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Employee Tax & Social Securities

legal due diligence indonesia

Processing Employee Tax and Social Securities (BPJS) in Indonesia

Hiring employees in Indonesia requires compliance with various authorities, such as the tax authorities and the social security body (BPJS). These bodies issue on regular basis new regulations and policies, which can make it complex for foreign investors to remain updated and process all tax and social security payments in time and compliantly.

PNB Law Firm offers both foreign and local investors tax and social security assistance, where our team of experts ensures the company remains compliant and all taxes and social security fees are paid duly. The admin support package, will take away the time and administrative burden of dealing with the Indonesian authorities. PNB Law Firm will handle it efficiently on your behalf, making you compliant with the laws and provide the relevant documents for your filing.

Payment & Reporting of Employee Income Taxes

Every company is obliged to withhold tax from his employees and submit monthly to the relevant Tax authorities.  The monthly process involves two steps:

  1. Step 1. Payment of taxes must be done before the 10th day of the every month. The tax authority will provide a receipt of payment, which is needed for the second step of the process – the reporting requirement.
  2. Step 2. Before the 20th day of every month the company must report the tax payment to the tax authority, using the receipt of payment. Once the company has successfully reported the taxes, the tax authority will provide evidence of acceptance of the tax report.

The payment and reporting of taxes is performed by the company. The employee tax payments are deducted from the gross salary of the employee.

Payment of Social Securities

There are two types of social security payment, the Healthcare Social Security (BPJS Health) and the Manpower Social Security (BPJS Manpower).

BPJS Health

BPJS Health (BPJS Kesehatan) is the Indonesian national health insurance. The monthly premium to be paid is 5% of the salary of the employee up to a cap of IDR 500,000 per month. The payment obligation is divided as follows:

  • 4% is covered by the employer;
  • 1% is covered by the employee.

The employer will pay the full premium to the BPJS Health government body. This 1% premium which is covered by the employee shall be deducted from the gross salary by the employer.

The BPJS Health covers the employee, their spouse and up to 4 children. Children will only be covered by BPJS Health of their parents if the following conditions are met:

  • they are unmarried
  • they are not older than 21 years old, or 25 years old if attending university.

BPJS Manpower

BPJS manpower is a package of social security insurances for employees. These insurances include:

  • Old Age Insurance (Jaminan Hari Tua – JHT). Employees will cover this insurance by deduction of 2% of their monthly salary. Companies will cover 3.7% of employee’s salary. These payments are actually not an insurance, but rather a pension fund. All amounts paid into this fund are accumulated by the BPJS body and usually will be taken by the employee upon retirement. The amounts can however be collected at an earlier stage by the employee under certain circumstances.
  • Work Accident Insurance (Jaminan Kecelakaan Kerja – JKK). Companies will cover this insurance by a deduction of 0.24% of the monthly salary of the employee. The work accident insurance only covers accidents of the employee during working hours.
  • Death Insurance (Jaminan Kematian – JK). Companies will cover this insurance by a deduction of 0.30% of the monthly salary of the employee. This is a form of a life insurance, where the family of the employee receives a certain amount of compensation in case the employee dies during work.
  • Pension Insurance  (Jaminan Pensiun – JP). Employees will cover this insurance by deduction of 1% of their monthly salary. Companies will cover 2% of employee’s salary. This type of insurance is similar to Old Age Insurance (Jaminan Hari Tua – JHT), however can only be collected by the employee after the employee retires.

The BPJS Manpower contributions are paid each month by the company. The company will usually deduct the employee part of the contributions from the gross salary of the employee.