Glossary

The Labor Code of the Philippines, established under Presidential Decree No. 442 in 1974, serves as the foundational legal framework governing employment practices in the country. It encompasses a comprehensive set of laws that regulate labor standards, labor relations, and social welfare. The code outlines the rights and obligations of both employers and employees, covering aspects such as wages, working hours, benefits, termination procedures, and dispute resolution mechanisms.

Over the years, the Labor Code has undergone various amendments to adapt to the evolving labor landscape and to enhance worker protection. It empowers the Department of Labor and Employment (DOLE) to enforce labor laws, ensuring compliance through inspections, adjudication of disputes, and implementation of labor policies. The code plays a crucial role in promoting social justice and industrial peace by balancing the interests of the workforce and the business sector.

The Social Security System (SSS) is a state-run insurance program mandated by the Philippine government to provide social security protection to private-sector employees, self-employed individuals, and voluntary members. Established in 1957 through Republic Act No. 1161, the SSS offers a range of benefits including retirement pensions, disability and sickness benefits, maternity and paternity leaves, and death and funeral assistance.

Contributions to the SSS are shared between employers and employees, calculated based on the employee’s monthly salary. The system aims to promote social justice by ensuring that workers have financial support during periods of unemployment, illness, or old age. The SSS continually evolves its programs to enhance member benefits and improve service delivery, contributing significantly to the social welfare of Filipinos.

The Pag-IBIG Fund, officially known as the Home Development Mutual Fund, is a government-managed savings program designed to assist Filipino workers in acquiring affordable housing. Established under Presidential Decree No. 1530 in 1978, the fund mobilizes savings from its members to provide housing loans, short-term loans, and other financial services.

Membership to the Pag-IBIG Fund is mandatory for all employees covered by the Social Security System (SSS) and the Government Service Insurance System (GSIS). Contributions are sourced from both employers and employees. The fund plays a pivotal role in addressing the country’s housing needs by offering low-interest loans and flexible payment terms, thereby enhancing the quality of life for many Filipinos through home ownership.

PhilHealth, or the Philippine Health Insurance Corporation, is the national health insurance program established to provide accessible and affordable healthcare services to all Filipinos. Created under Republic Act No. 7875 in 1995, PhilHealth aims to ensure universal health coverage by pooling funds contributed by the government, employers, and individual members.

PhilHealth offers a range of benefits including inpatient care, outpatient treatment, catastrophic coverage, and specific packages for various health conditions. Contributions are mandatory for employed individuals, with premiums shared between employers and employees. By subsidizing healthcare costs, PhilHealth plays a critical role in reducing the financial burden of medical expenses and promoting the overall health and well-being of the population.

Income tax in the Philippines is governed by the National Internal Revenue Code and administered by the Bureau of Internal Revenue (BIR). It is a tax levied on the income of individuals, corporations, and other entities. For individual taxpayers, income tax rates are progressive, meaning the rate increases as the taxable income increases.

Employees’ income taxes are typically withheld at source by employers through the withholding tax system, simplifying the tax payment process. The government utilizes income tax revenues to fund public services, infrastructure projects, and other national programs. Understanding income tax regulations is essential for compliance and effective financial planning for both individuals and businesses.

The minimum wage in the Philippines is the lowest daily or monthly remuneration that employers are legally allowed to pay their workers. It is determined by the Regional Tripartite Wages and Productivity Boards, which consider factors such as the cost of living, inflation rates, and regional socio-economic conditions. As a result, minimum wage rates vary across different regions in the country.

The establishment of minimum wage laws aims to protect workers from unduly low pay and to promote fair income distribution. Employers are required to comply with the prescribed minimum wage rates, and violations can result in penalties. Regular reviews and adjustments ensure that the minimum wage keeps pace with the changing economic environment and the needs of the workforce.

The 13th Month Pay is a mandatory benefit in the Philippines, established under Presidential Decree No. 851. It requires employers to provide an additional month’s salary to their employees, typically disbursed at the end of the year. This benefit applies to all rank-and-file employees who have worked for at least one month during the calendar year.

The 13th Month Pay is calculated based on the total basic salary earned during the year divided by 12. This mandatory bonus serves as a financial boost for employees, especially during the holiday season, and reflects the government’s commitment to enhancing workers’ welfare and purchasing power.

Basic salary refers to the fixed amount of money an employee earns before any additions or deductions are applied. It excludes allowances, bonuses, overtime pay, and other supplemental earnings. The basic salary serves as the foundation for calculating various benefits and deductions, such as social security contributions, income tax, and retirement benefits.

Understanding one’s basic salary is crucial for financial planning and for ensuring that compensation complies with labor laws, including minimum wage regulations. Employers are obligated to clearly state the basic salary in employment contracts, promoting transparency and mutual understanding between the employer and employee.

Overtime pay is additional compensation awarded to employees who work beyond the standard working hours prescribed by law or agreed upon in their employment contract. In the Philippines, the standard workweek consists of eight hours per day or 48 hours per week. Overtime work is compensated at a premium rate, typically 25% more than the regular hourly wage on ordinary days.

The provision for overtime pay is mandated by the Labor Code to protect workers from excessive working hours without adequate compensation. Employers are required to compensate overtime work accordingly, and failure to do so can result in legal penalties. Overtime regulations ensure fair labor practices and help maintain a healthy work-life balance for employees.

Night Shift Differential refers to the additional compensation provided to employees who work during night hours, typically between 10:00 PM and 6:00 AM. Under the Labor Code of the Philippines, employees are entitled to a night shift differential pay of not less than 10% of their regular wage for each hour of work performed during this period.

This provision acknowledges the inconvenience and potential health risks associated with night work. It serves as an incentive for employees who are required to work non-traditional hours, ensuring they are fairly compensated for their efforts during less desirable shifts.

Probationary employment is a trial period for new hires during which the employer evaluates the employee’s performance and suitability for the position. In the Philippines, the probationary period cannot exceed six months from the date the employee started working, unless covered by an apprenticeship agreement stipulating a longer period.

During probation, employees are entitled to the same rights and benefits as regular employees, except for security of tenure. Employers must clearly communicate the standards and criteria for regularization. At the end of the probationary period, the employer decides whether to regularize the employee, extend the probation (if legally permissible), or terminate the employment based on performance.

Regularization is the process by which a probationary employee attains permanent employment status after successfully meeting the standards set by the employer during the probationary period. Once regularized, the employee gains security of tenure, meaning they cannot be dismissed without just or authorized cause and due process.

Regular employees are entitled to all the benefits prescribed by law and company policy, including leave credits, health benefits, and protection against unjust dismissal. Regularization fosters job security and employee morale, encouraging long-term commitment and productivity within the organization.

Termination pay refers to the compensation that an employee is entitled to receive upon the termination of employment. This may include unpaid wages, pro-rated 13th month pay, cash conversions of unused leave credits, and other benefits accrued during employment. The amount and type of termination pay depend on the circumstances surrounding the termination, such as resignation, redundancy, or dismissal for just cause.

In cases of authorized causes like retrenchment or redundancy, employees may also be entitled to separation pay. Employers are obligated to settle all due compensation promptly upon termination, ensuring fair treatment of departing employees and compliance with labor laws.

Separation pay is a monetary benefit granted to employees who are terminated due to authorized causes such as redundancy, retrenchment, closure of the establishment, or illness. The amount is typically calculated based on the employee’s length of service and final salary, often one month’s pay or half a month’s pay for every year of service, depending on the reason for termination.

Separation pay serves as financial assistance to help the affected employee transition during the period of unemployment. It is a legal requirement aimed at providing a safety net for workers who lose their jobs through no fault of their own, reflecting the social justice principles embedded in Philippine labor laws.

Maternity Leave in the Philippines is a statutory benefit that provides paid leave to female employees who are pregnant or have recently given birth. Under the Expanded Maternity Leave Law (Republic Act No. 11210), eligible employees are entitled to 105 days of paid maternity leave, with an option to extend for an additional 30 days without pay.

The law covers all female workers, regardless of marital status or employment arrangement, and includes provisions for solo parents who are granted additional leave days. The benefit aims to support the health and well-being of both mother and child, allowing adequate time for recovery and infant care.

Paternity Leave grants male employees paid leave to support their spouses during and after childbirth. Under the Paternity Leave Act of 1996 (Republic Act No. 8187), eligible married male employees are entitled to seven days of paid paternity leave for the first four deliveries of their legitimate spouse.

This benefit recognizes the father’s role in early child care and supports family bonding. Employers are required to grant paternity leave upon the employee’s request and presentation of the necessary documentation, fostering a family-friendly work environment.

Sick Leave is a provision that allows employees to take paid time off from work due to illness or medical appointments. While not explicitly mandated by Philippine labor laws, many companies offer sick leave as part of their employment benefits or under the Service Incentive Leave provision, which grants five days of paid leave per year after one year of service.

Providing sick leave promotes employee health and productivity by allowing workers to recover from illnesses without financial penalty. Employers may require medical certification for extended absences to ensure the proper use of sick leave benefits.

Vacation Leave allows employees to take paid time off for personal reasons, rest, or recreation. Similar to sick leave, vacation leave is not specifically mandated by law but is commonly offered by employers as part of their benefits package. The Service Incentive Leave under the Labor Code provides for five days of paid leave, which can be used for vacation or sick leave purposes.

Vacation leave contributes to work-life balance, helping prevent burnout and enhancing overall job satisfaction. Employers may have policies outlining the accrual, scheduling, and approval process for vacation leave to ensure minimal disruption to operations.

Leave Conversion is the practice of converting unused leave credits into cash, typically at the end of the year or upon separation from the company. While not mandated by law, many employers in the Philippines offer leave conversion as an additional benefit to incentivize attendance and provide financial rewards.

Policies on leave conversion vary by company, including which types of leave are convertible and any limitations on the number of days that can be converted. This practice benefits employees by providing flexibility and additional income, while employers benefit from reduced absenteeism.

Retirement Benefits in the Philippines include mandatory retirement pay for employees who have reached the retirement age of 60 (optional) or 65 (mandatory) and have served at least five years with the company, as stipulated in the Labor Code. The minimum retirement pay is equivalent to one-half month’s salary for every year of service.

These benefits serve as a financial cushion for employees transitioning out of the workforce. Employers may offer additional retirement benefits through company-sponsored retirement plans or contribute to the employee’s Social Security System (SSS) pension, enhancing the retiree’s financial security.

A Payroll System is a structured process used by organizations to calculate and distribute salaries to employees accurately and timely. It involves computing gross pay, deducting taxes, contributions (SSS, PhilHealth, Pag-IBIG), and other deductions, and ensuring compliance with labor laws and tax regulations.

Efficient payroll systems can be manual, semi-automated, or fully automated using specialized software. They play a critical role in maintaining employee satisfaction, ensuring legal compliance, and providing financial records for auditing and reporting purposes.

Withholding Tax is the amount of income tax that employers are required to deduct from their employees’ salaries and remit directly to the Bureau of Internal Revenue (BIR). This system ensures that income taxes are collected regularly throughout the year, simplifying the tax payment process for employees.

The amount withheld is based on the employee’s taxable income and applicable tax rates. Proper computation and remittance of withholding taxes are crucial for compliance with tax laws, and failure to do so can result in penalties for the employer.

Employee Contributions refer to the mandatory deductions from an employee’s salary for government-mandated benefits such as the Social Security System (SSS), PhilHealth, and Pag-IBIG Fund. These contributions are usually matched or supplemented by the employer and are essential for funding the employee’s social security, health insurance, and housing benefits.

Understanding these contributions helps employees appreciate the benefits they are entitled to and ensures transparency in salary computations. Employers are responsible for accurately deducting and remitting these contributions to the respective government agencies.

The 13th Month Pay Law, established under Presidential Decree No. 851, mandates all employers in the Philippines to provide rank-and-file employees with a 13th-month pay equivalent to one-twelfth of the basic salary earned within the calendar year. This benefit must be given not later than December 24 each year.

The law aims to augment the income of employees during the holiday season, promoting their welfare and boosting consumer spending. Employers are required to comply with this law, and failure to do so can result in legal sanctions.

Holiday Pay is additional compensation provided to employees who work on regular holidays designated by the government. Under the Labor Code, employees who do not work on regular holidays are entitled to receive 100% of their daily rate, while those who work are entitled to 200% of their regular rate for the first eight hours.

This provision recognizes the importance of holidays and compensates employees who sacrifice their rest days to maintain essential services. Employers must observe the holiday pay rules to comply with labor regulations and promote fair labor practices.

Double Pay refers to the compensation given to employees who work on special non-working holidays or rest days. In the Philippines, if an employee works on a special holiday, they are entitled to an additional 30% of their basic daily rate. If the special holiday coincides with their rest day, they receive 50% extra.

These rates incentivize employees to work on days typically reserved for rest and personal time, ensuring that businesses can continue operations when needed. Proper computation and payment of double pay are essential for compliance and employee satisfaction.

A Rest Day is a day-off granted to employees, typically once a week, as mandated by the Labor Code. It is essential for the health and well-being of workers, allowing them time to rest and attend to personal matters. Employers must provide a rest day after every six consecutive working days.

While the employer determines the schedule of rest days, they must respect the religious beliefs and practices of employees when assigning these days. Employees may agree to work on their rest day but are entitled to premium pay for such work, promoting fair labor standards.

A Work Permit is an official document required for foreign nationals seeking employment in the Philippines. Issued by the Department of Labor and Employment (DOLE), the Alien Employment Permit (AEP) allows foreigners to legally work in the country. Employers must prove that the position cannot be filled by a Filipino citizen before hiring a foreign worker.

The work permit process ensures that employment opportunities are first made available to local workers and regulates the employment of foreigners. Compliance with work permit requirements is crucial to avoid legal penalties and promote lawful employment practices.

Tax Exemptions are provisions that reduce the taxable income of individuals, thereby lowering their income tax liability. In the Philippines, personal and additional exemptions were previously granted for dependents and other factors but were simplified with the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Under the TRAIN Law, individuals earning below a certain threshold are exempt from paying income tax, while others benefit from lower tax rates. Understanding tax exemptions helps employees and employers accurately compute withholding taxes and comply with tax regulations.

The Cost of Living Allowance (COLA) is an additional compensation granted to employees to help offset the effects of inflation and rising living costs. In the Philippines, COLA is prescribed by the Regional Tripartite Wages and Productivity Boards and varies by region.

COLA is integrated into the minimum wage computations and is mandatory for covered workers. It ensures that employees maintain their purchasing power despite economic changes, contributing to their overall welfare and job satisfaction.

Night Shift Pay, also known as Night Differential Pay, is the additional compensation for employees who work during the night shift hours, typically from 10:00 PM to 6:00 AM. Employees are entitled to at least 10% extra pay over their regular wage for each hour worked during this period.

This pay acknowledges the challenges and health risks associated with night work. Employers are required to provide night shift pay to eligible employees, ensuring fair compensation for those working outside regular daytime hours.

Overtime Rates refer to the premium pay rates applied to hours worked beyond the standard eight-hour workday. In the Philippines, the overtime rate is typically 125% of the regular hourly rate on ordinary days. Higher rates apply for overtime work performed on rest days, special holidays, or regular holidays.

Understanding overtime rates is essential for both employers and employees to ensure accurate compensation and compliance with labor laws. Employers must properly calculate and compensate overtime to promote fair labor practices and avoid legal issues.

Contractual Employment involves hiring workers on a temporary basis for a specific period or project, as defined in a contract. While allowed under Philippine law, contractual employment must adhere to regulations that prevent labor-only contracting and ensure that workers’ rights are protected.

Contractual employees are entitled to labor standards benefits such as minimum wage, overtime pay, and 13th month pay. Employers must ensure that contractual arrangements are lawful and do not circumvent employee regularization or deny statutory benefits.

End of Contract (ENDO) refers to the practice of terminating contractual employees before they reach the six-month threshold that would qualify them for regularization. This practice denies workers the benefits and security of tenure afforded to regular employees.

ENDO has been a contentious labor issue in the Philippines, prompting government efforts to regulate contractualization and protect workers’ rights. Employers are urged to comply with labor laws regarding employment status to promote fair employment practices.

A Labor Advisory is an official communication issued by the Department of Labor and Employment (DOLE) providing guidance on labor laws, policies, and practices. These advisories address various topics, including wage adjustments, holiday pay rules, and health and safety guidelines.

Labor advisories serve as important references for employers and employees to ensure compliance with current labor regulations. Staying informed about these advisories helps organizations adapt to legal changes and maintain lawful employment practices.

A Labor Union is an organization formed by workers to collectively negotiate with employers on matters such as wages, working conditions, and benefits. In the Philippines, the right to form and join labor unions is protected under the Constitution and the Labor Code.

Labor unions engage in collective bargaining, represent members in disputes, and advocate for workers’ rights. They play a crucial role in promoting fair labor practices, improving employment terms, and enhancing workplace democracy.

Workers’ Rights encompass the legal entitlements and protections granted to employees under the Labor Code and other labor laws. These rights include fair wages, safe working conditions, freedom from discrimination, the right to organize, and protection against unjust dismissal.

Understanding and upholding workers’ rights is essential for promoting social justice and industrial peace. Employers are obligated to respect these rights, and violations can result in legal consequences and damage to the organization’s reputation.

A Work Visa is an official authorization that allows foreign nationals to enter and work in the Philippines legally. The most common work visa is the 9(g) Pre-Arranged Employment Visa, which requires securing an Alien Employment Permit (AEP) from DOLE.

The work visa process involves multiple government agencies and strict compliance with immigration and labor regulations. Employers hiring foreign workers must ensure all legal requirements are met to avoid penalties and promote lawful employment.

A Collective Bargaining Agreement (CBA) is a written contract between an employer and a labor union representing the employees. The CBA outlines negotiated terms and conditions of employment, including wages, hours, benefits, grievance procedures, and other workplace issues.

CBAs are legally binding and play a significant role in defining labor relations within an organization. They are a product of collective bargaining, aiming to balance the interests of both employees and employers and to promote harmonious working relationships.

Hazard Pay is additional compensation granted to employees who perform hazardous or risky jobs that pose potential harm to their health and safety. In the Philippines, hazard pay rates and eligibility are determined by government regulations and company policies.

Providing hazard pay acknowledges the increased risks associated with certain jobs and compensates employees accordingly. Employers must identify hazardous positions and ensure that appropriate compensation and safety measures are in place.

A Job Contract is a formal agreement between an employer and an employee outlining the terms and conditions of employment. It includes details such as job responsibilities, salary, benefits, working hours, and duration of employment.

Having a clear and comprehensive job contract protects the interests of both parties by setting expectations and providing a legal framework for the employment relationship. It is essential for ensuring compliance with labor laws and for resolving any future disputes.

Service Incentive Leave is a statutory benefit under the Labor Code that grants employees who have rendered at least one year of service five days of paid leave annually. This leave can be used for vacation or sick leave purposes.

The Service Incentive Leave promotes employee well-being by providing time off for rest and personal matters. Employers are required to grant this leave, and unused leave may be converted to cash, depending on company policy.

Termination for Just Cause refers to the lawful dismissal of an employee due to serious misconduct, willful disobedience, gross neglect of duties, fraud, or commission of a crime against the employer or their family. The Labor Code outlines specific grounds that constitute just cause for termination.

Employers must follow due process when terminating for just cause, including providing written notice and conducting a fair investigation. Adhering to legal procedures protects the employer from potential legal disputes and upholds the principles of fairness.

Illegal Dismissal occurs when an employee is terminated without just or authorized cause or without following due process as required by law. Victims of illegal dismissal are entitled to remedies such as reinstatement, back wages, or compensation.

Employers must exercise caution and comply with legal requirements when terminating employees to avoid claims of illegal dismissal. Proper documentation and adherence to procedures are essential for lawful termination.

An Employee Handbook is a document provided by employers that outlines company policies, procedures, code of conduct, and expectations for employees. It serves as a reference for organizational rules, benefits, disciplinary measures, and other employment-related matters.

Having an employee handbook promotes transparency, consistency, and understanding within the organization. It helps prevent misunderstandings and provides a basis for resolving issues that may arise during employment.

Equal Employment Opportunity refers to the principle of non-discrimination in hiring, promotion, compensation, and other employment practices. Employers are prohibited from discriminating based on race, gender, age, religion, marital status, disability, or other protected characteristics.

Adhering to equal employment opportunity laws fosters a diverse and inclusive workplace, enhances the organization’s reputation, and ensures compliance with legal standards. Employers should implement fair policies and practices to uphold this principle.

Workplace Safety involves regulations and practices aimed at ensuring a safe and healthy working environment for employees. In the Philippines, the Occupational Safety and Health Standards (OSHS) set guidelines for hazard control, emergency preparedness, and employee training.

Employers are responsible for providing safe working conditions, conducting regular risk assessments, and complying with safety regulations. Promoting workplace safety reduces the risk of accidents, enhances productivity, and demonstrates a commitment to employee welfare.

Voluntary Resignation occurs when an employee chooses to terminate their employment of their own accord. Employees are typically required to provide written notice, often 30 days in advance, as stipulated in the Labor Code or their employment contract.

Proper resignation procedures allow for a smooth transition and enable employers to find a replacement without disrupting operations. Employers must settle all due compensation upon the employee’s departure, including unpaid wages and benefits.

Compensation and Benefits encompass the total remuneration package provided to employees, including basic salary, bonuses, allowances, health insurance, retirement plans, and other perks. A competitive compensation and benefits package is crucial for attracting and retaining talent.

Employers must balance financial considerations with market standards and employee expectations. Transparent communication about compensation and benefits fosters trust and enhances job satisfaction.

An Employee Retirement Plan is a program established by an employer to provide financial benefits to employees upon retirement. This may include pension schemes, provident funds, or contributions to the Social Security System (SSS).

Retirement plans help employees prepare for their future financial needs and reflect the employer’s commitment to their long-term welfare. Offering retirement benefits can enhance employee loyalty and position the company as an employer of choice.

The Luật Lao Động, or Labor Law of Vietnam, is the fundamental legal framework governing employment relationships in the country. It outlines the rights and obligations of both employers and employees, covering various aspects such as employment contracts, wages, working hours, labor discipline, occupational safety, and social insurance. The law aims to protect workers’ rights while promoting harmonious labor relations and economic development.

Initially enacted in 1994, the Labor Law has undergone several amendments to adapt to the evolving socio-economic landscape and international labor standards. The most recent significant revision took effect in January 2021, introducing changes like extending the retirement age, providing more flexibility in labor contracts, and enhancing protections against workplace discrimination and harassment. Compliance with the Labor Law is mandatory, and violations can result in legal penalties, including fines and suspension of business operations.

Lương cơ bản refers to the basic salary an employee receives before any additional benefits, allowances, bonuses, or deductions are applied. It serves as the foundational component of an employee’s compensation package and is crucial for calculating various statutory contributions such as social insurance, health insurance, and unemployment insurance.

Understanding the basic salary is essential for both employers and employees, as it affects not only the net take-home pay but also the calculation of overtime pay, severance allowances, and other labor-related benefits. The basic salary must comply with the regional minimum wage regulations set by the government, ensuring that employees receive fair and legal compensation for their work.

Bảo hiểm xã hội (BHXH), or Social Insurance, is a mandatory program in Vietnam designed to provide social security benefits to employees. Administered by the Vietnam Social Security (VSS), the program covers benefits such as sickness, maternity leave, occupational accidents and diseases, retirement pensions, and survivorship allowances.

Both employers and employees are required to contribute to the social insurance fund. The contribution rates are stipulated by the government and are based on the employee’s salary. As of October 2023, employers contribute 17.5% while employees contribute 8% of the salary used for social insurance calculation. Participation in the social insurance program is essential for safeguarding employees’ welfare and ensuring financial support in times of need.

Bảo hiểm thất nghiệp (BHTN), or Unemployment Insurance, is a compulsory insurance program aimed at providing financial assistance to employees who lose their jobs. Managed by the VSS, the program offers benefits such as unemployment allowances, vocational training support, and job placement services.

Both employers and employees contribute to the unemployment insurance fund, typically at rates of 1% of the salary used for social insurance calculation from each party. To be eligible for unemployment benefits, employees must have contributed to the fund for a certain period and meet specific conditions, such as registering with an employment service center. The program plays a crucial role in mitigating the financial impact of unemployment on workers.

Bảo hiểm y tế (BHYT), or Health Insurance, is a mandatory insurance program designed to provide affordable healthcare services to employees and citizens in Vietnam. Administered by the VSS, it offers coverage for medical examinations, treatments, and hospitalization costs at designated healthcare facilities.

Contributions to the health insurance fund are shared between employers and employees. Employers typically contribute 3%, and employees contribute 1.5% of the salary used for social insurance calculation. The health insurance program ensures that employees have access to necessary medical services without incurring prohibitive costs, promoting public health and well-being.

Thuế thu nhập cá nhân (TNCN), or Personal Income Tax, is levied on the income of individuals in Vietnam. It applies to various sources of income, including salaries, business activities, capital investments, and other earnings. Vietnam employs a progressive tax rate system, where the tax rate increases with higher income levels, ranging from 5% to 35%.

Employers are responsible for withholding personal income tax from employees’ salaries and remitting it to the tax authorities. Employees may be eligible for certain deductions and allowances, such as family circumstance deductions, which reduce taxable income. Annual tax finalization is required to ensure accurate tax payments and compliance with tax laws.

Tiền thưởng refers to bonuses provided to employees in addition to their regular salary. Bonuses can be discretionary or contractual and may be awarded based on individual performance, company profitability, or special occasions like the Lunar New Year (Tet). In Vietnam, it is common for employers to offer a “13th-month salary” as a year-end bonus.

Bonuses serve as incentives to motivate employees, improve productivity, and reward contributions to the organization’s success. While not mandated by law, any agreed-upon bonuses should be clearly outlined in the employment contract or company policies. Bonuses are subject to personal income tax and must be included in tax calculations.

A Hợp đồng lao động xác định thời hạn is a fixed-term employment contract specifying a definite duration of employment. Under Vietnamese labor law, a fixed-term contract can have a duration of up to 36 months. Upon expiration, the contract can be renewed once; subsequent renewals may require conversion to an indefinite-term contract.

Fixed-term contracts must include essential details such as job description, salary, working hours, and conditions of termination. They provide flexibility for employers to meet short-term staffing needs while offering employees clear expectations about the employment period. Employers must ensure that fixed-term contracts comply with legal requirements to avoid labor disputes.

Lương tối thiểu vùng refers to the regional minimum wage rates set by the Vietnamese government, varying based on geographic location and cost of living. The country is divided into several regions (Region I to IV), with Region I encompassing major cities like Hanoi and Ho Chi Minh City, where the minimum wage is highest.

Employers are required to pay employees at least the minimum wage corresponding to their region. The regional minimum wage is periodically adjusted to reflect economic conditions and inflation. Compliance ensures that employees receive fair compensation to meet basic living expenses, contributing to social equity and labor stability.

Lương thử việc is the salary paid to employees during the probationary period of their employment. Under Vietnamese labor law, the probationary period can last up to 60 days for most jobs and up to 180 days for certain specialized positions. During this time, the employee and employer assess suitability for the position.

The probationary salary must be at least 85% of the official salary for the position, as stipulated in the employment contract. Employers must specify the probationary terms, including duration and salary, in the labor contract or a separate probation agreement. Fair probationary practices help ensure mutual satisfaction and legal compliance.

Thời gian làm việc refers to the standard working hours prescribed by Vietnamese labor law. The maximum regular working hours are eight hours per day and 48 hours per week. Employers and employees can agree on flexible arrangements, but the total working hours should not exceed these limits.

Employers are required to provide at least one full day off per week, typically on Sundays. Any deviation from standard working hours must comply with legal provisions, and employers must ensure that working conditions promote employee health and safety. Adherence to working hour regulations helps prevent overwork and promotes a healthy work-life balance.

Giờ làm thêm refers to overtime work performed beyond standard working hours. Vietnamese labor law allows for overtime under certain conditions, but it must not exceed 50% of the normal working hours in a day or 40 hours in a month. Annual overtime must not exceed 200 hours, or 300 hours in special cases specified by the government.

Employees must consent to overtime work, and employers are required to pay overtime wages at premium rates. Overtime pay is at least 150% of the regular hourly wage on normal days, 200% on weekly days off, and 300% on public holidays. Proper management of overtime ensures compliance and protects employee rights.

Lương làm thêm giờ is the additional salary paid to employees for overtime work. As mandated by labor law, overtime pay rates are calculated based on the employee’s actual hourly wage and must include the statutory premiums. The calculation ensures that employees are fairly compensated for extra hours worked beyond the standard schedule.

Employers must accurately compute and promptly pay overtime salaries, reflecting the correct rates for normal days, rest days, and holidays. Proper documentation and transparent communication about overtime policies are essential for maintaining trust and avoiding labor disputes.

Báo cáo thuế involves the preparation and submission of tax declarations to the Vietnamese tax authorities. Employers are responsible for reporting and remitting taxes on behalf of their employees, including personal income tax, value-added tax (VAT), and corporate income tax. Regular tax reporting ensures compliance with legal obligations and contributes to national revenue.

Tax reporting deadlines and requirements are stipulated by the tax authorities and may vary based on the type of tax and the taxpayer’s status. Accurate tax reporting requires meticulous record-keeping and adherence to regulations. Failure to comply can result in penalties or audits.

Chế độ thai sản refers to the maternity leave benefits provided to female employees in Vietnam. Under labor law, eligible female employees are entitled to six months of maternity leave, with the option to start the leave up to two months before the expected delivery date. During this period, the employee receives maternity benefits paid by the social insurance fund.

The maternity benefit amount is calculated based on the average salary used for social insurance contributions in the six months preceding the leave. Additionally, female employees may receive a lump-sum allowance for childbirth expenses. These provisions support the health and well-being of both mother and child, promoting gender equality and family welfare.

Chế độ ốm đau covers sick leave entitlements for employees unable to work due to illness or injury. Employees participating in the social insurance program are eligible for sick leave benefits paid by the social insurance fund. The duration of sick leave depends on the working conditions and length of service but generally ranges from 30 to 60 days per year.

The sick leave allowance is a percentage of the salary used for social insurance contributions, typically ranging from 75% to 100%. Employers must facilitate the process by providing necessary documentation and ensuring that employees’ rights are protected during periods of illness.

Quyền lợi bảo hiểm refers to the insurance benefits employees receive through mandatory social, health, and unemployment insurance programs. These benefits include medical care, sickness allowances, maternity benefits, unemployment allowances, retirement pensions, and survivor benefits.

Participation in these insurance programs is compulsory for both employers and employees. Understanding and accessing these benefits is crucial for employees’ financial security and well-being. Employers play a key role in facilitating contributions and educating employees about their entitlements.

Chế độ nghỉ phép năm pertains to the annual leave that employees are entitled to under Vietnamese labor law. Employees who have worked for 12 months are entitled to at least 12 working days of paid annual leave. Those working under heavy, hazardous conditions or in remote areas may receive additional leave days.

Annual leave accrues based on the length of service, with one additional day added for every five years of employment with the same employer. Employers must schedule annual leave in consultation with employees, ensuring that business operations continue smoothly while respecting employees’ rights to rest and recreation.

Tiền lương thực tế refers to the net salary an employee receives after all mandatory deductions, such as personal income tax and social insurance contributions, have been subtracted from the gross salary. This amount represents the actual take-home pay available to the employee for personal use.

Understanding the difference between gross and net salary is important for financial planning and transparency. Employers should provide clear pay slips detailing all deductions to promote trust and compliance with legal requirements.

Chi phí lương encompasses the total payroll expenses incurred by employers, including gross salaries, bonuses, allowances, and employer contributions to social insurance, health insurance, and unemployment insurance. These costs are significant components of an organization’s operating expenses.

Effective management of payroll costs involves compliance with labor laws, strategic compensation planning, and budgeting. Employers must balance the need to attract and retain talent with financial sustainability, ensuring that compensation packages are competitive and lawful.

Thanh toán tiền lương refers to the process of calculating, disbursing, and recording employee salaries. This includes determining gross pay, applying deductions for taxes and insurance, and ensuring timely payment to employees. The payroll process must comply with legal regulations regarding pay frequency, record-keeping, and reporting.

Efficient payroll management is essential for maintaining employee satisfaction and operational efficiency. Employers may use payroll software or outsource to professional services to handle complex calculations and compliance requirements.

Giảm trừ gia cảnh are tax deductions provided for personal and family circumstances, reducing the taxable income for personal income tax purposes. Deductions are available for taxpayers themselves and their dependents, such as children under 18 years old, spouses without income, and elderly parents.

As of October 2023, the standard deduction for taxpayers is VND 11 million per month, and VND 4.4 million per dependent per month. Proper declaration of dependents allows employees to benefit from lower tax liabilities. Employers must assist in collecting necessary documentation to apply these deductions correctly.

Chế độ hưu trí refers to the retirement benefits available to employees through the social insurance system. Employees who have reached the retirement age (gradually increasing to 62 for men and 60 for women under recent reforms) and have contributed to social insurance for the required number of years are eligible for a monthly pension.

The pension amount is calculated based on the average salary used for social insurance contributions and the number of contribution years. Retirement benefits provide financial security for employees in their post-working years, reflecting the social safety net provided by the government.

Chi phí bảo hiểm includes the contributions that employers are required to make towards social insurance, health insurance, and unemployment insurance on behalf of their employees. These contributions are calculated as a percentage of the salary used for insurance purposes and represent a significant expense for employers.

Employers must accurately calculate and timely remit these contributions to the VSS. Failure to comply can result in penalties, interest charges, and legal action. Proper management of insurance costs is essential for financial planning and legal compliance.

Người lao động nước ngoài refers to foreign nationals employed in Vietnam. Foreign workers are subject to specific regulations, including work permit requirements, tax obligations, and participation in certain social insurance programs. Employers hiring foreign workers must ensure compliance with immigration and labor laws.

As per recent regulations, foreign employees with a labor contract of at least one year are required to participate in compulsory social insurance for certain benefits. Understanding the legal requirements for foreign workers is crucial for avoiding legal penalties and fostering a diverse workforce.

Giấy phép lao động is a work permit required for foreign nationals to legally work in Vietnam. Issued by the Department of Labor, Invalids and Social Affairs (DoLISA), the work permit is typically valid for up to two years and can be renewed. Employers must sponsor the work permit application and provide necessary documentation.

Exemptions from work permit requirements exist for certain categories, such as investors or intra-company transferees. Compliance with work permit regulations is essential for lawful employment of expatriates and avoiding fines or deportation.

Visa lao động refers to the visa category that allows foreign nationals to enter and stay in Vietnam for employment purposes. Commonly, the LD (Labor) visa is issued to foreigners with a valid work permit. The visa duration aligns with the validity of the work permit and must be obtained before commencing employment.

Employers must assist foreign employees in securing the appropriate visa, which may involve obtaining an entry visa, temporary residence card, or multiple-entry visa. Adherence to visa regulations is critical for legal residency and employment in Vietnam.

Quy định lao động encompasses the various laws, decrees, circulars, and guidelines that govern employment relationships in Vietnam. Key regulations include the Labor Law, Social Insurance Law, and decrees issued by the government to implement these laws.

Employers and employees must familiarize themselves with these regulations to ensure compliance. Employment regulations cover topics such as contracts, wages, working hours, labor disputes, and occupational safety. Non-compliance can result in legal penalties and damage to the organization’s reputation.

Đào tạo nhân viên refers to training and development activities provided by employers to enhance employee skills and competencies. In certain industries, such as construction or manufacturing, employee training on occupational safety and health is mandated by law.

Investment in employee training benefits both the employer and employees by improving productivity, job satisfaction, and compliance with professional standards. Employers may also be required to provide training when introducing new technologies or processes.

Phúc lợi nhân viên encompasses the various benefits employers provide to employees beyond basic salary. These may include bonuses, allowances, health insurance supplements, meal allowances, transportation, housing support, and other perks.

While some benefits are mandated by law, such as social insurance contributions, others are offered at the employer’s discretion to attract and retain talent. A comprehensive benefits package enhances employee satisfaction and competitiveness in the labor market.

Nghỉ lễ quốc gia refers to the paid leave employees are entitled to on national public holidays. Vietnamese labor law stipulates 11 official public holidays, during which employees are entitled to full pay without being required to work.

If employees work on public holidays, they must be compensated at a rate of at least 300% of their regular wage, excluding the regular salary for the day. Observing national holiday regulations respects cultural traditions and legal requirements.

Tiền lương theo hợp đồng is the salary amount agreed upon in the employment contract between the employer and the employee. This salary forms the basis for calculating benefits, taxes, and contributions. It should comply with minimum wage laws and reflect the job’s requirements and market rates.

The employment contract must clearly state the salary, payment frequency, and any additional allowances or bonuses. Transparency in salary agreements fosters trust and legal compliance.

Chi phí quản lý nhân sự refers to the costs associated with managing human resources, including recruitment, training, payroll administration, compliance, and employee relations. Effective HR management is essential for organizational success and involves both direct expenses and time investments.

Employers must budget for HR management costs and consider the return on investment in terms of employee performance, retention, and compliance with labor laws.

Chính sách đãi ngộ are policies that outline the compensation and benefits framework within an organization. These policies cover salary structures, bonus schemes, allowances, benefits, and criteria for salary increases or promotions.

Well-designed compensation and benefits policies help attract and retain talent, motivate employees, and ensure fairness and competitiveness. Employers should regularly review and update these policies to align with market trends and organizational goals.

Điều khoản hợp đồng are the specific clauses and conditions outlined in an employment contract. These terms define the rights and obligations of both the employer and the employee, including job responsibilities, salary, benefits, working hours, termination conditions, and dispute resolution mechanisms.

Clear and comprehensive contract terms are essential for legal compliance and preventing misunderstandings. Both parties should thoroughly review and agree upon the contract terms before signing.

Nghỉ phép không lương refers to periods of leave taken by an employee without pay, often for personal reasons such as extended travel, study, or family matters. While not explicitly regulated by law, unpaid leave is typically granted based on mutual agreement between the employer and the employee.

Employers may have policies outlining the conditions and maximum duration of unpaid leave. Granting unpaid leave can support employee well-being and retention, but employers must consider operational impacts.

Hợp đồng thời vụ is a seasonal or temporary employment contract used for hiring workers to meet seasonal demand or temporary workload increases. These contracts have a fixed duration and must comply with labor laws regarding contract types and durations.

Employers must ensure that seasonal contracts include essential terms and that employees receive statutory benefits and protections. Proper use of seasonal contracts allows flexibility while maintaining legal compliance.

Điều kiện lao động encompasses the physical and psychological environment in which employees perform their work. This includes factors such as workplace safety, ergonomics, working hours, rest breaks, and access to facilities.

Employers are responsible for providing safe and healthy working conditions as mandated by labor laws and occupational safety regulations. Good working conditions enhance employee well-being, productivity, and job satisfaction.

Quyền lợi lương hưu refers to pension benefits that employees receive upon retirement, primarily through the social insurance system. The pension provides a stable income for retirees based on their contribution history and salary levels.

Employers contribute to the social insurance fund, which finances pension benefits. Understanding pension entitlements helps employees plan for retirement and underscores the importance of continuous social insurance participation.

Tiền trợ cấp thôi việc is severance pay provided to employees upon termination under certain conditions, such as contract expiration without renewal or dismissal due to organizational restructuring. The severance amount is typically calculated based on half a month’s salary for each year of service.

Employers are obligated to pay severance in accordance with labor laws, ensuring fair compensation for employees who lose their jobs through no fault of their own. Proper calculation and timely payment of severance pay are essential for legal compliance and ethical employment practices.

Cắt giảm nhân sự refers to the reduction of employees due to restructuring, downsizing, or economic difficulties. Employers must follow legal procedures when conducting layoffs, including consulting with labor authorities, notifying employees, and providing severance pay where applicable.

Workforce reduction must be handled carefully to minimize legal risks and maintain organizational reputation. Transparent communication and adherence to labor laws are critical during such processes.

Tiền làm thêm ngày lễ is the additional pay provided to employees who work on public holidays. The labor law mandates that employees receive at least 300% of their regular wage for hours worked on public holidays, not including the regular salary for the holiday.

Employers must accurately calculate and compensate employees for holiday work, ensuring compliance with legal requirements and fair treatment of those who work during these times.

Báo cáo lao động involves submitting periodic reports to labor authorities, such as the Department of Labor, Invalids and Social Affairs. Reports may include information on labor usage, employment changes, occupational safety incidents, and compliance with labor regulations.

Timely and accurate labor reporting is a legal obligation and aids government oversight of employment practices. Failure to submit required reports can result in penalties and increased scrutiny.

Phí bảo hiểm xã hội refers to the contribution rates for social insurance, set by the government. As of October 2023, the total contribution rate is 25.5% of the salary used for insurance purposes, with employers contributing 17.5% and employees contributing 8%.

These contributions fund various social security benefits, including pensions, sickness allowances, and maternity benefits. Employers must accurately calculate and remit contributions to the VSS to comply with legal obligations.

Quy định nghỉ việc encompasses the legal provisions governing the termination of employment contracts. Termination may occur due to contract expiration, mutual agreement, employee resignation, or dismissal for cause. Employers must follow proper procedures, provide notice, and, in some cases, obtain consent from labor authorities.

Non-compliance with termination regulations can result in legal disputes, compensation claims, and damage to the employer’s reputation. Clear understanding and adherence to these regulations are essential for lawful employment practices.

Chế độ phúc lợi refers to the welfare benefits provided to employees, which may include health programs, life insurance, childcare support, and wellness initiatives. These benefits aim to improve employees’ quality of life and job satisfaction.

While not all welfare benefits are mandated by law, offering such programs can enhance employee engagement, productivity, and retention. Employers should consider employee needs and organizational capabilities when designing welfare benefits.

Công đoàn refers to labor unions and the rights of employees to organize and participate in union activities. Vietnamese law recognizes the role of labor unions in representing workers’ interests, negotiating collective bargaining agreements, and ensuring compliance with labor laws.

Employers must respect employees’ rights to unionize and collaborate with unions on labor-related matters. Positive labor-management relations contribute to a stable and productive work environment.

Hỗ trợ chi phí sinh hoạt includes allowances provided by employers to help employees cover living expenses, such as housing, transportation, and meal allowances. These allowances can enhance the overall compensation package and support employee well-being.

While some allowances may be taxable, others may be exempt under certain conditions. Employers should structure living cost allowances in compliance with tax regulations and consider their impact on employee satisfaction.

BPJS (Badan Penyelenggara Jaminan Sosial) is Indonesia’s social security agency responsible for administering the country’s national healthcare and employment insurance programs. There are two main components of BPJS: BPJS Kesehatan (for health insurance) and BPJS Ketenagakerjaan (for employment insurance). BPJS Kesehatan provides health coverage for both employees and non-employees, covering a wide range of medical services from preventive care to hospitalization.

On the other hand, BPJS Ketenagakerjaan offers protections like workplace accident insurance, death benefits, old-age savings, and pension programs. Employers are required by law to enroll all their employees in both BPJS Kesehatan and BPJS Ketenagakerjaan and make regular contributions on their behalf. The contribution rates are determined based on a percentage of an employee’s salary, with employers covering the bulk of the payments. BPJS not only ensures social security for employees but also creates a standardized system that employers must comply with to avoid penalties.

UMP stands for Upah Minimum Provinsi, or Provincial Minimum Wage, which refers to the minimum salary that employers are obligated to pay their employees, based on the province where they are located. The Indonesian government sets different minimum wages across its provinces, taking into consideration factors like the cost of living, inflation, and local economic conditions. UMP is updated annually and serves as a guideline for employers to ensure fair compensation to their workers.

Employers who do not comply with the UMP requirements may face legal consequences, including fines or sanctions. The UMP typically applies to unskilled workers or entry-level positions, but it also serves as a reference point for negotiating wages for more experienced professionals. In provinces with higher living costs, such as Jakarta or Bali, the UMP is generally higher compared to more rural or less economically developed regions. For companies using EOR services, adhering to the UMP is critical to ensure compliance with local labor laws and to avoid disputes with employees.

UMK, or Upah Minimum Kabupaten/Kota, is the minimum wage set at the city or regency level, which can be higher than the UMP (provincial minimum wage). In regions with significant economic activity, local governments may adjust the UMK to reflect the cost of living and business dynamics in that specific area. For example, cities like Surabaya and Medan might have higher UMKs than their surrounding rural areas.

The UMK is determined annually by local wage councils, consisting of representatives from the government, employers, and labor unions. It aims to protect workers by providing a livable wage based on the regional economy. Employers are legally bound to follow the UMK guidelines, and failure to comply could result in legal penalties. For businesses expanding into various regions of Indonesia, particularly through EOR services, understanding both the UMP and UMK is essential to ensure the correct wages are paid to employees according to their work location.

Pajak Penghasilan (PPh 21) is Indonesia’s employee income tax, deducted from an individual’s salary. Employers are required to withhold this tax from their employees’ monthly earnings and remit it to the tax authorities. PPh 21 is progressive, meaning higher income earners are taxed at a higher rate. The tax brackets range from 5% to 30%, depending on the employee’s total annual income.

It is important for employers to ensure that the correct amount of PPh 21 is deducted from employee salaries each month to avoid penalties from tax authorities. In the case of expatriates, different tax rates and regulations may apply, and employers must take care to understand these nuances. For companies using EOR services, ensuring compliance with PPh 21 requirements is crucial for tax purposes, as the EOR provider will handle the filing and reporting of employee taxes, ensuring proper legal adherence.

Gaji Pokok, or basic salary, is the core component of an employee’s remuneration before any additional benefits, bonuses, or allowances are included. In Indonesia, Gaji Pokok is typically negotiated during the hiring process and serves as the foundation for calculating various other entitlements, such as overtime pay, holiday allowances, and social security contributions.

Although it constitutes the main portion of an employee’s monthly compensation, Gaji Pokok is usually supplemented by allowances such as transportation, housing, and meal allowances, depending on the employer’s compensation structure. It is also the reference point for calculating mandatory contributions to the BPJS and income tax (PPh 21). Employers are required to ensure that the Gaji Pokok meets or exceeds the provincial or regional minimum wage (UMP or UMK) to comply with Indonesian labor laws.

Tunjangan, or allowances, are additional payments made on top of an employee’s basic salary (Gaji Pokok) to cover specific needs or incentives. Common types of tunjangan include transportation allowance, housing allowance, and meal allowance. Other specialized allowances, such as family allowance or risk allowance, may be offered depending on the nature of the employee’s role.

Tunjangan is often negotiated as part of the overall compensation package, especially for managerial and executive roles. While these allowances are usually separate from basic salary, they are still subject to taxation and are considered part of an employee’s gross income. Employers must ensure that tunjangan is properly calculated in payroll to avoid discrepancies, and EOR providers often assist in ensuring that both the employer and employee are aware of local regulations regarding such allowances.

Pesangon is the severance pay granted to employees upon termination of employment in Indonesia. This payment is regulated by Indonesian labor law and varies depending on the type of termination and the employee’s length of service. Pesangon is typically higher if the employee is terminated due to restructuring or other employer-driven reasons, compared to voluntary resignation or termination for cause.

Pesangon is calculated based on the employee’s last basic salary, and the payout may also include additional compensation like service appreciation payments and compensation for unused leave. It is crucial for companies, especially those operating through EOR services, to ensure that severance pay is calculated and paid according to labor laws to avoid legal disputes.

PKWT refers to a fixed-term employment contract, where an employee is hired for a specific duration or to complete a specific project. PKWT contracts are commonly used for temporary or seasonal workers, contractors, or for project-based roles. According to Indonesian labor laws, PKWT can only be issued for a maximum of two years and may be extended for one additional year.

Unlike permanent employees, workers on PKWT contracts do not have the same entitlements to severance pay unless explicitly stated in the contract. Employers must clearly outline the terms of employment, duration, and conditions for renewal or termination to avoid any legal misunderstandings. For businesses using EOR services, managing PKWT contracts properly ensures compliance with local employment laws.

PKWTT, or permanent employment contract, is an indefinite work contract where the employee is hired with no set end date. This type of contract offers greater job security and entitles employees to full benefits such as BPJS, annual leave, and severance pay upon termination.

Employers must comply with labor laws in structuring PKWTT contracts, ensuring that all statutory benefits are provided. For businesses operating with EOR services, managing PKWTT contracts requires careful attention to compliance with local laws and ensuring that employee rights are respected, such as paid holidays and overtime compensation.

Sistem Outsourcing refers to the practice of using third-party providers to supply workers or manage business processes. In Indonesia, outsourcing is commonly used for non-core business functions, such as security, cleaning, and logistics. The workers employed under outsourcing arrangements are technically employees of the third-party provider, not the company using their services.

This system is regulated by labor laws to ensure that outsourced workers receive fair treatment and benefits, including health insurance and minimum wage compliance. Outsourcing contracts must clearly specify the terms of employment, the type of work to be outsourced, and any associated benefits. Employers must also ensure that their outsourcing partners comply with labor regulations to avoid legal liabilities.

Karyawan Tetap, or permanent employees, are individuals who are employed under a PKWTT (indefinite contract) and enjoy the full range of employee benefits. Permanent employees in Indonesia have greater job security compared to contract workers, and their benefits include annual leave, paid sick leave, BPJS coverage, and severance pay upon termination.

Employers are required to provide a written employment contract outlining the terms of employment, including salary, benefits, working hours, and termination conditions. For companies using EOR services, managing permanent employees involves ensuring compliance with all local labor laws, tax regulations, and providing the appropriate benefits.

Lembur, or overtime, refers to additional hours worked beyond the standard workweek of 40 hours. Overtime pay is regulated under Indonesian labor law, and employees are entitled to compensation for any extra hours worked beyond their normal schedule. Overtime rates are typically 1.5 times the employee’s regular hourly rate for the first hour of overtime and double the hourly rate for subsequent hours.

Employers must track and report overtime accurately to ensure that employees receive the correct compensation. Failure to provide proper overtime pay can result in penalties. EOR providers can help ensure that businesses are in compliance with these regulations, especially when managing remote or dispersed teams across time zones.

Cuti Tahunan, or annual leave, is the paid leave entitlement provided to employees. In Indonesia, employees who have worked for at least 12 months are entitled to a minimum of 12 days of paid annual leave per year. This leave can be used for vacation or personal matters, and employees must apply in advance to take this leave.

Employers must ensure that employees are informed of their annual leave entitlements and that leave is recorded accurately in the payroll system. Unused leave may either be carried forward to the next year or compensated, depending on the company’s policy. For businesses using EOR services, managing employee leave records is crucial to maintaining compliance and employee satisfaction.

Tunjangan Hari Raya (THR) is a religious holiday allowance that must be paid to employees before major religious holidays such as Eid al-Fitr for Muslim employees, Christmas for Christians, and other holidays depending on the employee’s religious beliefs. THR is a mandatory benefit regulated by Indonesian labor law, and the amount is typically equivalent to one month’s basic salary for employees who have worked for at least 12 months.

Employees who have worked less than 12 months are entitled to a prorated THR based on the number of months they have worked. THR must be paid no later than seven days before the respective holiday. Failure to pay THR on time can result in penalties for employers. For companies using EOR services, ensuring timely and accurate THR payments is critical for compliance and maintaining good relations with employees.

Uang Penggantian Hak (UPH), or compensation for rights, is the payment made to employees upon termination of employment to cover certain entitlements they may have earned but not yet received. This can include compensation for unused annual leave, unpaid wages, and other benefits that are legally owed to the employee.

Employers are required to provide this compensation in addition to severance pay (Pesangon) to ensure that the employee receives their full entitlements. UPH is particularly important in cases of involuntary termination, where employees are entitled to a range of benefits to support them during the transition. EOR providers often handle the calculation and distribution of UPH to ensure compliance with Indonesian labor laws.

Jaminan Kecelakaan Kerja (JKK) is the work accident insurance provided under BPJS Ketenagakerjaan, designed to cover employees in the event of work-related accidents or injuries. JKK offers compensation for medical treatment, rehabilitation, and even death benefits to the employee’s family if the accident results in death. Contributions to JKK are made by employers, and the rate depends on the level of risk associated with the employee’s job.

JKK also covers long-term disabilities caused by workplace accidents and can include lump-sum payments or pensions depending on the severity of the injury. Employers must ensure that all employees are enrolled in the JKK program to avoid legal liabilities and ensure that workers are adequately protected.

Jaminan Kematian (JKM) is the death insurance program provided by BPJS Ketenagakerjaan. This insurance ensures that in the event of an employee’s death, their family or designated beneficiaries will receive financial compensation. JKM covers the costs of funeral services and provides a lump-sum payment to the employee’s family.

Employers are required to contribute to this insurance as part of their employees’ social security package. The aim is to provide financial security to the families of deceased employees, ensuring they are not left without support. For businesses using EOR services, making sure that JKM contributions are properly managed is vital for compliance with Indonesia’s labor and social security laws.

Jaminan Hari Tua (JHT) is a retirement savings program under BPJS Ketenagakerjaan. Both employers and employees contribute to JHT, which accumulates over the course of the employee’s working life and is paid out as a lump sum when the employee retires, becomes permanently disabled, or passes away. Employees are entitled to withdraw a portion of their JHT funds after reaching a minimum contribution period of 10 years.

The JHT program is designed to provide financial security for employees in their old age, helping them manage expenses post-retirement. For companies, ensuring that contributions to JHT are timely and accurate is crucial, as penalties may apply for non-compliance.

Jaminan Pensiun (JP) is the pension program offered by BPJS Ketenagakerjaan to provide financial security for employees after retirement. Unlike JHT, which is a lump sum, JP provides employees with a monthly pension payment based on their contributions and the length of their employment. JP is intended to supplement the employee’s income after they leave the workforce, ensuring a steady income during retirement.

Employers contribute to JP on behalf of their employees, and the contribution rates are determined by government regulations. For businesses using EOR services, ensuring that JP contributions are properly handled is key to maintaining compliance and supporting employees’ long-term financial well-being.

A Surat Peringatan (SP) is a warning letter issued to employees in Indonesia for violations of company policies, misconduct, or underperformance. Employers usually follow a progressive discipline system, issuing multiple SPs before terminating an employee. SPs are formal written notices that outline the employee’s infraction, the corrective actions required, and the potential consequences of failing to meet the outlined expectations.

Issuing SPs is part of an employer’s legal responsibility to provide fair warning and documentation before taking further action, such as termination. Properly managing and documenting SPs ensures that employers have a legal defense in case of wrongful termination claims.

Peraturan Perusahaan refers to the company regulations or internal rules that govern the employer-employee relationship within a specific company. These regulations are required by Indonesian law for companies with 10 or more employees and must be registered with the Ministry of Manpower. They cover various aspects such as working hours, wages, benefits, disciplinary procedures, and employee rights.

Having clear and comprehensive Peraturan Perusahaan ensures that employees understand their rights and obligations, while also protecting employers by providing a framework for addressing workplace issues. For businesses using EOR services, aligning their policies with these regulations is crucial for maintaining compliance and employee satisfaction.

Laporan Upah refers to the wage report that employers must submit to the Indonesian tax authorities as part of their payroll management duties. This report details the salaries paid to employees, including deductions for taxes, BPJS contributions, and any other benefits. It serves as the official record for both the employer and the government to ensure that all wage-related taxes and contributions are paid correctly.

Employers must ensure that Laporan Upah is accurate and filed in a timely manner to avoid penalties. EOR providers usually manage this process to ensure compliance with local regulations and tax reporting requirements.

Upah Lembur pada Hari Libur refers to the overtime pay on public holidays. Employees who work on public holidays are entitled to receive higher pay rates, typically double their normal hourly wage. Public holidays are recognized nationally and regionally, and employees are entitled to paid leave on these days. However, if employees are required to work on such days, employers must compensate them at the legally mandated overtime rates.

Employers must track and compensate holiday work hours accurately to avoid violating labor laws. EOR providers help companies ensure that employees receive their entitled compensation for holiday work and that payroll is managed correctly.

Kewarganegaraan Ganda, or dual citizenship, refers to an individual holding citizenship in more than one country. Indonesia does not recognize dual citizenship for adults; however, children born to Indonesian parents abroad may hold dual citizenship until the age of 18, at which point they must choose between their Indonesian nationality or the foreign one.

For companies hiring expatriates, understanding citizenship laws is important for managing work permits and visas. Dual citizenship can affect an expatriate’s legal status in Indonesia, and employers must ensure they comply with both Indonesian and international regulations when hiring foreign workers.

A Perusahaan Jasa Tenaga Kerja (PJT) is a labor supply company that provides workers to other businesses on a contractual basis. This form of outsourcing is commonly used in industries such as security, cleaning, and manufacturing, where businesses may not want to hire workers directly. The workers remain employees of the PJT, which is responsible for their salaries, benefits, and legal compliance.

Outsourcing labor through a PJT allows companies to focus on their core activities while ensuring that labor laws are still adhered to. However, companies using PJT workers must ensure that the PJT is complying with labor regulations, as failure to do so can result in legal liabilities for both the PJT and the hiring company.

Waktu Kerja refers to the standard working hours in Indonesia, which are set at 40 hours per week, typically distributed as 8 hours per day over 5 days, or 7 hours per day over 6 days. Employees are entitled to at least one rest day per week, and any work beyond the standard 40 hours is considered overtime, which must be compensated accordingly.

Employers must adhere to labor regulations regarding working hours to avoid penalties. EOR providers help ensure that employee working hours are properly tracked and that overtime pay is provided when necessary.

Sanksi Pemutusan Hubungan Kerja refers to the penalties imposed for wrongful termination. Employers who unlawfully terminate an employee may be subject to legal penalties, including the requirement to reinstate the employee or provide compensation. The sanctions may also include fines or other punitive measures imposed by labor authorities.

Employers must follow proper legal procedures when terminating an employee to avoid these penalties. EOR services ensure that terminations are handled in compliance with local labor laws, minimizing the risk of legal action against the employer.

Kewajiban Pengusaha, or employer obligations, refers to the responsibilities that employers in Indonesia have towards their employees. These obligations include providing fair wages (at or above the UMP/UMK), ensuring safe working conditions, enrolling employees in BPJS (social security), paying overtime, and providing mandated leave such as maternity leave, annual leave, and sick leave.

Failure to meet these obligations can result in legal penalties, fines, and disputes with employees. EOR providers assist companies by ensuring that these obligations are met and that payroll, benefits, and compliance are managed correctly.

Penetapan Upah Minimum refers to the determination of the minimum wage in Indonesia. The minimum wage is set by the government at both the provincial (UMP) and city/regency (UMK) levels and is reviewed annually. The minimum wage is based on factors such as the cost of living, inflation, and local economic conditions.

Employers must comply with the minimum wage regulations, ensuring that no employee is paid less than the applicable UMP or UMK. For businesses using EOR services, adhering to these wage regulations is critical to maintaining legal compliance and avoiding disputes with employees.

Izin Mempekerjakan Tenaga Asing (IMTA) is a permit required to employ foreign workers in Indonesia. Employers must obtain an IMTA from the Ministry of Manpower to hire expatriates. This permit is part of the country’s effort to regulate and control the employment of foreign nationals while ensuring that local workers are not displaced.

Employers must submit a detailed application, including the justification for hiring foreign workers, and ensure that the foreign employee meets the qualifications for the position. IMTA is essential for businesses that want to legally employ expatriates in Indonesia, and EOR providers can assist in navigating the permit application process and ensuring compliance with local laws.

A Visa Kerja, or work visa, is required for foreign nationals who wish to work in Indonesia. The visa is typically issued after the employer secures an IMTA (Izin Mempekerjakan Tenaga Asing) or work permit. There are several types of work visas, including short-term visas for temporary work and long-term visas for expatriates employed under long-term contracts.

Employers are responsible for assisting foreign employees in obtaining the appropriate work visa, ensuring that all legal procedures are followed. Foreign employees working without a valid visa are subject to penalties, and employers could face sanctions as well. An EOR provider can help ensure that work visas are obtained correctly, taking the complexity out of international hiring.

Hak Cuti refers to employee leave entitlements, which include annual leave, sick leave, maternity leave, and other types of leave such as religious holiday leave (e.g., Tunjangan Hari Raya or THR). Employees are entitled to a minimum of 12 days of annual leave after working for 12 consecutive months, as well as paid leave for maternity and certain personal reasons like bereavement.

Employers must ensure that these leave entitlements are properly documented and granted as required by law. EOR providers manage employee leave tracking and ensure compliance with labor laws, helping companies avoid disputes or penalties for improperly handling leave entitlements.