In Japan, it is common to set wages that include tax, but in Indonesia, there are quite a few companies that set wages based on take-home pay. Before the laws and regulations regarding income tax related to in-kind payments were revised in 2023, many companies clearly stated that ``income tax will be borne by the company'' and agreed with employees that wages were set as take-home pay. Currently, wages are still set on a take-home basis, and in order to make the income tax borne by the employee, the grossed-up wage is treated as a tax-included wage, from which the income tax is deducted and the company pays the tax. Why do so many companies still prefer to agree on take-home pay?

[Management of overtime wages]

In Indonesia, overtime wages are calculated by law and are 1.5 to 3 times the hourly wage, depending on whether overtime is worked on weekdays or on holidays, and how long overtime is continuously worked. In order to keep fixed costs as low as possible, even companies that operate 24 hours a day often use two shifts and overtime work instead of three shifts. If the number of employees is kept low, overtime hours will naturally increase, and employees' overtime wages will also increase.
On the other hand, the history of talking about work-life balance in Indonesia is still young, and even today there are many employees who want to increase their income by working as much overtime as possible. Therefore, there are actually a surprisingly large number of employees who accurately record their overtime work, calculate their income, and check the amount of wages they have been paid. If it is take-home pay, it will be as calculated, but if tax is included, the tax amount will of course change, so if you do not understand the tax calculation method properly, you will not be able to confirm whether the calculation is incorrect, and employees tend to be dissatisfied.
On the other hand, income tax is basically calculated based on the number of dependents and the amount of income. The amount of tax-free income is determined by the number of dependents, and the tax rate changes depending on the total annual income. It is complicated and difficult to understand unless you have studied tax law properly, so even if the company explains how it is calculated, employees tend to be unconvinced and become dissatisfied.

[It also affects trust in the company]

In the first place, you may not be able to receive all of the wages paid by the company, and it is still difficult to accept that your income tax will be deducted. I still can't shake the feeling that my wages are being cut. It can be said that many people have not reached the level where they can think about what taxes are used for and how they are necessary to run the country. Therefore, there are many cases where dissatisfied employees rush to HR and demand a proper explanation. Not only is this process extremely complicated, but many employees end up being dissatisfied with the company without being satisfied. It's not that the company deducts a lot, but dissatisfaction with the company from employees tends to lead to them not trusting what the company says in various cases. Therefore, there are many companies that think that there are many advantages to signing a contract with take-home pay.