Why is "take-home pay" preferred in Indonesia? The reality of labor management explained from overtime pay and taxes

Latest update date: July 15, 2026 Posted date: January 26, 2026

Introduction: Why “take-home pay” is preferred in Indonesia

In Japan, it is common to set wages including tax (gross).
in indonesiaWage setting based on take-home pay (net) (take-home pay)There are companies that do this.

2023Before the income tax law regarding payments in kind was revised in 2007,
The employment contract clearly states that ``income tax will be borne by the company.''
There were many cases where an agreement was reached with the employee as take-home pay.

Even now, after the law has been revised,The base wage is set on a take-home basis,
The amount after adding up the income tax (gross up) is paid as "tax-inclusive wages",
Tax is deducted from this and the company pays the tax.This form has become established.

Why do many companies in Indonesia still prefer to agree on take-home pay?

Workers can easily manage their “overtime wages” themselves.

Business: Want to keep fixed costs as low as possible = increase in overtime pay

In Indonesia, the method of calculating overtime wages is strictly stipulated by law.

Depending on whether you work overtime on weekdays, work on holidays, or how many consecutive hours you work,
The hourly rate will jump from 1.5 times to 3 times.

Companies want to keep fixed costs as low as possible, so
24Even in factories that operate on fixed hours, instead of using a 3-shift system, it is possible to use 2 shifts + overtime work.
There are many cases where this happens.

In order to reduce the number of employees to a minimum, overtime hours per person naturally increased,
Overtime pay will also increase.

Workers: Want to increase their income by working overtime

The concept of work-life balance has only recently begun to spread in Indonesia.
It is becoming popular among the younger generation.

but“I want to work as much overtime as possible to increase my take-home income.”
This idea is held by the majority of people, especially the elderly.

Therefore, many employeesAccurately record your overtime hours,
Check if the amount of wages paid matches your calculationsI'm doing it.

Here, if the wage is "take-home pay",
There will be no problems as the employee will be paid according to their calculations.

However, in the case of "tax-included wages," the tax rate and tax amount vary depending on the total income, so
Employees who do not fully understand how taxes are calculated
I became suspicious and wondered if the company's calculations were wrong.
Causes of dissatisfactionIt will be.

Complex income tax structure and personnel costs involved in explaining it

Lack of knowledge about tax law: “Why is my salary reduced?”

In the first place, personal income tax in Indonesia is based on the number of dependents (determining the tax-exempt income limit).
It is very complicated because the tax rate changes depending on the amount and total annual income.

Difficult to understand unless you have specialized knowledge of tax law.
No matter how logically the company explains,
There are many cases where employees are not satisfied.

Furthermore, among workers
“Of course I should receive the full amount of wages offered by the company.”There is a deep-rooted awareness that
“Why is tax deducted (reduced) from my salary?”
The current situation is that I have not been able to shake off this feeling.

How taxes are used to run the country
There is also the background that it is difficult to say that social tax awareness has penetrated deeply into the general public.

As a result, employees who are dissatisfied with their pay slips may ask HR directly for explanations.
There are many cases where people come to us for help.

The amount of time and effort required for human resources work to deal with this is enormous.
No matter how carefully we explain things, in the end, employees remain unsatisfied.
This will cause you to accumulate dissatisfaction with the company.

Conclusion: “Take-home pay” is a defensive measure to protect trust in the company

This does not mean that the company deducts an unreasonably large amount.

However, the dissatisfaction caused by not understanding the tax system is
Eventually, “This develops into a feeling of distrust, ``I can't trust what the company says.''
This could have a negative impact on other operations and labor-management relations.

That's why we avoid unnecessary labor troubles and personnel costs,
In order to maintain a relationship of trust with employees, it is still better to choose ``take-home pay.''
Many companies believe that there are significant benefits.

In addition to salary settings in Indonesia, which we covered in this column,
For work regulations, employment contracts, and labor consultation, please contact
Keystone Consulting Group provides practical support for Japanese companies.

For inquiries, please contactherefrom.

References:Minister of Finance Regulation No. 66 of 2023 (Peraturan Menteri Keuangan (PMK) Nomor 66 Year 2023）
References:2023Labor Law No. 6 (Undang-undang (UU) Nomor 6 Year 2023）

Return to list ＞