What to ask an Indonesian EOR before you sign
Providers in this market use EOR, PEO and staffing partner interchangeably, and the label tells you very little. One question separates the arrangements that protect you from the ones that leave you exposed.
Providers in this market call themselves EOR, PEO, employment agency and staffing partner, sometimes interchangeably and sometimes within the same proposal, and the label itself tells you very little. One question separates the arrangements that protect you from the ones that leave you exposed, and it takes a sentence to ask.
Ask who signs the employment contract
An Employer of Record signs it. The provider becomes the legal employer of your staff under Indonesian law, holds the contract in its own name, files PPh 21 under its own tax registration, and enrols the employee in BPJS under its own membership. The compliance obligation is theirs because the employment relationship is theirs, and you can hire without an Indonesian entity.
Arrangements marketed as PEO or co-employment typically leave the employment contract with you, which means you need a local entity for the contract to sit in. The provider then administers payroll and filings on your behalf. That is a useful service, and it is a different product carrying a different prerequisite. Companies discover the distinction when they ask a PEO to onboard somebody and are told to incorporate first.
There is a third pattern to watch for, where a provider engages your people as contractors and invoices you for their time, which is something other than employment. If the working relationship has the substance of employment, involving fixed hours, direction, exclusivity and integration into your team, then treating it as a contract for services creates a misclassification exposure that lands on somebody eventually.
The question, verbatim: whose name is on the employment contract, and under whose tax and BPJS registrations are the filings made? If the answer is the provider's, you have an Employer of Record. If the answer is your own company, you need an Indonesian entity before anything can proceed. If the answer involves the word contractor, ask a great many more questions.
Then ask these six
What is the fee actually charged on? A percentage of employment cost and a flat monthly figure per employee behave completely differently as salaries rise. A percentage gets more expensive on exactly the senior hires you most want, while a flat fee gets proportionally cheaper as salaries rise. Ask which, ask what the percentage applies to, and ask whether VAT sits on top.
Is the salary figure in the quote net or gross? Indonesian candidates negotiate the amount that reaches their bank account, and a quote built on the gross figure understates your cost by between 6 and 35 percent depending on seniority. Our guide on how salaries are quoted here covers why. Ask which figure the proposal is built on and satisfy yourself the answer is consistent.
Does the quote include the thirteenth month? THR is statutory and it lands every year, so a quote showing twelve payments is understating annual cost by roughly a twelfth plus the tax on it. Ask to see it broken out as its own line.
What does an exit cost, and who provisions for it? A provider employing on fixed-term contracts owes statutory end-of-term compensation at the close of every term, and a provider employing permanently owes the full severance package instead. Establish which basis they use, whether the exit cost is billed as it accrues or invoiced when it lands, and what happens if you dispute the calculation.
Do they also recruit? A provider paid per placement earns a fee each time your engineer changes job, and if the same firm holds your payroll it also knows what everybody earns and when contracts renew. We have written up why we decline recruitment work. Ask the question, and ask what happens to your salary data as well.
Who is in Indonesia? Verifying credentials against originals, witnessing a signing and attending a mediation all require somebody physically present. Ask where the people handling your account actually sit, and ask who attends if a termination escalates.
Two things worth checking yourself
Ask for the statutory rates the provider is using and check them against the source. The pension wage ceiling changes every March, VAT on services is 11 percent and has been throughout, and the first income tax band ends at 60,000,000 where pre-2022 tables put it at 50,000,000. A proposal built on stale figures is telling you something about how it will be maintained. Our cost tables cite the regulation behind every rate so you have something to compare against.
Then ask what happens when the arrangement comes to an end. Establish the notice period on the service agreement, whether employees can be transferred to your own entity later with continuity of service preserved, and who holds the employment records afterward. The exit terms matter most in the arrangement you regret, which is the one nobody models at signing.
Where we sit
We are an Employer of Record, the contract is in our name, and the filings are under our registrations. We charge a percentage of employment cost, we include THR and every mandatory contribution in the figure we quote, we decline recruitment work, and everybody handling your account is in Jakarta.
We are also a boutique, so if you want a single supplier covering forty countries we are the wrong answer and will say so. We have set out how we compare against Deel and Remote on price, including the salary above which their flat fee costs you less than our percentage. Ask us the questions above and we will answer them in writing.
