THR payment in Indonesia is also known as the religious holiday allowance. Following the law, permanent employees must receive financial support once a year before their longest religious festivities.
How does the law regulate THR payment in Indonesia? How to calculate the amount you need to pay out? As an employer, can you offer any other forms of payment besides money?
What is a Tunjangan Hari Raya (THR) payment in Indonesia?
Indonesia has four types of holidays:
THR is the yearly labor allowance. According to the law, companies are obliged to submit the THR payment in Indonesia to their employees once per year before the most extended religious holiday ceremonies of the employee’s religion.
The importance of the THR payment in Indonesia
The Indonesian society is known for its religious diversity. People practice different traditional celebrations in their communities. Families express gratitude for several days by following their religious customs. The ceremonies and long holidays are known to be costly.
Indonesia is a collectivist society, meaning that higher importance is on a group rather than on an individual. Thus, during the holidays, following the traditions with families and communities is common. Spending on matters that are important to their faith is a high priority and part of the culture in Indonesia.
Without the THR payment, it would be difficult for families to afford the festivities. Since the majority of the Indonesians are Muslims, most of the THR payments take place just before the end of Ramadan. As an unfortunate side effect, the times before festive holidays also mean an increase in crime rates because people are looking for any means to bring more money back to their families. That’s how vital THR is in Indonesia.
How to know if you are eligible to receive THR in Indonesia?
Coming from the frequency of holidays, every employee would gladly accept THR bonus. However, there is a way of making sure who is eligible. Note that if you have worked for a company for at least one month, you already have the right to receive the THR payment.
Although, it also matters which contract you have signed. THR applies to employees with an agreement for a specific period (PKWT) and an indefinite period (PKWTT). Freelance workers do not receive THR payment.
The government recognizes six official religions:
Representatives of all the above receive the special holiday bonus once a year, before their religious holiday.
Note that you can only pay or receive the THR payment in the form of money. Those suggesting alternative payment methods are mistaken and breaking the law.
THR is not an optional payment for the company; it is mandatory by law, and the employee’s performance never affects it.
Once you establish the fact that you are eligible, there will be further questions. To prevent you from finding faulty or outdated information about the THR, here is what you must know:
#1 When is THR in Indonesia paid out?
As THR is a payment connected directly to religion, it is paid out before celebrations. The time depends on the employee religion and the approaching holiday.
The most extended festive holidays for different religions are:
- Idul Fitri (end of Ramadan) for Muslims
- Christmas for Christian Protestants and Catholics
- Silence Day, also known as Seclusion (Nyepi) for Hindus
- Vesak (Waisak) for Buddhists
- Chinese New Year (Imlek) for Confucians
If the employer and employees agree, the entire team can have one preferred payment time. For example, a company can pay THR to everyone during Idul Fitri regardless of their religion.
#2 How much is the THR payment in Indonesia?
The THR amount is a one-time salary for those who have worked for the company 12 months without stopping. If it is less than 12 months, the THR payment is proportional to how long the employee has worked in the company (e.g., if six months then half the salary). THR “salary” includes base salary and fixed monthly allowance but does not have to cover other payments such as bonuses.
#3 When should the THR payment take place?
THR should be paid latest seven days before the beginning of the holidays. It is an essential aspect that the employer is punctual about paying out the THR payment. No matter if you are a foreign entrepreneur leading an Indonesian team or a local manager in the same role.
Ceremonies and long holidays are costly, and your employees will be counting on receiving this payment on time.
#4 What happens if the employer cannot pay THR in Indonesia?
If a company is in financial difficulties, it is also struggling to pay the staff, not to mention bonuses such as the THR. However, note that your employer must face the consequences for not following the required timelines:
- A penalty of 5% for the delay of the THR payment – your employer must still pay the bonus
- Employer suffers loss and isn’t able to settle the amount in any way – your employer must propose an exception for 30 days before the festive holiday to the local Manpower Department
How THR affects hiring in Indonesia
Essentially THR is the 13th salary all your permanent employees receive. For example, if an employee receives a salary of $1,000 a month, their annual salary would be US$ 13,000, and the monthly average would be $1083.
However, employees rarely calculate their salaries this way. In their mind, they would still be receiving a $1,000 monthly salary, with a guaranteed bonus.
Hiring employees after Ramadan
It also means that the worst time to recruit people is before they are waiting for their THR payment. It’s just not economically wise to resign from your previous job before you are about to receive a big bonus. On the other hand, the best time to hire is right after Ramadan because the prospective candidates have just received their bonuses and are more eager to look for a new job.
For any further questions regarding employment matters in Indonesia, contact Emerhub via the form below.