Foreign-owned companies in Indonesia need to set up payroll before paying their first employees. This includes collecting employee data, registering employees with BPJS, configuring PPh 21 withholding, establishing a payroll calendar, and arranging salary payments.
Prepare the Company Before Setting Up Payroll
Before running payroll, the company should have an established PT PMA, a tax identification number or NPWP, and an operational corporate bank account.
These provide the company structure needed to register employees, meet tax and social security obligations, and process salary payments.
Collect Employee and Salary Information
Each employee should be entered into the payroll system with the information needed to calculate salary and statutory deductions.
This normally includes:
- Employment status and start date;
- Base salary;
- Fixed and variable allowances;
- Bonuses or other compensation;
- Tax identification information;
- BPJS information; and
- Expatriate status, where relevant.
The salary information should correspond with the employee’s contract. Permanent and fixed-term employees may have different employment entitlements, while expatriate employees can create additional tax and immigration requirements.
Register Employees With BPJS
Employers must register eligible employees with BPJS Kesehatan and BPJS Ketenagakerjaan.
Setting up payroll? MAP Resources Indonesia can help. Contact info@mapresourcesindonesia.com
BPJS Kesehatan covers health insurance, while BPJS Ketenagakerjaan administers employment-related programs covering old-age security, pensions, workplace accidents, death benefits, and job-loss protection.
Payroll must distinguish between the employer and employee portions of the applicable contributions. The employee portion is deducted through payroll, while the employer contribution is an additional employment cost.
Because contribution bases and limits can change, payroll should use the rates and salary ceilings applicable to the relevant period.
Configure PPh 21 Withholding
Companies employing individuals in Indonesia generally act as PPh 21 withholding agents.
Salary, allowances, bonuses, benefits in kind, and other compensation may affect the employee’s taxable remuneration depending on their tax treatment.
Avoid payroll errors. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
For regular employees, the applicable Effective Tax Rate (TER) is generally used for monthly withholding during most of the year. The employee’s annual tax position is reconciled in the final tax period using the applicable annual calculation.
Payroll should support both monthly TER withholding and the final-period reconciliation.
Set the Monthly Payroll Calendar
The payroll calendar should establish cut-off dates for employee information, payroll calculations, approvals, salary payments, and statutory obligations.
A typical monthly process includes:
- Closing attendance and variable-pay information;
- Calculating salary, allowances, overtime, bonuses, and other compensation;
- Calculating BPJS contributions and PPh 21 withholding;
- Checking gross pay, deductions, statutory contributions, and net salary against employee records;
- Reviewing and approving payroll;
- Transferring net salaries and confirming the amounts match the approved payroll; and
- Paying and reporting statutory liabilities within the applicable deadlines.
The calendar should also account for the religious holiday allowance (THR) when employees become entitled to it.
Decide How Payroll Will Be Administered
Foreign-owned companies can operate payroll internally, use payroll software, or outsource payroll administration.
In-house payroll requires sufficient local capability to maintain employee data, calculate deductions, process payments, and meet Indonesian payroll requirements.
Payroll software can automate calculations and employee records but must be configured for Indonesian tax and BPJS requirements.
Outsourcing places much of the monthly calculation and administration with a payroll provider, while the company provides employee information and approves the payroll.
Maintain Payroll Records and Update Changes
Update payroll records for new hires, departures, salary adjustments, bonuses, allowance changes, and other events affecting employee remuneration.
Need monthly payroll support? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com
Companies should retain payroll calculations, salary records, BPJS information, tax withholding records, and payment evidence to support subsequent payroll, accounting, and tax reporting.
Set Up Payroll With MAP Resources Indonesia
MAP Resources Indonesia assists foreign-owned companies with payroll setup and ongoing administration, including employee payroll records, BPJS, PPh 21 calculations, salary processing, and monthly payroll support. Contact MAP Resources Indonesia at info@mapresourcesindonesia.com.
