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TOP Questions about Payroll Services in Indonesia

Posted 2.05. 2018 by Cekindo / Last update on 27.09. 2018

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Sometimes theory is not enough. Therefore Devi, an HR specialist in Cekindo, has answered frequently asked questions coming from our clients. Do you want to know more? Let us know by calling us at +6221 30 061 585 or send us an email at info@cekindo.com. You can also use our contact form. We will be happy to assist you.

What is the difference between payroll processing and outsourcing?

Outsourcing is the transfer of the payroll responsibility completely to another entity (provider). Within the outsourcing package, Cekindo provides all calculations (wages, bonuses, tax, health and social security) as well as last mile compliance (submitting all the tax reports to institutions). To make the service complete, we can also fully manage the payments (salaries and tax) as well as payslip distribution.

Payroll processing involves determining the actual wages, including bonuses and other forms of compensation, of an employee. The other activities stay within internal the HR department.

What are the mandatory deductions for Indonesian payroll?

There are at least three mandatory deductions:

Social Security (BPJS Manpower)

This program supports workforce in terms of social risks. It also deals with implementation of the specific economic mechanism of social insurance. The program covers work-related accident (JKK), life insurance (JKM), pension plan (JHT) and retirement contribution (JP).

Work-related accident (JKK), the percentage depends on the level of risk of the working environment. It is the company’s contribution:

Group I (very low risk): 0.24 percent from wages per month

Group II (low risk): 0.54 percent from wages per month

Group III (middle risk): 0.89 percent from wages per month

Group IV (high risk): 1.27 percent from wages per month

Group V (very high risk): 1.74 percent from wages per month

Life insurance (JKM), this program is the company’s contribution: 0.30 percent from wages per month.

Pension plan (JHT), total percentage 5.7 percent from wages per month.

The company’s contribution: 3.7 percent

The employee contribution: 2 percent

Retirement contribution (JP), total percentage 3 percent from wages per month.

The company’s contribution: 2 percent

The employee contribution: 1 percent

The maximum wage limit as the basis for calculating the contribution of the Retirement program is Rp 8,094,000.  

BPJS Health (National Health Social Agency)

The employer will cover a big portion of the BPJS health fees. However, a small portion is deducted directly from the employee wages.

Withholding Tax

It is the tax withheld by the employer on behalf of the employee. The company pays it directly to the government and makes up a part or the entire income tax of the employee.

Who will submit/pay employee salary tax?

The employee is still responsible for paying the taxes on salary. It is for this reason the employee still needs to file his or her own tax return. However, it is the employer that needs to withhold it through a deduction on the wages and pays it to the government.

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