THR & National Holidays: The Affect to Your Business in Indonesia

As a result, delays in contract preparation, negotiations, or maintenance are unfortunately inevitable when the owners or landlords are absent.

Reduced Productivity and Efficiency

Even though big retailers might be able to gain revenue during the national holidays, retailers of smaller size will still choose to close over these periods. This is because of the possibly reduced productivity and efficiencydue to the lack of human resource.

Reduced productivity results in possible changes in working hours. This happens especially during the month preceding Lebaran break – Ramadhan. Lunch break gets shorter and working hours might start sooner. The choice is, however, left upon employees. It means that some workers might work from 7.30 am to 4 pm while others will be available from 8 am till 5 pm as usual.

Added Payroll Costs

When businesses choose to operate over the national holidays, they also agree to absorb the cost of paying employees for an additional day that employees are not supposed to work.

This is usually done by paying employees double wages through the penalty rate or overtime rate that is applied.

Election Days as National Holidays

President Joko Widodo announced the nationwide regional election day on June 27 this year as a national holiday, after the long Idul Fitri holiday.

The West Java, Central Java and East Java gubernatorial elections are considered the most important elections in Indonesia. In an effort to standardise the election date for all Indonesian regions, starting from 2027, the government in Indonesia plans to make all regions hold their elections on the same date. Thus, residents in Indonesia can expect more national holidays from regional elections in the very near future.

In 2019, the closest national holiday for an election will be the presidential election on April 17, 2019.

Religious Holiday Allowance

Businesses that have employees in Indonesia must be familiar with the Religious Holiday Allowance (unjangan hari raya, with acronym THR).

THR—a non-wage income or bonus— is paid to employees by employers in Indonesia once a year as financial support at the approaching celebration of the religious holiday.

Religious holidays include Eid al-Fitr (for Muslims), Christmas Day (for Christians), Day of Silence (for Hindus), Waisak (for Buddhists), and Chinese New Year (for Confucianists).

According to Indonesian law, the payment is compulsory and must be made based on employee’s religion.

Why is THR Important

Indonesians place a large emphasis on their religious diversity and collectivist societies. During these periods, they spend on things that are important to their culture, traditions, family and communities.

As a result, THR plays a vital role for Indonesian families to be able to afford these festivals. The ceremonies and celebrations will be hard for them to hold without the THR.

The Eligibility of THR in Indonesia

According to Indonesian law Regulation 6/2016, employees hired on a permanent basis and temporary basis (freelance employees are included after the amendment of law) will be able to receive THR.

If an employee has only worked for one month, he or she is also entitled to receive the THR payment. It is also worth noting that the eligibility of THR is not based on an employee’s performance.

The six faiths or religions that are recognized by the Indonesian government to receive the THR are Islam, Hinduism, Catholicism, Protestantism, Buddhism and Confucianism.

The Consequence If THR Is Not Paid

If the employer is unable to, or delay the THR payment to their employees, in circumstances such as improper management or financial difficulties — whatever the reason may be, they will have to face some severe consequences.

• Five percent of the THR as the penalty for delayed payment. Employers are still required to pay their employees the full THR along with the penalty with no exceptions.
• If an employer is in fact in a financial struggle with losses, they must propose to the local Manpower Department for an exception of 30 days before the national religious holiday.

Outsourcing payroll services from a third-party provider is the easiest way how to comply with Indonesian legislation, know the effects of national holidays in Indonesia on your business and the religious allowance.

Contact us and get detailed information about our services and how we can cooperate to increase the performance of your company in Indonesia. Consultants in our offices in Jakarta, Semarang and Bali are at your service.

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