Understanding the Religious Holiday Allowance THR in Indonesia

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 and what are the THR payment deadlines in 2019? As an employer, can […]

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 and what are the THR payment deadlines in 2019? As an employer, can you offer any other forms of payment besides money?

Table of contents

    What is a Tunjangan Hari Raya (THR) payment in Indonesia?

    Indonesia has four types of holidays:

    • Religious
    • National
    • International
    • Commemorative

    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

    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:

    • Islam
    • Protestantism
    • Catholicism
    • Hinduism
    • Buddhism
    • Confucianism

    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 one week before celebrations. The time depends on the employee’s religion and the approaching holiday.

    The most extended festive holidays for different religions are:

    Holiday

    THR payment deadline in 2019

    Idul Fitri (end of Ramadan) for Muslims

    29 May

    Christmas for Christian Protestants and Catholics

    18 December

    Silence Day, also known as Seclusion (Nyepi) for Hindus

    28 February

    Vesak (Waisak) for Buddhists

    10 May

    Chinese New Year (Imlek) for Confucians

    29 January

    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.

    Let's grow your business in Indonesia

    Emerhub has years of experience with corporate secretarial services in Indonesia.

    Get in touch with Emerhub by filling in the form below and our consultants will reach out to you within a few working hours.

    Optional. Leave blank if you prefer to communicate via email.
    corporate secretarial services in Indonesia

    Diligent and detailed, could improve internal communication

    The team carries out its work diligently with detailed information given. However, internal teamwork has some room for improvement as it sometimes takes a bit of time to receive the requested information. Anyhow, they are professional and carry out every project we assign to them.

    Jim Ong
    Finance Department, bloomandgrowasia.com

    Supportive and easy to reach

    Emerhub has been very supportive. Easy to reach. Whenever we need signatures or contact Emerhub for anything, we get a quick response.

    Yoseano Wibisono
    GCP Applied Technologies

    We felt like we were investing our money doing the right things

    I think the best part is I feel Emerhub is confident when it comes to regulations and very updated compare to some of the others. A sense of security when we were actually investing our money doing the right things. So coming from a bad experience before Emerhub and having to change all our documents because of the mistake having been made earlier. We have confidence that with Emerhub we are doing the right thing.

    Camilla Fulland
    Prime Stoves

    Search Emerhub blog