Company Registration VS Employer of Record in Indonesia

For businesses looking to expand into Indonesia and hire employees, two of the popular options are incorporating a company or using an Employer of Record (EOR) service. While each approach has its advantages, the choice between these can greatly influence your market entry strategy and operational costs in Indonesia.

In this article, we will take a look at both of these approaches and evaluate which one works best for your particular situation.

Company Incorporation in Indonesia

Incorporating a company in Indonesia as a foreigner involves setting up a PT PMA (Perseroan Terbatas Penanaman Modal Asing), which is a limited liability company for foreign investors. In case of foreign companies, the options include setting up a branch office or a subsidiary.

This process requires significant investment and time but offers full control over operations.

Key requirements for company incorporation in Indonesia

Here are the key requirements to incorporate a company in Indonesia

• Minimum paid-up capital of IDR 10 billion (approximately USD 611,808¹) for foreign owned companies
• At least two shareholders
• Appointment of at least one commissioner and one director
• Obtaining necessary licenses and permits from BKPM (Investment Coordinating Board)

The company incorporation process takes a week, however, the process of securing mandatory licenses and permits to start your operations can take anywhere from 5-14 weeks as it involves registration with various government agencies.

Employer of Record (EOR) in Indonesia

An Employer of Record service in Indonesia provides an alternative way for companies to hire employees without establishing a legal entity. The EOR acts as the legal employer, handling payroll, benefits, and compliance, while the client company manages the day-to-day work of the employees.

When a company uses an EOR service in Indonesia:

1. The EOR becomes the legal employer of the workers in Indonesia.
2. The client company maintains control over the employees’ daily tasks and responsibilities.
3. The EOR handles all employment-related administrative tasks, including payroll, benefits, and compliance with local labor laws.
4. The client company pays the EOR a fee for their services, typically a percentage of the employee’s salary or a flat monthly fee.

Using an EOR enables you to start operations in Indonesia within days or weeks, rather than months, and requires significantly less upfront investment. It is a popular options among companies looking to hire employees in Indonesia and test the market before setting up a legal entity.

Company Incorporation vs EOR in Indonesia

Here’s a comparison of company registration VS employer of record service in Indonesia:

Choosing EOR VS Company Incorporation

Choosing between company incorporation and EOR in Indonesia depends on various factors including your business goals, available resources, timeline, and risk tolerance. To help guide you, our experts have identified specific scenarios where each option may be more advantageous.

Consider the following recommendations based on different business situations:

Not sure which option works best as per your situation? fill out the form below to schedule a free consultation and discuss your needs with our local experts in Indonesia.

Expand Your Business in Indonesia with RecruitGo’s Employer of Record Service

RecruitGo is an Employer of Record Service provider in Indonesia and other Southeast Asian markets that helps foreign companies hire local talent without the need of setting up a company.

Our local experts source top talent as per your requirements, bring them on board, and manage aspects such as payroll and employee benefits in compliance with local laws.

Furthermore, when you are ready to incorporate your company in Indonesia, we will assist you during the setup phase to compliantly transition your employees from EOR to your company.

For more details, fill out the form below and we will put you in touch with our local experts.

1. The exact amount may vary depending on current IDR to USD exchange rate. ↩︎