7 Benefits of Using Employer of Record in Indonesia

For many businesses, the reason for expanding internationally is pretty obvious – business owners want to access a wider talent pool and customer base. However, the expansion sometimes comes with some challenges as they don’t know how to do so especially when it comes to dealing with employment tasks and legal compliance. These challenges can be easily ironed out – thanks to the existence of the Indonesian employer of record services.

The Employer of Record, or EOR, is a third-party contractor who is responsible for a company’s formal employment tasks and carries out regulatory and legal requirements of employment and payroll, immigration, and taxes.

However, an employer of record does not participate in the employee’s daily work activity. An employer of record is beneficial for companies expanding into another country or a different location and chooses not to hire and manage the employees directly.

What is Employer of Record (EOR)?

An Employer of Record (EOR) is a service provider that legally employs workers on behalf of a company. While the company manages the employee’s day-to-day tasks and performance, the EOR handles administrative responsibilities such as payroll processing, tax filings, social security contributions, and compliance with local labor laws.

For businesses looking to expand into a new market without setting up a legal entity, an EOR provides a fast and compliant way to hire local talent. This model reduces risk, lowers upfront investment, and ensures all legal employment obligations are met, so your team can focus on business growth, not bureaucracy.

When You Should Use Employer of Record (EOR)

Employer of Record services (EOR) offer the right solutions in these situations:

• Expanding into Indonesia without a local entity: You want to start operations quickly, but setting up a company takes time.
• Hiring local talent fast: You’ve found the right candidate, but your business isn’t fully established yet.
• Unfamiliar with local labor regulations: You’re unsure about payroll, taxes, BPJS, or employee rights in Indonesia.
• Want to focus on business growth: Your team needs to stay focused on growth, not getting stuck in paperwork.

With EOR, you can legally hire in Indonesia while avoiding the delays and risks of setting up a company right away.

Difference between Employer of Record (EOR) and Professional Employer Organization (PEO)

Business owners sometimes mistake EOR with PEO or Professional Employer Organization. But there’s a significant difference between them: the provider of EOR serves as a full legal employer for employees regarding the payroll and other employment tasks. An EOR doesn’t require foreign companies to have a legal entity in the region they expand their business to.

As for PEO providers, they are not the full legal employer and will not hold any legal liabilities as they don’t appear in an employment contract. PEO is only suitable for companies requiring third-party help on certain HR functions; whereas EOR is a total solution for businesses that would like to expand more rapidly without going through the complex steps of setting up a business structure in Indonesia.

7 Benefits of Using Employer of Record Services for Businesses

1. Improving Efficiency

Starting a business in a new country means you have first had a steep learning curve especially the local laws and legislations and employment issues.

Thus, if business owners try to figure all of them out by themselves, they have to encounter constant defeats and may even bring the team spirit down.

An EOR can be a good idea for foreign investors. An Indonesian EOR provider is already competent in the country’s employment rules, they can help you streamline the entire employment process effectively. An effective employment and HR processes create happier employees.

2. Comprehensive One-Stop HR Solution

An EOR can assist your business in Indonesia with so many things, from recruiting suitable talent to designing a health insurance program, managing tax and payroll to navigating business and legal complexities.

Since EOR is the expert in payroll and tax management, they ensure that all payroll and compensation are correctly calculated and legally compliant. Furthermore, they can offer personal development opportunities and necessary training for your employees.

3. Professional Advice on Market Entry

As mentioned, an EOR goes beyond just handling an employee’s payroll. They can serve as your advisor and give you ideas and insights on how your business can succeed in the dynamic market.

4. Full Compliance with Local Labor Laws

EOR providers manage all employment-related compliance, including payroll tax, BPJS, THR, and employment contracts., ensuring you meet Indonesian labor regulations. This reduces the risk of penalties or legal complications due to unfamiliarity with local laws.

5. Time-Saving HR Operations

By outsourcing payroll processing, benefits administration, and monthly reporting, your team can focus on core business activities. EORs streamline back-office tasks, allowing faster and more efficient employee onboarding.

6. Reliable Payroll and Employee Benefits

EORs ensure employees are paid on time, with accurate deductions and contributions. They also manage benefits such as health insurance and social security, giving both you and your team peace of mind with professional-grade payroll systems.

7. Flexible and Scalable Hiring

Whether you need to hire one employee or build a remote team, an EOR makes it easy to scale up or down. This is especially useful for project-based roles, market testing, or temporary assignments in Indonesia.

How InCorp Can Help

Handling HR tasks and paperwork can be time-consuming and complex, often distracting you from focusing on business growth. Employer of record services help simplify these challenges by managing them on your behalf.

At InCorp Indonesia (an Ascentium Company), we provide a full employer of record service in Indonesia. Companies expanding into Indonesia can contract with InCorp to make your employment in the country simple regardless of the company size.

Why choose InCorp?

• Full Compliance: Our employer of record service is equally effective for both foreign and local investors as we make sure full compliance with Indonesian laws and regulations.
• Comprehensive Solutions: Our specialists will take care of the tax and payroll processing, be legally responsible for the employees, comply with local regulations, and sponsor employees on work permits.
• Time Efficient: We manage all HR paperwork in no time, ensuring an efficient, hassle-free process and allowing you to focus on core business activities.

With us, you will have no risk of violating tax, labor, and employment regulations in Indonesia.

Discuss your needs by filling in the form below.