Moving an employee between two Indonesian companies in the same group is not an internal reassignment. Each PT PMA is a separate employer, employee income tax (PPh 21) withholding agent, and BPJS registrant, so the move must be documented either as a continuation of employment under a tripartite agreement or as a termination by the original employer followed by a new hire.
The structure chosen affects severance, PPh 21, and the treatment of the employee’s accrued years of service.
Does the Employee Have to Be Terminated First?
No. The original employer, the new employer, and the employee can sign a tripartite agreement under which the employment relationship continues with the new company. The new employer recognizes the employee’s years of service, and no severance package is paid upon transfer.
The alternative is for the original employer to end the employment and pay the applicable termination entitlements. The new company then hires the employee under a new contract, and years of service restart from zero.
Moving employees between your Indonesian companies? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
Either route requires the employee’s agreement. A resignation letter signed only to move the employee to another group company should not be treated as a genuine resignation that removes the employee’s termination entitlements.
Employees on a fixed-term contract (PKWT) require separate attention. Where the PKWT with the original employer ends, statutory PKWT compensation is generally due for the period already worked.
What Should the Tripartite Agreement Cover?
A tripartite agreement should specify how the employee’s existing rights and service record transfer to the new employer. It should state:
- The transfer date and the new employer’s name as the employer from that date
- Recognition of prior years of service for severance, long-service pay, and other service-based entitlements
- Whether unused annual leave carries over or is paid out by the original employer
- How service is counted for the religious holiday allowance (THR)
- The salary, allowances, and benefits applying at the new employer
- Whether the original employer compensates the new employer for the accrued service liability it takes on
Recognizing prior service transfers the severance liability to the new employer rather than settling it. If the employee is later terminated, the new employer’s severance calculation includes the years worked at the original company.
Any payment between the two companies for assuming that liability is a related-party transaction. It should be documented, and its tax treatment should be assessed for both companies before payment.
How Is PPh 21 Calculated When an Employee Moves Mid-Year?
The withholding agent changes on the transfer date, even where employment continues under a tripartite agreement.
The month in which the employee stops working for the original employer is that employer’s final tax period. The original employer recalculates PPh 21 based on the employee’s actual income for the months worked, applies the full non-taxable income threshold (PTKP), refunds any excess withholding, and issues the PPh 21 withholding certificate.
The new employer withholds monthly using the effective tax rates (TER) from the first month and recalculates PPh 21 in December on the income it has paid. Each employer generally calculates PPh 21 only on its own payments.
Need PPh 21 support for a mid-year employee transfer? Email MAP Resources Indonesia at info@mapresourcesindonesia.com
Because each employer applies the full PTKP and the lower tax brackets to its share of the income, total withholding for the year can fall short of the employee’s actual liability.
Consider an unmarried employee without dependants (TK/0) earning IDR 50 million (USD 2,900) per month who transfers on July 1. Each employer pays IDR 300 million (USD 17,600) during the year. Ignoring occupational expenses and pension contributions for simplicity, each employer withholds IDR 30.9 million (USD 1,800), for a total of IDR 61.8 million (USD 3,600).
Tax on the combined annual income of IDR 600 million (USD 35,300) is IDR 107.8 million (USD 6,300). The employee must pay the IDR 46 million (USD 2,700) difference with the annual individual income tax return.
Where the group pays net salaries or tax-equalizes employees, this shortfall becomes a company cost that should be budgeted at the time of the transfer.
How Is Severance Taxed if the Employee Is Terminated Instead?
Where the original employer terminates the employment, the severance, long-service pay, and compensation for rights paid as a lump sum are subject to final PPh 21. This is separate from the tax on the employee’s regular salary.
The rates are 0% on the first IDR 50 million (USD 2,900), 5% on the portion above IDR 50 million up to IDR 100 million (USD 5,900), 15% on the portion above IDR 100 million up to IDR 500 million (USD 29,400), and 25% on the portion above IDR 500 million.
The original employer must also settle the regular PPh 21 for the final tax period as part of the employee’s final pay. The termination route brings the full cost of the employee’s past service forward into the transfer year, while the tripartite route defers it to the new employer.
What Changes for BPJS?
The original employer should report the end of its BPJS Health and BPJS Employment registrations for the employee, and the new employer should register the employee from the transfer date.
The two companies should agree which of them pays contributions for the transfer month. Registering the employee in the same month avoids a gap in health coverage for the employee and their family.
Is a Secondment a Better Alternative?
A group can instead keep the employee on the original employer’s payroll while they work for another group company, with the employment cost recharged.
This avoids changing the employer, but it creates a recurring intercompany charge. The recharge must be supported on arm’s-length terms and may be treated as a service, with potential VAT and PPh 23 consequences even where no markup is added.
Choosing between a transfer and a secondment? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
Placing an employee to work under another company’s direction can also raise questions under Indonesia’s outsourcing rules, which since April 30, 2026, restrict outsourcing to specified supporting activities. A secondment is generally better suited to a defined, temporary assignment than to a permanent move.
What Additional Steps Apply to Foreign Employees?
A foreign employee’s work authorization is tied to the employer. The new employer needs its own approved Foreign Manpower Utilization Plan (RPTKA) covering the position before the employee starts work there. It must also pay the applicable foreign worker levy.
The employee’s Limited Stay Permit (ITAS/KITAS) is sponsored by the employer, so the immigration sponsorship must be transferred to the new company where permitted or a new permit obtained. The employment and immigration records should be updated to reflect the new sponsoring employer.
A change of employer does not by itself change the employee’s tax residency. A resident foreign employee remains subject to PPh 21, while a non-resident remains subject to PPh 26 at each employer.
Manage Group Employee Transfers with MAP Resources Indonesia
MAP Resources Indonesia can help foreign-owned groups structure employee transfers between Indonesian companies while managing the employment, payroll tax, BPJS, and work permit requirements. Contact us at info@mapresourcesindonesia.com.
