Moreover, the wage formula ensures employees can look forward to higher salaries annually.

2. SOCIAL SECURITY

Indonesia’s social security system is inclusive, and it’s mandatory for businesses to help employees build their benefits. For this reason, the government mandates cost sharing, which means both employees and employers contribute to the fund, especially for retirement and pension. Businesses have to pay 3.7 percent and 2 percent of the monthly salary, respectively.

Moreover, since the country wants to establish universal healthcare, companies must provide 3 percent of the employee’s monthly salary to it.

3. OVERTIME

Based on article No.77 of the Labour Law, companies may have to pay overtime when employees work:

·         More than 7 hours for those who work 6 days a week

·         More than 8 hours for those who work 5 days a week

·         During public holidays

·         During rest days of the employee

To calculate the overtime pay, you should consider the exact overtime hours, monthly wages, fixed allowances, and the nature of the day the employee rendered their overtime.

For example, employees who work overtime during weekdays will receive 1.5 times their hourly wage during their first overtime hour. In accordance with the regulation of Ministry of Manpower No.102 of 2004, it will increase for 2 times if the employee takes overtime during normal working days. However, if it’s during the weekend, a rest day, or an official holiday, it will be started with 2 times hourly wage for the initial 7 hours, 3 times hourly wage for the eighth hour, and 4 times hourly wage for the overtime hours to 9 and 10.

Note that not all employees should be paid overtime. These usually include supervisors or implementers and planners. But their compensation should reflect their level of expertise, knowledge, and nature of their work.

Conduct Your Due Diligence Now

These costs are on top of the other employee-related expenses and responsibilities. One, you may have to pay for all the costs associated with work permits in Indonesia. Moreover, based on the law, you need to hire three locals for every one foreigner employee.

Hiring the right people then becomes necessary at the expense perspective. When you need to conduct due diligence, we highly suggest leaving it to the experts of Cekindo. We can perform a thorough pre-employment background check for as short as 1 week. Not only that, we provide other supportive services such as work permits processing and employee recruitment, as well as payroll processing.

Call us today at +622 180 660 900, and let us know how we can help you.

Related Posts

Virtual Office Bali: How It Can Change Your Entrepreneurship

Virtual Office Bali: How It Can Change Your Entrepreneurship

Multiple-Entry Business Visa: How to Get Yours Now

Multiple-Entry Business Visa: How to Get Yours Now

Contact Us

    Footer

    Jakarta – Slipi

    Grand Slipi Tower 9th fl. (Unit G)

    Jl. Letjen. S. Parman Kav. 22-24

    Palmerah, West Jakarta 11480

    Indonesia

    +6221 80660900

    Jakarta – Kuningan

    AXA Tower 36th fl. Kuningan City

    Jl. Prof. Dr. Satrio Kav. 18

    South Jakarta 12940

    Indonesia

    +6221 50101510

    Jakarta – Kebon Jeruk

    Business Park Kebon Jeruk, Blok H1-H2

    Jl. Raya Meruya Ilir No.88

    Jakarta Barat 11620, Indonesia

    +622180660900

    Bali

    Istana Kuta Galeria

    Blok BW 2 No. 3A

    Jl. Patih Jelantik, Kuta, Badung

    Bali 80361, Indonesia

    +62361 2090200

    Semarang

    Ruko Peterongan Plaza Blok C-2

    (in front of Sri Ratu Peterongan)

    Jl. MT. Haryono No.719

    Semarang 50242, Indonesia

    +6224 86001600

    Privacy Policy · © 2021 · Cekindo Business Center

    Pre Order Visa Promo - Popup Banner

    ×
    X
    REGULATION UPDATES:
    Indonesia has closed its borders to foreign travelers until 8th February 2021. With the exceptions of foreigners with KITAS, KITAP, and diplomatic permits.
    The Ministry of Manpower has temporarily suspended all new foreign Visas and KITAS applications until 8th February 2021.
    Employed Foreigners (holding an existing and valid KITAS) who are currently in Indonesia, may file for an extension under their Employer.
    The immigration office in Denpasar (Bali) is limiting Visa extensions to 4 times. To continue staying in Bali, Foreigners can apply for a new Single-Entry Business Visa in Bali. The process takes up to 14 days and the overstay penalty is 1Mil IDR a day.
    If you require more guidance, please get in touch with our teams for the latest updates.
    Further details on COVID19.go.id