Employer of Record or your own PT PMA
Companies assume there is a headcount at which incorporating in Indonesia becomes correct. The trigger is almost always a change in what the business needs to do here, and employing people is not on that list.
Employing people in Indonesia through an Employer of Record and incorporating your own company are answers to different questions, and the second one is rarely about headcount. Companies tend to assume there is a number of employees at which incorporating becomes correct. The trigger is almost always a change in what the business needs to do here.
What incorporating actually commits you to
A foreign-owned company in Indonesia is a PT PMA (Perseroan Terbatas Penanaman Modal Asing), and under BKPM Regulation No. 5 of 2025 it needs minimum paid-up capital of 2,500,000,000 with a total investment plan above 10,000,000,000 for each five-digit business activity code, at each location, excluding land and buildings. Two distinct activities means two codes and roughly double the plan, and the paid-up capital carries a twelve-month lock-in on top of that.
You also need at least two shareholders, a notarised deed of establishment, approval from the Ministry of Law, a tax number, a Business Identification Number through the OSS portal, and a corporate bank account. Four to six weeks is a realistic run from a standing start to a company that can actually pay somebody, assuming nothing needs resubmitting.
The part companies underweight is what happens afterward, because the obligations run whether or not the business trades. Quarterly LKPM investment activity reports to BKPM through OSS, monthly and annual tax filings, annual financial statements, and books kept to Indonesian standards. A dormant PT PMA still files nil returns and still files its LKPM, and missing an LKPM can suspend the Business Identification Number, which stops you renewing permits or operating legally until it is resolved.
You will also need at least two people enrolled in BPJS Ketenagakerjaan from the first month, which the director and commissioner can cover, and a KITAS for any foreign national serving as a director. Corporate income tax runs at 22 percent, and ongoing accounting and corporate secretarial support commonly costs between 1,500 and 4,000 US dollars a year before you have employed anybody.
What an Employer of Record commits you to
We become the legal employer of your staff, so the contracts, the payroll, the PPh 21 filings and the BPJS enrolments sit with us under our registrations. You direct the work and receive a single invoice each month. There is no capital to commit, no entity to maintain, no quarterly report to remember, and no residual obligation if you decide to stop.
The fee is a percentage of employment cost, so at some point on a large enough team the arithmetic favours carrying your own overhead. That crossover sits a long way further out than most companies expect, because the entity has a floor cost that lands whether you employ two people or twenty.
What actually triggers incorporation
Incorporate when you need a legal presence to do something an employment arrangement cannot deliver. Signing contracts with Indonesian customers in your own name, invoicing locally in rupiah, holding a sector license, importing goods, taking a lease in the company name, or holding property all require an entity. So does building a business whose value sits in an Indonesian balance sheet.
Employing a team here requires none of those capabilities at all. If your Indonesian people are engineers building a product sold elsewhere, an entity adds obligations and removes nothing from your list.
Here is a useful test to run before you commit to either route. Write down what the entity would let you do that you cannot do today. If the list is only employ people, you do not need one. If the list includes selling, invoicing, licensing or holding assets in Indonesia, you probably do, and the sooner you start the four to six week clock the better.
Running both at once
Plenty of companies incorporate and keep an Employer of Record alongside it. A common pattern is to move the commercial team into the new entity while engineering stays employed through us, particularly during the months when the entity exists on paper without a working payroll function. Another is to incorporate for a specific license and leave general employment where it already works.
Transferring employees from us into your own entity is a straightforward exercise when the time comes, involving new contracts, re-registration for BPJS and tax, and continuity of service preserved so nobody loses accrued entitlements. We will run that transfer and we will tell you when we think you have reached the point of doing it.
Our recommendation
Start with an Employer of Record and incorporate when the business needs the entity for its own reasons. That sequence lets you hire in weeks instead of months, keeps 2,500,000,000 in your own bank instead of locked in someone else's for a year, and leaves the decision reversible while you are still learning what the market is worth to you.
Our cost tables show what the employment route costs across twelve salary bands. If you want the two routes compared on your actual numbers, send us the headcount and we will lay both out.
