An Employer of record is an easy way to hire Indonesians without setting up a company in Indonesia. Indonesia has a large educated workforce, which can be beneficial for overseas companies.
EOR in Indonesia allows companies to have Indonesian employees working remotely while paying benefits to the employees.
Why to use Employer of Record in Indonesia
Benefit for the company
A foreign company may decide to use EOR for several reasons. The first reason is to avoid having to set up an entity in Indonesia, especially if the clients are not in Indonesia and the company doesn’t need to have a physical office or presence.
The second main reason is to prepare an establishment in Indonesia and test the market with some employees without the burden of having to close the company if the business doesn’t work.
Benefit for the employee
Since COVID-19, a large number of employees have preferred to work remotely but do not get any social benefits such as retirement pension contributions or social security contributions. With the employer of record (EOR), employees get the benefit for themselves and their families. Employers pay the employee’s contribution without having to set up an entity in Jakarta or the rest of Indonesia.
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How does EOR work?
EOR is simple. The foreign company hires an Employer of Record (EOR) in Indonesia. This EOR company hires the employees on behalf of the employer (the foreign company). The EOR company in Indonesia pays the social security and pension contributions and handles the administrative work on behalf of the employer.
The EOR has a working contract with the Indonesian employee while having a service-level agreement with the employer. The real employer is a foreign company, and the EOR does not handle any business relationship with the employee except the human resources and salary part.
Cost of the EOR
The EOR invoices the employer a percentage of the employee’s salary. There is usually a minimal amount. The employer transfers to the employer of record the following:
- Salary of the employee
- Pension contributions
- Social security contributions
- EOR company fee
The EOR also invoices a deposit at the beginning of the contract in order to pay the employee in case the employer is not paying the employer of record and to have time to break the contract with the employee.
In Indonesia, the cost of EOR ranges from 3% to 10% of the salary with a minimum invoice of around 50 USD (higher cost is probably not justified). ILA can assist you in deciding which solution is best for you, namely, establishing an entity and using an EOR. ILA can assist you either in the Philippines or Indonesia.
Also read: All You Need to Know About Working Conrtact in Indonesia
