Terms of Employment in Indonesia

Normal working hours in Indonesia are prescribed by Government Regulation No. 35/2021 of 2 February 2021 regarding fixed-term employment agreements, outsourcing, working hours and rest hours, and termination of employment (GR 35/2021) as not more than seven hours per day and 40 hours per week based on a six-day working week or eight hours per day and 40 hours per week for a five-day working week. Wages of employees who work five days per week must not be less than the wages of employees who work six days per week.

The five-day working week has become common among private companies since the government applied a five-day working week for civil servants and employees of state-owned businesses. Regardless, after four hours of continuous work, an employee is entitled to at least 30 minutes of rest time. Employers must also provide reasonable time to perform religious observances, including Muslim prayers, which are performed five times a day.

Overtime Pay – Entitlement and Calculation

In accordance with GR 35/2021, overtime is payable at a rate of one-and-a-half times the hourly wage for the first hour and twice the hourly wage thereafter. Overtime pay is calculated based on an employee's monthly wage, with the hourly wage being equal to 1/173 of the monthly wage. GR 35/2021 also specifies overtime pay for work done during rest days (e.g., Saturday and Sunday, depending on whether the employee is on a six-day or five-day work week).

Certain categories of employees are not entitled to receive overtime payment. These employees are, literally translated, employees with responsibilities as thinkers, planners, executors and controllers of the company's operations whose working hours cannot be limited and who receive higher salaries. It is widely thought that employees with these responsibilities are those at or above the managerial level or professional employees. These special categories of employees should be specified in the employment contract, company regulation or collective labor agreement (CLA). Otherwise, all employees will be entitled to overtime pay.

Overtime Pay – Contractual Waiver

Overtime pay requirements cannot be waived contractually except for certain categories of employees, which must still be specified in the employment contract, company regulation or CLA.

Vacation and Holidays

Employees are entitled to annual leave of a minimum of 12 days per year insofar as the employee has worked for 12 months consecutively. The employer can decide a suitable time for the employee to take their leave. These provisions also apply to fixed-term employees.

The implementation of annual leave should be specified in the employment contract, company regulation or CLA.

Sick Leave and Sick Pay

The Labor Law, as amended, stipulates that the employer is prohibited from terminating an employee's employment who is absent because they are sick, supported by a doctor’s note. If the employee suffers from prolonged sickness, the employer will need to pay full wages for the first four months of sick leave, 75 percent of full wages for the second four months, 50 percent for the third four months, and 25 percent thereafter until the employer terminates the employee.

Further, female employees are not obliged to work on the first and second days of menstruation if they feel sick and provide proper notification to the employer. However, this provision should be further regulated in the employment agreement, company regulation or CLA.

Leave of Absence

Generally, the Labor Law allows employees to take paid leave under the following circumstances:

• marriage: three days;
• marriage of employee’s child: two days;
• circumcision or baptism of employee’s child: two days;
• employee’s wife giving birth or experiencing miscarriage: two days;
• death of employee’s spouse, parent, parent-in-law, child or step-child: two days;
• death of other family member living in employee’s household: one day;
• miscarriage: one-and-a-half months; and
• maternity leave for female employee: one-and-a-half months before the birth and one-and-a-half months after delivery.

The company regulations or CLA may provide additional circumstances under which employees would be allowed to take paid leave.

Excerpted from Lexology Panoramic: Labor & Employment 2024, published by Law Business Research.

Find the Indonesia chapter of Lexology Panoramic: Labor & Employment 2024 here.

 Further reading:

Constitutional Court: Employment Terminations in Indonesia Require Court Decision

Employing Foreign Workers in Indonesia

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