The Core of Compliance: Indonesia's BPJS System

Indonesia's national social security system is administered by the Badan Penyelenggara Jaminan Sosial (BPJS), which is divided into two primary branches that every employer must contribute to.

1. BPJS Kesehatan (Healthcare Security)

This program provides universal health coverage for all citizens. It is a mandatory contribution for every employee.

• Purpose: To cover inpatient and outpatient medical services, maternity care, and other essential health benefits.

  
  

• Contribution Breakdown: The total contribution is 5% of the employee's monthly salary, subject to a current salary cap of IDR 12,000,000 (approx. S$1,020).

  • Employer's Share: 4%

  • Employee's Share: 1%

2. BPJS Ketenagakerjaan (Manpower & Social Security)

This branch is more complex, comprising several programs designed to protect workers against various life and work-related risks. As the employer, you are responsible for contributing to the following:

• Old Age Security (JHT - Jaminan Hari Tua): A compulsory savings plan, similar in concept to a provident fund.

  • Employer's Share: 3.7%

    
    

• Work Accident Security (JKK - Jaminan Kecelakaan Kerja): Provides compensation and medical care for work-related injuries.

  • Employer's Share: 0.24% to 1.74%, depending on the industry's risk level. A typical rate for professional services is 0.54%.

    
    

• Death Security (JKM - Jaminan Kematian): A lump-sum payment to the employee's family in the event of death.

  • Employer's Share: 0.3%

    
    

• Pension Security (JP - Jaminan Pensiun): A monthly pension benefit upon retirement.

  • Employer's Share: 2%, calculated on a salary currently capped at IDR 9,559,600 (approx. S$815).

In total, an employer's monthly contribution to BPJS Ketenagakerjaan is typically between 6.78% and 8.28% of an employee's salary.

Beyond BPJS: Other Critical Employer Responsibilities

Your legal duties in Indonesia extend well beyond monthly social security payments.

• THR (Tunjangan Hari Raya) - The Religious Holiday Allowance: This is a legally mandated annual bonus equivalent to one full month's salary. It must be paid to the employee approximately one week before their primary religious holiday (e.g., Eid al-Fitr for Muslim employees). This is a significant and non-negotiable part of an employee's compensation.
  
  

• Tax Withholding (PPH 21): The employer is legally responsible for correctly calculating, withholding, and remitting the employee's monthly income tax to the Indonesian tax authorities.
  
  

• Strict Termination and Severance Laws: Indonesian labor law is highly protective of employees. Terminating an employment contract requires adherence to strict legal procedures and often involves substantial severance payments calculated based on the employee's tenure and reason for termination.

The Financial Reality: A Cost Comparison vs. Singapore's CPF

To understand the real financial picture, let's compare the total annual cost of employing a professional in Singapore versus Indonesia.

Scenario: A mid-level employee with a base salary of S$5,000 in Singapore versus an equivalent role with a base salary of IDR 25,000,000 (approx. S$2,125) in Indonesia.

Analysis: While Singapore has a higher monthly contribution percentage (17% CPF), Indonesia's mandatory THR adds a significant cost. However, because the base salary for equivalent roles is substantially lower in Indonesia, the total annual cost of employment is still dramatically less. This is the powerful financial leverage that hiring in Indonesia offers—but only if compliance is managed perfectly.

MixWork: Your Partner in Indonesian Compliance

The complexity of BPJS calculations, varying salary caps, mandatory THR, and strict labor laws creates a significant administrative and legal burden. For a foreign company, a single misstep can be costly. This is where MixWork, as your Employer of Record (EOR), becomes indispensable.

• We Handle the Complexity: Our in-country experts manage all BPJS registrations, monthly calculations, and payments. You never have to worry about changing regulations or complex formulas.
  
  

• We Ensure Full Compliance: We manage THR, tax withholding, and all other legal obligations, ensuring you are always 100% compliant with Indonesian labor law.
  
  

• We Mitigate Your Risk: As the legal employer, we assume the responsibility for compliance, protecting your business from the significant financial and legal risks of getting it wrong.
  
  

• We Provide Absolute Clarity: You receive one simple, consolidated monthly invoice that clearly outlines all costs. This allows you to budget with confidence and transparency.

Conclusion: Strategic Growth Requires Expert Guidance

Indonesia represents a phenomenal opportunity for Singaporean businesses to access top-tier talent and achieve significant operational leverage. However, the path to success is paved with complex compliance requirements that are starkly different from our own.

Attempting to navigate this landscape alone is a high-risk, low-reward strategy. The potential for error is significant, and the consequences are severe. Partnering with an EOR like MixWork transforms this complex challenge into a streamlined, secure, and strategic advantage.

Don't let compliance complexity become a barrier to your growth. Contact MixWork today to learn how our EOR services can make hiring in Indonesia safe, simple, and profoundly successful.