Famously known as “The Emerald of the Equator”, Indonesia is home to at least 300 ethnic groups, in which the majority of the population belong to Javanese, Sundanese, Batak, among others. With various distinguished communities across Indonesia, the country is a multicultural nation with diverse cultural identities. Hence, on doing business in Indonesia, investors are advised to take culture and customs into consideration. In this article, Viettonkin will bring helpful insights and tips related to Indonesian public holidays to investors. 

Major public holidays in Indonesia

Each year, Indonesia’s national holidays are stipulated by the Joint Ministerial Decree. The Indonesian Government has recently announced national holidays and collective leave days for 2023. In total, there are 24 days in which 16 days are national holidays while the rest are collective leaves^* . 

(*) collective leaves: In case the public holidays coincide with the weekend, Thursday, or Tuesday, the employees are granted an additional collective leave day, also known as “cuti bersama” in Indonesian.

Eid Al-Fitr - known as Lebaran -  is one of the most significant and celebrated holidays in Indonesia, marking the end of Ramadan. This holiday reflects Muslim’s holiest month, thus, people spend the day with close family members and friends. Idul Adha is another Muslim day that is quite wide-spread in Indonesia. On this holiday, Muslims will go to Mosques and share meat with other people. The day is filled with warmth and caring for those who are less fortunates. Similarly, Isra Mi’raj is also a holiday for the Muslims community. This holiday is an occasion for Muslims to  socialize and visit families and friends. 

In addition, besides having Chinese New’s Year like other ASEAN countries (Singapore, Thailand, among others), Indonesian people celebrate Balinese Hinduism New Year “Hari Raya Nyepi” on March 22 annually. The holiday is very popular in Bali with local residents enjoying the new year by not using electricity anywhere. They believe that this occasion is to reflect on oneself without any distractions. 

Furthermore, to every Indonesian, Indonesian Independence day is of the most importance. The celebration may even take place for over a month to remember the day Indonesia found liberation and independence from the colonists. It is also referred to as Hari Merdeka. Last but not least is Pancasila Day when Sukarno - Indonesia’s first president - declared the five important principles in Pancasila, by which the new nation ought to be governed. The principles hold strong life philosophy and Indonesian core values for Indonesians. 

Implications of public holidays for enterprises and companies in respect of the Calculation of Employee Salary and Holidays

Under the Manpower Law, employees can have all national public holidays off. In case employers require their employees to work on those days, they have to pay overtime wages. In accordance with Government Regulation 35/2021, overtime is payable at a rate of 1.5 times the hourly wage for the first hour and twice the hourly wage thereafter. 

In addition, according to Indonesian Regulations 6/2016, all local employees on a permanent basis and temporary basis are eligible for a yearly religious holiday bonus - the so-called Tunjangan Hari Raya (THR), which must be paid in Indonesian Rupiah. Yet, employers do not necessarily pay the THR to foreign employees. 

The Tunjangan Hari Raya (THR)

Indonesians appreciate their diverse religions and collectivist societies. Hence, through public holidays, they spend on significant things to their culture and customs. In this way, THR helps Indonesian people to afford these celebrations. 

THR is equal to the salary of one month for employees with a least 12-month work. Meanwhile, for those with less than 12 months of work, the THR will be paid on a prorated basis, which is calculated as follow:

(service period/12) x 1 month’s salary

In accordance with the amended law, freelance workers are also eligible for THR. Similar to the aforementioned conditions, those working for over 12 continuous months are entitled the THR equal to one month’s salary. This bonus is calculated on the average salary they received throughout this period.

In case employees have worked over 1 month yet less than a year, the THR bonus is calculated based on the average monthly salary throughout the employment period.  

How employers are fined with the non-compliance of THR?

Only businesses with permission from Indonesia’s Ministry of Manpower can delay this allowance payment to employees. Otherwise, they have to face a fine or other alternative administrative sanctions. To be more specific, 

• 5% of the THR is the penalty for delayed payment. Employers are obliged to pay their employees the full THR bonus with the fine without any exceptions. In case the employer is in financial difficulties, they must submit to the local Manpower Department for an exception of 30 days prior to the national religious holiday. 
• Written warning from the Manpower Department,
• Business activities restrictions,
• Temporary suspension of all production; and
• Suspension of business activities within a certain period;

The employees have all rights to sue their employer in the Industrial Relations Court if the employer still delays the THR payment despite the implementation of the sanctions. 

One mindful note for investors in Indonesia is that holidays will affect the tax planning of investors. If the legal and compliance due dates coincide with public holidays, they might be extended. Thus, paying attention to national holidays is essential. Being attentive to public holidays may help investors schedule their tax compliance ahead of the due date, hence fulfilling tax obligations on time. 

To avoid future legal violations, investors are  advised to consult leading experts in the field. In this way, investors can reduce the risk of non-compliance, and legal concerns, thus focusing more on core business activities. With decades  of experience in many Southeast Asia markets, along with a team of seasoned and professional experts insightful of the regional and domestic markets, Viettonkin is willing to accompany and support investors along Indonesian legal procedures and compliance.