THR in Indonesia: What It Is, How to Calculate It, and When to Pay

If you employ staff in Indonesia, you are legally required to pay THR (Tunjangan Hari Raya) once a year. THR is a mandatory religious holiday allowance, essentially a 13th month salary that employees receive before their main religious celebration. For the majority of Indonesian employees, this means a bonus payment before Eid al-Fitr at the end of Ramadan.

THR applies to all employers regardless of company size, and covers both permanent and fixed-term contract employees. Missing the payment deadline or paying less than the required amount triggers penalties and can lead to labor disputes.

This guide explains who must receive THR, how to calculate the correct amount, when payment is due, and what happens if you get it wrong.

What Is THR?

THR stands for Tunjangan Hari Raya, which translates to Religious Holiday Allowance. It is a mandatory non-wage benefit that employers must pay to employees before major religious holidays. The legal basis is Minister of Manpower Regulation No. 6 of 2016 (Permenaker 6/2016), which replaced earlier regulations dating back to 1994.

Unlike performance bonuses or discretionary payments, THR is a legal entitlement. Every employee who has worked continuously for at least one month is eligible, regardless of whether they are on a permanent contract (PKWTT) or a fixed-term contract (PKWT). The amount is tied to the employee’s salary and length of service.

THR is paid once per year, timed to the employee’s primary religious holiday. For Muslim employees, this is Eid al-Fitr. For Christian employees, it is Christmas. For Hindu employees, Nyepi. For Buddhist employees, Vesak. For Confucian employees, Chinese New Year. Each employee receives THR before their own religious holiday, not a single company-wide payment date.

In practice, because approximately 87% of Indonesia’s population is Muslim, most companies process the bulk of their THR payments before Eid al-Fitr. But if you have employees of other religions, you need to track their respective holidays and pay accordingly.

Who Is Eligible for THR?

THR applies to all employees who have worked continuously for at least one month as of the religious holiday date. This includes permanent employees (PKWTT), fixed-term contract employees (PKWT), and daily workers who meet the continuity requirement.

1. Permanent employees (PKWTT) are entitled to THR without question. If they have worked for 12 months or more, they receive one full month’s salary. If they have worked between one and twelve months, they receive a prorated amount.
2. Fixed-term contract employees (PKWT) have the same THR rights as permanent employees. A common misconception is that contract workers are not entitled to THR, but this is incorrect. As long as the contract is active at the time of the religious holiday and the employee has worked at least one month continuously, they qualify. If a PKWT contract is renewed without a gap, the tenure is calculated cumulatively across contracts for THR purposes.
3. Daily workers are also eligible if they have worked continuously for at least one month. For daily workers, the ‘one month salary’ used in the calculation is based on the average of their earnings over the previous 12 months (or over their actual tenure if less than 12 months).
4. Freelancers and independent contractors are not entitled to THR because they are not employees. However, if someone is classified as a contractor but their working arrangement resembles employment (set hours, ongoing work, employer supervision), they may be legally reclassified as an employee and would then be entitled to THR along with other employment benefits. Misclassification is a compliance risk.
5. Employees who resign before the holiday may still be entitled to THR depending on timing. If an employee resigns 30 days or less before the religious holiday, they remain entitled to THR calculated as of their resignation date. The payment should be included in their final settlement.

How to Calculate THR

The THR calculation depends on how long the employee has worked and what components make up their salary.

The Basic Formula

Employees with 12 months or more of continuous service: THR equals one month’s salary.

Employees with less than 12 months of continuous service: THR is calculated proportionally using this formula:

THR = (Months of Service / 12) × One Month’s Salary

Months of service are counted from the employee’s start date to the date of the religious holiday. Partial months are typically rounded to the nearest full month for calculation purposes.

What Counts as ‘One Month’s Salary’?

One month’s salary for THR purposes includes the basic salary plus any fixed allowances. Fixed allowances are regular payments that do not vary based on attendance or performance, such as a housing allowance, transport allowance, or meal allowance paid at a consistent amount each month.

Variable components like overtime, commissions, and performance bonuses are generally not included in the THR calculation because they fluctuate. However, if your company has a policy or collective agreement that includes additional components in THR, you must follow that policy if it results in a higher payment than the legal minimum.

Under Permenaker 6/2016, the basic salary should constitute at least 75% of the total of basic salary plus fixed allowances. If your salary structure does not meet this ratio, you may need to adjust how you calculate THR.

THR Calculation Examples

Example 1: Full-year employee with simple salary

Rina has worked at your company for 3 years. Her monthly salary is IDR 8,000,000 with no separate allowances.

THR = IDR 8,000,000 (one full month’s salary)

Example 2: Full-year employee with salary plus fixed allowances

Budi has worked for 18 months. His basic salary is IDR 10,000,000 per month, plus a fixed transport allowance of IDR 1,000,000 and a fixed meal allowance of IDR 500,000.

One month’s salary = IDR 10,000,000 + IDR 1,000,000 + IDR 500,000 = IDR 11,500,000

Since Budi has worked more than 12 months, THR = IDR 11,500,000

Example 3: Employee with less than 12 months

Siti joined the company on September 1, 2025. Eid al-Fitr 2026 falls on March 21. By that date, she will have worked approximately 7 months (September through March). Her monthly salary is IDR 6,000,000.

THR = (7 / 12) × IDR 6,000,000 = IDR 3,500,000

Example 4: Contract employee with renewed contract

Dika was hired on a 12-month PKWT contract starting January 1, 2025. The contract ended December 31, 2025, and was immediately renewed for another 12 months starting January 1, 2026. By Eid al-Fitr on March 21, 2026, Dika’s cumulative tenure is approximately 15 months. His salary is IDR 7,500,000.

Since his tenure exceeds 12 months (contracts are calculated cumulatively when renewed without gaps), THR = IDR 7,500,000

Example 5: Daily worker

Ahmad works as a daily laborer and has been with the company for 8 months. His daily rate varies, but over the past 8 months his total earnings were IDR 32,000,000.

Average monthly earnings = IDR 32,000,000 / 8 = IDR 4,000,000

THR = (8 / 12) × IDR 4,000,000 = IDR 2,666,667

When Must THR Be Paid in Indonesia?

THR must be paid no later than 7 days before the employee’s religious holiday. This is a firm deadline under Permenaker 6/2016, Article 5.

For 2026, Eid al-Fitr is expected to fall on March 20-22 based on the Ministry of Religious Affairs calendar. This means the deadline for THR payment to Muslim employees is March 14, 2026. Many companies pay earlier, around two weeks before the holiday, to give employees more time to prepare for celebrations and travel.

For employees of other religions, the deadline is 7 days before their respective holiday. If you have Christian employees, their THR is due by December 18 (7 days before Christmas). Hindu employees’ THR is due 7 days before Nyepi, and so on.

THR must be paid in full. Installment payments are not permitted under Indonesian law. You cannot split THR into two or three payments, even if cash flow is tight. The full amount must be transferred to the employee by the deadline.

THR must be paid in Indonesian Rupiah. Payment in goods, vouchers, or foreign currency is not allowed. The full THR amount must be deposited as cash into the employee’s account.

Penalties for Late or Non-Payment

Failing to pay THR on time or at all carries financial and administrative penalties under Government Regulation No. 36 of 2021 on Wages and Permenaker 6/2016.

1. 5% penalty for late payment. If you miss the 7-day deadline, you owe an additional 5% of the total THR amount as a penalty. This penalty is calculated from the date the payment was due and does not reduce your obligation to pay the full THR. The penalty funds must be used for employee welfare, not remitted to the government.
2. Administrative sanctions for non-payment. Companies that fail to pay THR entirely face escalating sanctions: first a written warning from labor authorities, then restrictions on business operations, and potentially suspension of production activities if the issue remains unresolved. These sanctions can seriously disrupt your business.
3. Employee complaints. Employees can report THR violations to the local Manpower Office (Disnaker), which may trigger an inspection. The Ministry of Manpower also operates a THR complaint hotline and online portal each year during the pre-holiday period. In 2026, the official complaint portal is at poskothr.kemnaker.go.id.

If your company faces genuine financial hardship and cannot pay THR on time, you must submit a written request for exemption to the local Manpower Office at least 30 days before the religious holiday. This is not an automatic pass; authorities will review your financial situation and may still require partial payment or impose conditions.

Tax Treatment of THR

THR is subject to income tax (PPh 21) just like regular salary. When you pay THR, you must calculate and withhold the appropriate tax before disbursing the net amount to the employee.

Indonesia uses a progressive income tax system with rates ranging from 5% to 35% depending on annual taxable income. Because THR is typically paid in a single month alongside regular salary, the combined income for that month is higher, which may push the employee into a higher tax bracket for that pay period.

Since 2024, Indonesia has used the TER (Tarif Efektif Rata-rata / Average Effective Rate) method for monthly PPh 21 withholding. Under this system, you apply a flat percentage based on the employee’s tax category (single, married with various numbers of dependents) to their gross monthly income. The THR month will have a higher withholding because the gross income is higher.

At year-end, the actual tax liability is reconciled using the standard progressive rates. If the monthly TER withholdings resulted in overpayment, the excess is refunded or credited. This means employees may see a larger tax deduction in the THR month, but it balances out over the year.

For 2026, the government has introduced a tax incentive for workers in labor-intensive sectors earning up to IDR 10 million per month: their PPh 21 is borne by the government under PMK 105/2025. If your employees qualify for this incentive, their THR may be tax-exempt or partially exempt. Check the current regulations to confirm eligibility.

THR for Foreign Employees

Foreign employees (TKA) working in Indonesia under a work permit are entitled to THR on the same basis as Indonesian employees. The religious holiday for THR purposes is based on the employee’s own religion, not the majority religion in Indonesia.

If you have a foreign employee who is Christian, their THR is due before Christmas. If they are Buddhist, before Vesak. The calculation method is the same: one month’s salary for those with 12+ months of service, or a prorated amount for shorter tenure.

Make sure your payroll system tracks each employee’s religion so you can process THR payments at the correct time throughout the year.

Common THR Mistakes to Avoid

• Excluding contract employees. PKWT employees have the same THR rights as permanent staff. Not paying them THR is a violation.
• Resetting tenure on contract renewal. If a fixed-term contract is renewed without a gap, tenure is cumulative for THR purposes. An employee on their third consecutive 12-month contract has 36 months of tenure, not 12.
• Paying in installments. THR must be paid in full by the deadline. Splitting it into multiple payments is illegal regardless of your cash flow situation.
• Missing the deadline for non-Muslim employees. If you only focus on Eid al-Fitr, you may forget that Christian, Hindu, Buddhist, and Confucian employees have their own THR deadlines throughout the year.
• Using gross salary without fixed allowances. THR is based on basic salary plus fixed allowances, not basic salary alone. Excluding fixed components shortchanges your employees.
• Not budgeting for THR. THR is predictable. You know it is coming every year. Build it into your annual budget and cash flow planning so you are not scrambling for funds when the deadline approaches.

THR Payment Checklist

Use this checklist to ensure your THR process is compliant:

• Identify all eligible employees (permanent, contract, and daily workers with 1+ month tenure)
• Confirm each employee’s religion and corresponding religious holiday
• Calculate each employee’s tenure as of the holiday date
• Determine one month’s salary (basic + fixed allowances) for each employee
• Apply the THR formula: full month for 12+ months tenure, prorated for less
• Calculate PPh 21 withholding on the THR amount
• Process payment at least 7 days before the religious holiday
• Pay in full, in Indonesian Rupiah, via bank transfer
• Provide payslips showing the THR amount and any tax withholding
• Document all THR payments for your records and potential audits

Let RecruitGo Handle THR for Your Indonesian Team

THR is one of several mandatory payments that make Indonesian payroll more complex than many foreign companies expect. Beyond THR, you need to manage BPJS contributions, PPh 21 withholding, provincial minimum wage compliance, and annual tax reporting.

RecruitGo’s Employer of Record service in Indonesia handles all of this for you. When you hire through our EOR, we calculate and process THR for each employee based on their tenure, salary, and religious holiday. We ensure payment is made on time, in the correct amount, with proper tax withholding and documentation.

Our local payroll team tracks the religious holidays relevant to your workforce and alerts you in advance when THR payments are due. You do not need to worry about missing deadlines for employees of different religions or making calculation errors that could trigger penalties.

If you are building a team in Indonesia and want to ensure full compliance with THR and other employment obligations without setting up your own entity, talk to us about how our EOR and payroll services work.