How to Hire Employees in Bali: Employment Regulations in Indonesia

If you plan on setting up a business and hire employees in Bali, it is crucial to be familiar with the employment regulations in Indonesia first. Knowing how to handle employment relationships more effectively will help you avoid bad surprises along the way. In this article, we will provide a comprehensive guide to hiring employees […]

hire employees in Bali

If you plan on setting up a business and hire employees in Bali, it is crucial to be familiar with the employment regulations in Indonesia first. Knowing how to handle employment relationships more effectively will help you avoid bad surprises along the way.

In this article, we will provide a comprehensive guide to hiring employees in Bali, including:

  • types of employment contracts and what they should include
  • what are the employee rights, minimum wages, and working hours in Bali
  • what you need to do if there is a need to terminate an employee

Table of contents

    Choosing the type of employment contract in Bali

    When hiring employees in Bali, the most crucial step is to have proper employment contracts since the very beginning of their employment.

    According to the Indonesian Manpower Law, there are two types of employment contracts in Indonesia:

    • Permanent employment contract
    • Non-permanent or temporary employment contract

    A permanent employment contract comes with a 3-month probation period. Keep in mind that after the probation period, the employee will become permanent and it will be more complicated to terminate the employee.

    The other type of employment contract is non-permanent or temporary. This agreement is only valid for a particular time but no longer than two years.

    You can extend a temporary employment contract once and the extended period cannot be more than one year.

    In general, the employment contract should last indefinitely, unless the job:

    • is temporary or seasonal by nature
    • concerns a project that will end in less than three years (based on reasonable estimation)
    • involves a new product or activity that is still experimental

    However, as non-permanent or temporary employment contracts are less complicated to terminate, it is recommendable to opt for this type of arrangement if possible.

    If you are not sure whether your employment contracts are in compliance or which type of contract you should choose for your employees, contact us via [email protected]. Our consultants will gladly help you draft or review your employment contracts.

    Company’s internal regulations in Bali

    Each company in Bali that hires 10 or more employees must set their company’s internal policies that specify:

    • rights and obligations of both the employer and employee
    • working conditions
    • ethics and rules
    • validity terms of the regulations

    Having the company’s internal regulations written down is not mandatory for smaller businesses. However, we highly recommended you to do so as it will help you manage your company’s activities more efficiently.

    Bear in mind if your company has 10 or more employees, you also need to register your company’s internal regulations with the Ministry of Manpower, according to the Manpower Law 13/2003. If the employee’s union requires a change, you must agree to negotiate.

    Minimum wages in Bali

    In Bali, just as in the rest of Indonesia, minimum wages are regional. To hire employees in Bali, you must comply with the relevant minimum wage standard.

    However, in some cases, you may be allowed to postpone it if you are currently unable to comply with the minimum wage.

    Regional minimum salaries

    Below are the regional minimum wages in Bali, as of 2018.

    Regency

    Minimum salary

    Badung

    Rp. 2,499,580.99 (~$169)

    Kota Denpasar

    Rp. 2,363,000 (~$160)

    Gianyar

    Rp. 2,240,766 (~$151)

    Karangasem

    Rp. 2,180,000 (~$147)

    Jembrana

    Rp. 2,181,393 (~$147)

    Tabanan

    Rp. 2,239,500 (~$151)

    Klungkung

    Rp. 2,164,991.583 (~$146)

    Buleleng

    Rp. 2,165,000 (~$146)

    Bangli

    Rp. 2,128,253 (~$144)

    Employee rights in Bali

    Social security and insurance

    You also need to ensure that all your full-time employees, including foreign nationals, are registered for the public health insurance scheme (BPJS Kesehatan) and the Indonesian social security program (BPJS Ketenagakerjaan).

    Indonesian National Social Security System

    Type of social security Paid by the employer Paid by the employee
    Retirement savings (JHT) 3, 7% 2%
    Work-related injury insurance (JKK) 0, 24 – 1, 74% 0%
    Pension Plan (JP) 2% 1%
    Non-work related accidental death insurance (JKM) 0, 3% 0%

    Indonesian National Health Insurance System

    Type of social security Paid by the employer Paid by the employee
    Health insurance

    3%

    (from maximum IDR 8,000,000 gross salary)

    2%

    (from maximum IDR 8,000,000 gross salary)

    Working hours

    Employees in Bali usually work 40 hours per week, and no more than six days per week and seven hours a day. With a written employment contract, you can base it on 5-day, 8-hour per day and 40 hours per week. Wages of employees working on a 5-day week must not be less than the wages of employees working on a 6-day week.

    After every continuous period of work of 4 hours, an employee can have at least half an hour of rest. After every six consecutive days of work, an employee must be given a rest day. You must also provide your employees reasonable time to perform religious observances such as prayers.

    However, you do not have to pay for the days your employee fails to perform work unless otherwise regulated by the law.

    Overtime

    The maximum allowed overtime work in Bali is 3 hours a day, and no more than 14 hours a week. The employee must agree with performing extra hours, and they have the right to receive overtime pay, at the rate of 1.5 times the hourly rate for the first hour and twice the hourly rate thereafter.

    Employees in Bali who are working during public holidays must receive overtime pay, too.

    Company leave

    Each employee working in Bali is entitled to a day of holiday with pay for every 23 working days, up to a maximum of 12 days a year. The employee must take one part of the leave in a period of at least six consecutive workdays.

    New mothers get three months of paid maternity leave.

    Employing foreign employees in Bali

    If you plan on hiring foreign nationals in Bali, keep in mind that you also need to ensure the legality of their employment in Indonesia.

    Previously, Indonesia required all foreign nationals to have a work permit (IMTA). In July 2018, however, the government replaced this requirement with a notification from the Ministry of Manpower.

    Find more information in our previous article about new work permit regulations in Indonesia

    How to terminate an employment contract in Bali

    According to the Manpower Law, both you and your employees must try as much as possible to avoid employee termination. But if you do encounter this, it is essential that both parties understand their rights and responsibilities.

    Under the law, here is a list of what you need to do in the case of permanent employees:

    1. Negotiate with the employee (and his workers’ union, if any) before termination
    2. Give three warning letters to your employee (if the separation is due to violations of work agreements or company regulations)
    3. Provide severance pay and other remuneration as per regulation

    With your fixed-term employees, it is possible to agree that both parties terminate the contract with prior notification following a specific timeframe.

    Causes of employee terminations and types of payments

    There can be various causes for terminating an employee in Bali:

    • General reasons, such as declining work performance, failure to meet targets
    • Rationalization in the company
    • Employee resigns at his/her own will
    • Grave misconducts
    • Change in the status of the company ownership
    • Five days of absence from work
    • Imprisonment
    • Retirement age
    • The company goes bankrupt and closes down

    The amount of compensation payment varies, depending on the cause of termination and the length of service. Contact us at [email protected] for details on how to handle individual cases of terminating an employee.

    When to use an Employer of Record (EOR) instead

    If you want to avoid all the hassles that come along with hiring and terminating employees in Bali,  you can use our employer of record (EOR) service instead.

    An EOR is a service provider such as Emerhub that hires employees who will be on their payroll, but work for other companies.

    Using an EOR frees you from having to deal with any paperwork, including:

    In other words, an EOR enables you to have employees in Bali without dealing with any compliance requirements.

    If you have any questions about hiring employees in Bali or you would like to learn more about our employer of record service, contact our Bali office directly by leaving your questions in the form below.

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