Last time, we explained the premises of an employment contract and the payment upon termination of the contract. This time, we will discuss obligations and rights related to remuneration and the associated revisions to employment contracts.

[Remuneration settings]

There are no regulations regarding the amount of wages, but as a general rule, there is an obligation to set them in rupiah. "Foreign workers dispatched from overseas" are recognized as an exception to the Rupiah pricing, so it may be a problem if locally hired employees are also priced in US dollars. If wages are set in a foreign currency, we recommend that you have evidence that can be presented in the event of an audit, etc., such as creating documents to prove that the employee is dispatched from the head office.
Another thing to keep in mind is whether wages are set on a gross basis (tax included) or on a net basis (take-home pay). The Ministry of Finance Regulation No. 66 of 2023 stipulates the provisions for taxation of in-kind payments, and the income tax allowance is subject to income tax if the company pays the income tax. In other words, if you set wages online, you will be subject to income tax on top of the income tax paid by the company, which will then be borne by the company, resulting in endless taxation, so it is no longer possible to set wages online. This case is not limited to locally hired employees, but wages must be set on a gross or gross-up basis. Gross is a setting in which personal income tax is deducted from wages. On the other hand, gross-up is a method in which the actual amount that the employee will receive is agreed in the contract, but based on that amount, the tax-included amount is calculated and the company pays it as the employee's income. As with gross, the employee's personal income tax is deducted from the grossed-up total, so the amount received by the employee is the amount before grossing up.
Many of the companies that have been setting their wages online so far state in their employment regulations/labor agreements that ``income tax will be borne by the company.'' Therefore, we recommend that you write in your employment contract that ``wages will be set on a gross/gross-up basis'' and take action in accordance with the law. If you agree on an employment contract that differs from the work rules/labor agreement, the employment contract will take precedence unless there is a violation.

[Bonus and religious festival allowance]

There are no legal regulations regarding bonuses, so payment will be considered in accordance with the company's regulations. On the other hand, there are many cases where it is understood that only Indonesian employees are required to pay the religious festival allowance, or that it is an employee's right and can be waived in the employment contract. It is a company obligation, and it is a violation even if the employee agrees that the payment is not required, so be sure to provide the payment.

Relevant regulations: Finance Minister Decree No. 66 of 2023 Per-66/MEN/2023, Government Decree No. 35 of 2021 PP-35/2021