One of the biggest compliance risks for foreign-owned companies (PT PMA) operating in Indonesia is navigating the local labor law, which is often complex and highly protective of employees. Beyond salary, every PT PMA must meticulously comply with three primary employee obligations to avoid legal disputes and regulatory fines.

1. Mandatory Social Security Enrollment (BPJS Ketenagakerjaan & Kesehatan)

The most immediate and critical obligation is enrollment in the national social security program, known as BPJS (Badan Penyelenggara Jaminan Sosial). This is not optional; it is mandatory for every employee.

• BPJS Ketenagakerjaan (Manpower Social Security): This program covers work-related risks, including:
  • Jaminan Kecelakaan Kerja (JKK): Work Accident Insurance.
  • Jaminan Hari Tua (JHT): Old Age Security (a mandatory retirement savings).
  • Jaminan Pensiun (JP): Pension Fund.
  • Jaminan Kematian (JKM): Death Benefits.
• BPJS Kesehatan (Health Social Security): This covers comprehensive health insurance for the employee and their immediate family.

Key Compliance Requirement: Both the company and the employee are required to contribute a percentage of the employee’s gross salary monthly. Failure to enroll and make timely contributions is a serious labor law violation that results in fines and loss of reputation.

2. Written Employment Contracts and Severance Pay (Pesangon)

While the Omnibus Law has introduced more flexibility, the fundamental requirement for formal contracts and severance calculation remains paramount.

• Written Contracts: All employment relationships must be formalized through a written contract. The contract must clearly specify the type of agreement:
  • PKWT (Perjanjian Kerja Waktu Tertentu): Fixed-Term Contract (for specific projects or temporary roles).
  • PKWTT (Perjanjian Kerja Waktu Tidak Tertentu): Indefinite-Term Contract (for permanent employment).
• Severance Liability (Pesangon): Indonesian law mandates specific, generous severance payments upon termination (except in cases of gross misconduct). The amount of severance (Pesangon) is calculated based on the employee’s tenure and the reason for termination.

Key Compliance Requirement: Misclassifying an employee or failing to correctly calculate and reserve funds for potential severance liability exposes the company to costly and drawn-out industrial disputes. This is the single biggest area of labor litigation risk for foreign companies.

3. Income Tax Withholding (PPh 21)

Every employer is legally designated as a tax collector for the government regarding employee income tax.

• Monthly Deduction: The company is responsible for calculating and withholding the employee’s income tax (PPh 21) from their salary every month.
• Reporting Obligation: This PPh 21 must then be deposited to the Directorate General of Taxes and reported monthly and annually.

Key Compliance Requirement: Failure to calculate PPh 21 correctly leads to tax underpayment by the company (as the withholding agent), resulting in significant fines and penalties imposed by the Tax Office directly on the employer.

Mitigate Your Risk: Partner with Accura

The Indonesian labor landscape is complex, requiring meticulous attention to detail across HR, legal, and tax domains. Even minor errors in BPJS contribution percentages or PPh 21 calculations can escalate into major legal and financial liabilities.

Accura specializes in ensuring full-stack labor compliance for foreign investors. We provide:

• Guaranteed Payroll & PPh 21 Management: Accurate, timely calculation and reporting of PPh 21.
• BPJS Administration: Ensuring timely enrollment, contribution, and reporting for both Health and Manpower BPJS programs.
• Contract and Severance Audit: Reviewing your employment contracts and assisting with accurate severance liability calculations, drastically mitigating litigation risk.

Focus on your core business goals. Let Accura handle your non-negotiable labor compliance.