Indonesian employment and tax glossary
BPJS, THR, PPh 21, PTKP, PKWT. Indonesian employment runs on acronyms and nobody explains them. Here is every one we use, with the regulation behind it.
Indonesian employment runs on acronyms, most of them Indonesian, and none of them explained anywhere your finance team will look. Every term we use across this site is defined below, with the regulation behind it where one exists.
The state social security administrator, split into two arms. BPJS Ketenagakerjaan covers employment benefits and BPJS Kesehatan covers health. Enrolment in both is mandatory for every employee.
The national health insurance scheme. Contributions are 5 percent of wages, 4 percent employer and 1 percent employee, capped at a wage base of 12,000,000 a month, covering the employee plus a spouse and up to three children. Perpres No. 64/2020.
The employment arm of state social security, also called BPJamsostek. Administers JHT, JP, JKK, JKM and JKP.
An occupational expense deduction available to every permanent employee, set at 5 percent of gross income and capped at 500,000 a month or 6,000,000 a year. It reduces taxable income. PMK No. 168/2023.
A company that becomes the legal employer of your staff in a country where you have no entity. The EOR holds the employment contract, runs payroll, and carries the compliance obligation. You direct the work.
Old-age savings under BPJS Ketenagakerjaan. Total 5.7 percent of wages, split 3.7 percent employer and 2 percent employee, uncapped.
Work accident cover, paid entirely by the employer at between 0.24 and 1.74 percent of wages depending on risk class. Office-based work falls in the very low class at 0.24 percent.
A death benefit for causes unrelated to work, paid entirely by the employer at 0.3 percent of wages.
Unemployment benefit. It requires no additional employer contribution, being funded by an internal recomposition of the JKK and JKM contributions.
Pension under BPJS Ketenagakerjaan. Total 3 percent of wages, split 2 percent employer and 1 percent employee, capped at a monthly wage ceiling of 11,086,300 from March 2026. The ceiling is revised every February in line with the previous year's GDP growth.
The Indonesian Standard Industrial Classification, a set of five-digit codes maintained by Badan Pusat Statistik. Each code determines licensing requirements, foreign ownership limits and minimum investment thresholds. Relevant only if you incorporate your own entity.
The standard inpatient class scheme replacing the old tiered BPJS Kesehatan room classes with a single standard and twelve technical criteria. Mandated by Perpres No. 59/2024.
An Indonesian taxpayer identification number, held by both companies and individuals.
Taxable income, being gross income less allowable deductions and less the PTKP threshold. Rounded down to the nearest 1,000 in practice.
A fixed-term employment contract, capped at five years in total including every extension under Article 8 of PP No. 35 of 2021. Cannot carry a probation period, and cannot be used for work of a permanent nature. See our guide on fixed-term against permanent employment.
An indefinite employment contract, the default form of permanent employment.
Withholding tax on employment income. Progressive from 5 percent on the first 60,000,000 of taxable income up to 35 percent above 5,000,000,000. UU No. 7/2021 and PP No. 55/2022.
Value added tax. The statutory rate is 12 percent but it is applied to an 11/12 tax base under PMK No. 131/2024, giving an effective 11 percent on services. Only certain luxury goods bear the full 12 percent.
A foreign-owned Indonesian limited company. Requires minimum paid-up capital of 2,500,000,000 and an investment plan above 10,000,000,000 per business activity code per location. BKPM Regulation No. 5/2025. Using an Employer of Record avoids needing one.
The non-taxable income threshold. 54,000,000 a year for a single taxpayer, plus 4,500,000 if married, plus 4,500,000 per dependent to a maximum of three.
The average effective rate method used for monthly PPh 21 withholding since January 2024 under PP No. 58/2023. It changes the timing of withholding within the year, not the annual total.
The religious holiday allowance, worth one month of wages and payable no later than seven days before the employee's own religious holiday. A statutory entitlement, not a bonus, which is why Indonesian employees are paid thirteen times a year. Permenaker No. 6/2016.
Provincial and city or regency minimum wages, set regionally and reviewed periodically. The floor in Jakarta differs from the floor elsewhere.
Every figure here was verified against an Indonesian government source. The rates that move are the Jaminan Pensiun wage ceiling, revised each February and effective each March, and the regional minimum wages. Our cost tables carry the current values with citations.
