Why Do THR Rules Matter for Employers in Indonesia?
What do THR rules require employers in Indonesia to pay each festive season? Permenaker No. 6 of 2016 imposes a 5% fine for late payment. In this guide, we set out the seven THR rules for employers in Indonesia to lock into payroll planning. The regulation still governs the religious holiday allowance in Indonesia in 2026 and defines eligibility, pro-rata formulas, cash payment, the 7-day deadline and sanctions. 3E Accounting Indonesia, part of a regional group with 15+ years of experience and more than 80 staff across Singapore, Malaysia, Hong Kong and Indonesia, supports clients from obtaining a company registration number NIB in Indonesia through to payroll compliance. Knowing how long company setup in Indonesia takes can also help employers plan for hiring and payroll.
Who Is Eligible for THR?
1 month of continuous service qualifies employees for THR. Ministry of Manpower Regulation (Permenaker) No. 6 of 2016 extends the obligation to permanent employees (PKWTT) and fixed-term contract workers (PKWT). Recent hires and probationary staff are covered from month one. Treating THR as a discretionary long-service bonus understates the payroll liability.
How Is THR Calculated Based on Tenure?
After 12 months of continuous service, the allowance is one month's wage, or more if required by an employment agreement, company rules, collective agreement or established practice. Staff employed between one and eleven months earn a pro-rata share, calculated as months worked divided by twelve. The base is the wage without allowances or the basic wage plus fixed allowances; separate averaging rules apply to casual daily workers and piece-rate earners. Under Ministry of Manpower Circular No. M/3/HK.04.00/III/2026, piece-rate earners use their average monthly wage over the 12 months before the religious holiday. A documented formula prevents payroll disputes.
How Must THR Be Paid?
100% of the allowance must be paid in rupiah, by cash or bank transfer. Parcels, merchandise or shopping vouchers are not compliant substitutes, however well-meant. Non-cash gifts can supplement the statutory payment but never replace it. This keeps the benefit liquid for workers' seasonal expenses.
Seven-Day Payment Deadline
The full amount is due at least 7 days before the religious holiday. For Idulfitri on 21 March 2026, the H-7 deadline was 14 March 2026. Partial early payment does not satisfy the rule; the entitlement must be complete by H-7. The Ministry of Manpower issues circulars confirming each year's deadline.
THR requirements at a glance
| Requirement | Rule |
|---|---|
| Eligibility | At least 1 month of continuous service for permanent and fixed-term employees |
| 12 months or more of service | One month's wage |
| Less than 12 months of service | Months worked divided by 12, multiplied by one month's wage |
| Payment | Full allowance in rupiah, at least 7 days before the holiday |
| Late payment | A 5% fine on the total THR due |
Alignment with Recognized Religions
6 religions are officially recognized in Indonesia, and THR follows each worker's own faith. THR generally falls once a year before the worker's own religious holiday; if the same holiday occurs more than once in a year, payment follows its observance. An agreed payout date may be standardized for all staff, commonly before Idulfitri, if the employer-worker agreement is recorded in an employment agreement, company regulations or collective labor agreement. Documenting the choice keeps payroll consistent.
Termination and Resignation Protocols
Permanent employees whose employment is terminated by the employer within 30 days before the holiday retain their THR entitlement under Article 7 of Permenaker No. 6 of 2016. Ministry of Manpower guidance has interpreted this protection as excluding voluntary resignation, although other official guidance takes a broader view; check the circumstances and seek advice. The 30-day protection does not apply to fixed-term employees whose contracts expire before the holiday. Budgeting THR into final pay settlements prevents disputes.
Penalties for Non-Compliance
Late payment incurs a 5% fine on the total THR due; the fine does not accrue daily or compound. The employer must still pay the THR, and non-payment can lead to administrative sanctions, from written warnings to temporary suspension of business activities. A late-payment record also complicates future labor inspections and industrial relations. Marking H-7 in the payroll calendar costs nothing by comparison. Contact us for help with payroll compliance.
Ready to Get THR Compliance Right?
3E Accounting Indonesia handles payroll, tax and corporate secretarial support so every THR payment lands accurate and on time.
Frequently Asked Questions
Every employee with at least one month of continuous service — permanent (PKWTT) and fixed-term (PKWT) alike — is entitled under Permenaker No. 6 of 2016, which remains in force in 2026.
Divide completed months of service by 12 and multiply by one month's wage. A worker with 6 months of service, for example, receives 50% of a month's wage.
THR must be paid in full no later than 7 days before the religious holiday. For Idulfitri on 21 March 2026, payment was due by 14 March 2026.
No. The allowance must be paid in Indonesian Rupiah by cash or bank transfer. Parcels, merchandise or vouchers cannot substitute for the statutory payment.
A 5% fine on the total THR due applies to late payment; it does not accrue daily or compound. The employer must still pay the THR, and non-payment can lead to administrative sanctions.
Abigail Yu
Director
Abigail Yu oversees executive leadership at 3E Accounting Group, leading operations, IT solutions, public relations, and digital marketing to drive business success. She holds an honors degree in Communication and New Media from the National University of Singapore and is highly skilled in crisis management, financial communication, and corporate communications.
