By Business Team Last updated on October 7, 2019

Important Labor Laws in Indonesia: What you need to know!

Knowing labor laws in Indonesia is important before establishing business in Indonesia. Comprehensive understanding of existing labor laws is important as any non-compliance will lead to problems with authorities. In this article, we will give you the guidelines for the crucial regulations regarding labor law for the employer.

What is the working hour in Indonesia?

Regarding work hours, all employees must only spend 40 hours on working in a week. For six workdays, it is divided into seven hours per day. For five workdays, it is eight hours per day. 

What are the regulations for overtime work?

Employers are obliged to pay overtime fees if the employees are required to work over the time limit specified by labor laws. The overtime can only be performed if there’s an agreement between both parties; employer and employee. The maximum time of overtime work is three hours a day, or 14 hours a week, not including the overtime during public holidays or weekends.

The calculations for overtime fee are as follows:

Hours in a day Workweek Weekend & Public Holidays
5-Days Workweek 6-Days Workweek
1st hour 1,5x
1st 5-hour 2x
1st 8-hour 2x
Each hour later 2x 3x 3x
7th & 8th hour 4x
10th & 11th hour 4x

How to determine the employee’s salary?

If the salary component consists of basic salary and fixed allowance, the amount of minimal basic salary is 75% of the total basic salary and fixed allowance. Each provincial-level government annually issues a minimum wage that is applicable in the province. This is one of the most important things that you have to know. Minimum wage refers to the lowest monthly wage consisting of basic wage including fixed allowance. The employer is prohibited to pay lower wages than the Provincial Minimum Wage. Jakarta has a high minimum wage compared to other smaller cities.