HR & Payroll: Winning 2022 Through Total Compliance

As we enter the year that hopefully will become the phase in which our businesses start to heal, we should again take a closer look at our compliance factor. Why? Because remaining compliant will help your business to avoid unwanted, negative exposure. These days, businesses can face PR fiasco as it suddenly goes viral due to some talent complaining on social media. Stay compliance also helps us to avoid lawsuits, guard stakeholders’ trust, and increase retention rate.

One of the most highlighted corporate compliance factors is the one regarding payroll. Companies that fail to treat their talents right in terms of payroll, easily get sacked by the regulators and receive society’s punishment. We’ve heard some viral cases in which companies pay their talents below the actual standard minimum wage in the region, withhold their entitled benefits, etc.

In Indonesia every year, we’re familiar with the official government announcement of standard minimum wage in the coming year. Companies should stay compliant with the updated regulations. As HR, have you paid attention to next year’s wage regulations?
Moreover, there are several payroll elements in Indonesia that you must understand in order to remain compliant:

1. Basic Salary
The basic salary is the wage earned by the employee with a nominal value which is the result of an agreement between the employee and the company, in accordance with the region’s UMP or UMK.

2. Allowance
Unlike the basic salary, allowance is a sum of money that is given to employees based on a purpose, such as a pension plan or a Christmas bonus.

3. Income Tax (PPh 21)
Income Tax or PPh 21 is a tax or deduction on salaries earned by employees based on government regulations. This salary component must be included in the payroll process so that both the employee and the company can meet their tax obligations.

4. Payment of BPJS Health and Employment
Every company that operates in Indonesia and employs people is required to pay BPJS health and BPJS employment. Employees also have to pay both BPJS, but with a smaller percentage than the company.

5. Incentives or Overtime Pay
If an employee is required for overtime by the company, the company is obliged to pay overtime pay to the employee. The government has also issued regulations for this incentive or overtime pay.

Neglecting the compliance aspect will only be hurting your one business, and you could face whopping legal fees from lawsuits. If you’re wanting to remain compliant but feel out of hand with the many priorities within your organisation, you can work it out with MPHRO partners such as KPSG. Contact us now for inquiries.