Local Employment Compliance for Offshore Teams in Indonesia

Offshore teams in Indonesia are subject to Indonesian employment law, and compliance means four things: a proper employment contract (permanent PKWTT for ongoing roles), mandatory BPJS health and employment social security, THR holiday pay, and at least the regional minimum wage.

The Indonesian employer of record carries these obligations, not the Australian client, so a compliant arrangement depends on the provider directly employing the team. Indonesia's outsourcing rules have also been under revision through 2026, and they exclude finance and accounting roles from labor-supply outsourcing.

This article covers each requirement, so you know what a compliant offshore arrangement looks like before you sign with a provider.

Key Takeaways

• Indonesian employment law applies to offshore staff, even when they work only for an Australian client

• The Indonesian employer of record carries the compliance obligations, not the Australian business

• BPJS Kesehatan and BPJS Ketenagakerjaan enrolment is mandatory for every employee

• BPJS Kesehatan is 5% of salary (4% employer, 1% employee), and the rate was unchanged as of April 2026

• THR is a mandatory holiday payment of up to one month's salary, prorated for staff with under 12 months of service

What Law Governs Employment for an Offshore Team in Indonesia?

Indonesian employment relationships, including those of staff working exclusively for a foreign client, are governed by Law No. 13 of 2003 on Manpower, as substantially amended by the 2020 Job Creation Law (Cipta Kerja) and its implementing regulations.

Foreign companies operating in Indonesia must navigate employment laws, tax regulations such as PPh21, and statutory benefits including BPJS and THR.

The critical point for an Australian CPA firm is that this law applies to the employer of record in Indonesia, whoever legally employs the staff member, not to the overseas client receiving the work.

If your offshore provider directly and legally employs the Indonesian accountant, that provider carries the compliance obligation.

What Type of Employment Contract Applies?

Indonesian law recognises two contract types, and the distinction matters for a dedicated offshore hire:

PKWTT (Perjanjian Kerja Waktu Tidak Tertentu) 

An open-ended, permanent employment agreement. This is the standard structure for a genuine dedicated FTE arrangement, since the role is ongoing rather than tied to a fixed project.

PKWT (Perjanjian Kerja Waktu Tertentu) 

A fixed-term contract, legally restricted to temporary, seasonal, or project-based work of limited duration. It cannot lawfully be used to fill an ongoing, indefinite role.

A dedicated offshore accountant working continuously on a CPA firm's bookkeeping and reconciliation work is, in substance, a permanent role, which is why reputable providers structure these placements as PKWTT employment on their own Indonesian entity, rather than as a rolling series of short-term contracts.

What Are the Mandatory Social Security Contributions (BPJS)?

Every employer in Indonesia, including a PT PMA (foreign-owned company) or an Indonesian staffing provider serving foreign clients, must enrol employees in both BPJS Kesehatan (health insurance) and BPJS Ketenagakerjaan (employment social security).

This applies to all companies operating in Indonesia, and non-compliance can result in denial of government business services and administrative sanctions.

Program	Employer Contribution	Employee Contribution	Covers
BPJS Kesehatan	4%	1%	Healthcare
JKK (Work Accident)	0.24–1.74%	—	Workplace injury
JKM (Death Benefit)	0.30%	—	Death coverage
JHT (Old Age Savings)	3.70%	2%	Retirement fund
JP (Pension)	2%	1%	Monthly pension

For BPJS Kesehatan specifically, the 5% total contribution (4% employer / 1% employee) is calculated against a salary base capped at IDR 12 million per month, and as of April 2026 there had been no change to this rate despite an earlier proposal in the 2026 state budget documents to raise it, the Finance Ministry confirmed contributions would hold steady until the economy shows stronger growth.

These figures apply equally to PT PMA and locally-owned companies, with no exception for foreign ownership.

What Is THR and How Is It Calculated?

THR (Tunjangan Hari Raya, or Religious Holiday Allowance) is a mandatory annual payment under Minister of Manpower Regulation No. 6 of 2016, applying to every employee, permanent or fixed-term, who has worked at least one continuous month.

THR cannot be prorated down to nothing for shorter tenures, employees under 12 months of service still receive a proportional payment.

• 12+ months of service: full one month's salary

• 1–12 months of service: (months worked ÷ 12) × one month's salary

• Payment timing: no later than seven days before the relevant religious holiday (H-7), paid in full, in cash, never in instalments

• Tax treatment: under Government Regulation No. 58/2023, THR is taxed together with that month's regular salary using the Average Effective Rate method, rather than as a separately taxed lump sum

This is a genuine cash-flow item to plan for, not a discretionary bonus, and a provider quoting an "all-inclusive" monthly rate should already be budgeting THR into that figure.

Why BOS Resources for Indonesian Offshore Compliance

Given how much of this comes down to how a provider actually structures employment, not just what it charges, BOS Resources is built around direct, compliant employment rather than informal or labor-supply arrangements.

Team members are employed on Australian-facing dedicated FTE placements from a secured Jakarta office, working Australian business hours, with BPJS, THR, and statutory on-costs already built into the all-inclusive monthly rate rather than treated as separate line items a client needs to track independently.

Frequently Asked Questions

Does Indonesian labor law apply to staff working exclusively for a foreign client?

Yes. The law applies to whoever legally employs the staff member in Indonesia, regardless of where the paying client is based.

What's the difference between PKWT and PKWTT contracts?

PKWTT is an open-ended permanent employment agreement, appropriate for ongoing dedicated roles. PKWT is a fixed-term contract legally restricted to temporary or defined-duration project work.

Is THR mandatory for offshore accounting staff, and can it be prorated to zero for newer hires?

THR is mandatory for anyone who has worked at least one month. It cannot be prorated to zero; staff under 12 months still receive a proportional payment.

Does the minimum wage that applies depend on the client's location or the employee's?

The employee's. Indonesia's minimum wage (UMP/UMK) applies based on where the employee physically works.