How to Build Your Dream Team in Indonesia

Hiring in Indonesia gives your business access to one of Southeast Asia’s largest, youngest, and fastest-growing workforces.

It allows you to scale efficiently with competitive labor costs, a digitally skilled talent pool, and flexible hiring models, all within a jurisdiction that encourages foreign investment and company formation.

In this article, we will walk you through the necessary steps to build your dream team in Indonesia, from understanding the local hiring laws to structuring your company and recruiting talent.

Legal Framework for Hiring Employees in Indonesia

In Indonesia, hiring is subject to certain local laws. As a result, you will need to follow Indonesian employment laws.  Here are the essentials:

• Entity Registration: You must have a legal entity (typically a PT PMA for foreign companies) to hire employees. Without it, you cannot issue work contracts or sponsor work permits. There are service providers who can assist you with setting up a PT PMA quickly and in full compliance with local laws.
• Employment Contracts: Must be written in Bahasa Indonesia and include clear terms: job role, salary, working hours, termination clauses, and benefits.
• Probation Period: Legally capped at 3 months for permanent employees.
• Social Security Registration (BPJS): Employers are required to register their staff for health insurance and employment protection under the Social Security Registration (BPJS) system.
• Minimum Wage Compliance: Varies by province and must be strictly followed.
• Termination Laws: Severance pay is mandatory depending on tenure, as per the Manpower Law (UU No. 13/2003, revised in Omnibus Law 2020).

Some firms offer Legal & HR Compliance support to ensure your contracts, payroll, and benefits align with all local regulations.

Benefits of Hiring in Indonesia

Hiring in Indonesia gives you access to a growing, affordable, and tech-savvy workforce. But there are additional business benefits as well:

• Affordable Labor Market: Lower average salaries compared to Singapore or Malaysia, especially for digital, creative, and support roles.
• Young, Skilled Talent Pool: 70% of Indonesians are under 40; many are English-speaking and digital-first.
• Government-Supported Digital Economy: The government supports the digital economy through 4G internet access expansion, growth of special economic zones, talent incentives, and high startup activity through platforms like the Ministry of Investment.
• Remote Work Acceptance: The pandemic has normalized remote hiring, enabling you to hire Indonesian talent without a physical presence.
  
  

Employer of Record (EOR) providers allow you to legally employ Indonesian staff without setting up a local entity, while they manage payroll, taxes, and compliance on your behalf.

The Process of Building Your Team in Indonesia

Once you’re legally set up to operate in Indonesia, you need to start structuring and hiring your team. Below is the exact process you should follow:

1.   Start by Defining Your Organizational Structure

You need to decide early on whether a flat or hierarchical structure fits your business. If you’re building a startup with fast turnaround and cross-functional teams, opt for a flat structure, while for companies requiring clearer reporting lines and accountability, opt for a hierarchical model. This decision will impact how you delegate, who you hire first, and how you manage communication.

2.   Determine Core Roles and Responsibilities

Don’t hire randomly. Identify key business functions and break them into specific roles. At this stage, you need to avoid overlapping job descriptions, and assign specific purpose and measurable responsibility.

Several international talent partners can help you benchmark roles, define job scopes, and write descriptions that match local market expectations.

3.   Create a Clear Reporting Structure

As soon as your team crosses 5–7 people, you should create a simple organizational chart. Even if your company is small, it helps to visually map out what each person is responsible for.

4.   Start the Hiring Process

Once your structure is clear, you can begin hiring employees in Indonesia. You should first decide whether you’re hiring as a registered entity (PT PMA) or using an Employer of Record (EoR). If you’re not ready to open a company but want to hire quickly, an EOR model gives you a fast, compliant hiring route without needing to navigate entity setup.

You can post about your job openings on diff on social media platforms but this can be a time-consuming process. Also, you need to have local insight to filter through applicants to find the right fit.

Local recruitment experts who understand Indonesia’s talent market can help source candidates who are qualified and ready to contribute.

5.   Register Employees and Stay Compliant

Upon hiring, it is mandatory to register employees for both BPJS Kesehatan (Health Insurance) and BPJS Ketenagakerjaan (Employment Social Security).

You also need to set up a payroll system that handles

monthly salary disbursements, tax deductions (PPh 21), and annual reporting. These systems must comply with Indonesian tax laws.

Company Registration vs. Employer of Record in Indonesia: Which One Should You Choose?

Now that you understand the company registration process in Indonesia, you might be wondering:

Should you go through the full process of setting up your own entity, or is using an Employer of Record (EOR) a smarter move?

Let’s break it down so you can choose the right approach for building your team in Indonesia:

Aspect	Employer of Record (EOR)	Company Registration (Own Entity)
Setup Time	1–2 weeks to onboard employees	2–3 months or more to fully register a company
Initial Costs	Minimal—monthly service fee only	High—legal, licensing, capital requirements
Compliance & Admin	Handled by EOR (payroll, taxes, contracts)	You manage everything internally
Legal Employer	EOR is the legal employer	Your company is the legal employer
Flexibility	Easy to scale up/down or exit	Less flexible due to legal obligations
Market Testing	Ideal for testing new markets quickly	Not practical for short-term or lean hiring
Control Over Operations	Moderate—EOR acts on your behalf	Full operational and managerial control
Best For	Startups, SMEs, remote teams, pilot projects	Long-term plans, full office setup, large teams

If your priority is speed, compliance, and low upfront cost, then EOR is the most efficient way to build your team in Indonesia. While there are many EOR providers in the market, it’s crucial to partner with a reliable one that understands the local landscape and ensures full compliance.

We recommend partnering with RecruitGo. They are the local experts in Indonesia help you hire in Indonesia quickly, legally, and without the hassle of company registration

Build your team faster in Indonesia with a reliable EOR partner

Indonesia is undergoing rapid transformation. Its digital economy is projected to reach over USD 360 billion by 2030.

As more companies enter the market, competition for skilled employees is rising. Hiring in Indonesia requires more than just job posts.

Working with a trusted partner who can manage everything from recruitment to compliance, allows businesses to scale confidently and legally.

For a more tailored consultation, reach out to an experienced team with proven knowledge of Indonesia’s hiring ecosystem and local laws.