Navigating the intricacies of local labor laws is widely considered one of the most significant hurdles for foreign business owners and HR managers operating in Bali. Failing to fully grasp mandatory entitlements does not merely risk severe administrative penalties; it can fundamentally fracture the trust and morale of your local workforce, which is the backbone of any successful hospitality or service business. Among the various statutory obligations, few cause as much annual anxiety and confusion as the Tunjangan Hari Raya (THR), or Religious Holiday Allowance.
One specific mandate that frequently leads to operational disruption is the requirement for THR in Indonesia. Mismanaging this mandatory payment often results in heated internal disputes, government sanctions, and unnecessary financial strain right before major religious holidays when cash flow is often tightest. For foreign investors, assuming this is simply a “bonus” similar to Western corporate structures is a dangerous misconception that can lead to legal action.
This comprehensive guide breaks down exactly how to manage THR in Indonesia, from strict eligibility rules to precise calculation formulas, ensuring your business remains compliant and your team feels valued. For the official text of the regulation, you can refer to Permenaker No. 6 Tahun 2016, which remains the primary legal foundation for these obligations.
Table of Contents
- Understanding the Legal Framework
- Who is Eligible for the Holiday Allowance?
- Calculating the Correct Payment Amount
- The Strict H-7 Payment Deadline
- Real Story: A Lesson from Pererenan
- Penalties for Late or Non-Payment
- Common Mistakes HR Teams Make
- Best Practices for 2026 Compliance
- FAQ's about THR in Indonesia
Understanding the Legal Framework
At its core, THR Keagamaan is a mandatory non-wage income that employers must pay to workers roughly one week before their respective religious holidays. It is distinct from a performance bonus, a 13th-month salary, or a voluntary gift; it is a statutory right protected by the government. The philosophy behind it is to assist workers in meeting their increased needs during religious celebrations, such as purchasing new clothes, food for feasts, and funding travel to their hometowns.
The primary legal basis is Minister of Manpower Regulation No. 6 of 2016 regarding Religious Holiday Allowances for Workers/Laborers in Companies. This regulation applies to every person or legal entity that employs people in exchange for wages. Whether you run a small boutique café in Canggu or a large luxury resort in Nusa Dua, the obligation to provide THR in Indonesia is absolute. It cannot be waived by internal company agreements or mutual consent contracts; any agreement attempting to bypass this right is null and void by law.
Who is Eligible for the Holiday Allowance?
Many foreign employers mistakenly believe that only permanent staff with years of service are entitled to this benefit. However, the regulation is surprisingly broad and favors the worker. Eligibility formally extends to workers under permanent status (PKWTT) and fixed-term contracts (PKWT), provided they have worked for at least one month continuously. This one-month threshold is critical; if a worker joins just five weeks before the holiday, they are already entitled to a pro-rated payment.
A major area of confusion lies with freelancers and daily workers. In the Bali hospitality sector, “daily workers” (DW) are common. However, if a daily worker has a consistent work pattern for consecutive months—typically three months or more of continuous work—local authorities often view them as entitled to THR in Indonesia. It is crucial to review your worker classifications carefully. If you are treating someone as a “freelancer” but they work set hours under your direct supervision, the Department of Manpower (Disnaker) may reclassify them, triggering retroactive THR obligations.
The first compliance step is knowing exactly who qualifies for THR in Indonesia. The core rule is simple: any employee who has worked continuously for at least one month under an employment relationship is entitled to THR, regardless of whether their contract is permanent or fixed-term. This includes daily workers if they meet the minimum service and work-day thresholds defined in the regulation. (Kementerian Komunikasi dan Digital)
Employees with 12 months or more of continuous service are entitled to THR in Indonesia equal to one month’s wage, while those with 1–11 months receive a pro-rated amount based on their length of service. For workers paid a fixed monthly salary, “wage” typically means basic salary plus fixed allowances; for those with variable pay, the wage base is usually calculated using an average over a defined reference period.
Employers also need clear policies for special situations. For staff who resign or are terminated close to the holiday, the regulation notes that THR in Indonesia remains due if they meet the minimum service requirement and are still employed within a certain window before the holiday; this should be supported by internal SOPs and termination letters to prevent disputes. Employees hired shortly before the holiday must also be included if they pass the one-month threshold in time 📋.
Finally, remember that THR is paid per religious holiday per employee, not per company celebration. If you host a multi-faith team, each worker’s THR in Indonesia is tied to the holiday of their religion. This means your HR data on religious affiliation must be handled carefully, respecting privacy and anti-discrimination principles while still meeting legal obligations.
Calculating the Correct Payment Amount
The calculation of the allowance depends entirely on the employee’s tenure. For employees who have worked for 12 continuous months or more, the religious bonus amount is equal to one month’s full wages. This “wage” is legally defined as the basic salary plus any fixed allowances. Variable allowances, such as transport money that is only paid based on attendance, are generally excluded from the calculation base unless company policy states otherwise.
For employees with more than one month but less than 12 months of service, the amount is calculated explicitly on a pro-rata basis using the following formula: (Months of Service / 12) x 1 Month’s Wage
For example, if a staff member earns IDR 6,000,000 and has worked for 6 months, they receive (6/12) x 6,000,000 = IDR 3,000,000. It is vital to get these numbers right to the decimal. If you are struggling with complex payroll structures or tax implications regarding these payments, it is often wise to consult a trusted tax management company to ensure your calculations align with the latest regulations and tax codes.
The Strict H-7 Payment Deadline
Timing is everything when it comes to the mandatory holiday stipend. The regulation explicitly states that the allowance must be paid no later than seven days (H-7) before the employee’s religious holiday. This deadline is non-negotiable. The government usually sets up “Posko THR” (complaint posts) annually to monitor compliance, and employees are encouraged to report delays immediately.
In Bali, this logistical challenge is unique because staff may observe different holidays. Muslim staff receive THR before Idul Fitri, while Hindu staff generally receive it before Nyepi. However, some companies choose to disburse it for everyone before Galungan or stick to a single payout date if agreed upon in the Company Regulations (Peraturan Perusahaan). Despite these internal arrangements, the default legal stance remains that payment is tied to the specific religious holiday of the employee. If you delay payment until after the holiday, the purpose of the allowance—to help with holiday costs—is defeated, and the legal violation has already occurred.
Real Story: A Lesson from Pererenan
In early 2024, a villa owner in Pererenan named Mark faced a difficult operational situation. He employed a mixed team of staff from Java and Bali. Assuming he could streamline his accounting by paying everyone their THR in Indonesia at the same time—during Christmas to match his own Western budgeting cycle—he delayed payments for his Muslim staff who celebrated Idul Fitri months earlier. He believed his “Christmas Bonus” policy was generous enough to override local timing rules.
The result was a near-strike situation. His housekeeping team felt deeply disrespected as they had no funds for their homecoming (mudik) travel tickets, which must be bought weeks in advance. Mark was reported to the local Manpower Office (Disnaker) in Badung. He was forced to pay the full THR immediately, plus administrative fines, and had to spend months rebuilding trust with a team that felt invisible. The lesson here is clear: never assume Western bonus timing applies to Indonesian statutory obligations.
Penalties for Late or Non-Payment
The Ministry of Manpower takes enforcement increasingly seriously. Employers who pay late are subject to a fine of 5% of the total THR amount. Importantly, paying this fine does not absolve the employer of the obligation to pay the Tunjangan Hari Raya itself. The fine is deposited into the state treasury or used for workers’ welfare, not returned to the company.
Beyond financial penalties, non-compliance with the statutory guidelines can lead to severe administrative sanctions. These range from written warnings to the freezing of business activities. In the modern era of social media, the reputational damage of being “outed” as a non-paying employer can be even more devastating than the fines. Viral complaints on platforms like TikTok or Instagram can destroy a brand’s ability to hire quality local talent in the future.
A SaaS startup in Jakarta had grown rapidly from 12 to 70 employees in three years. The founders, both foreign, knew they had to pay THR in Indonesia, but treated it informally: they wired varying “holiday bonuses” just a few days before Eid, sometimes after H-7, with no clear formula. For a while, staff accepted it because salaries were above market and the team liked the culture. 📖
Problems surfaced when a new HR manager joined. She reviewed the payroll history and realized that several contract employees with more than 12 months’ service had been systematically underpaid THR, and a few ex-employees had never received their final year’s allowance at all. Rumours started spreading that the company did not respect labour law, and one disgruntled former staff member threatened to report them to the authorities.
The founders decided to fix things properly. With HR and legal support, they reconstructed each employee’s THR in Indonesia for the past three years using the legal formulas, identified shortfalls, and prepared a back-payment schedule. They communicated clearly to all staff, explaining the mistake, the recalculation, and the company’s plan to pay the arrears in one lump sum before the next Eid, alongside the current year’s THR paid fully and on time.
The impact was immediate. Employees felt heard and respected; many commented that they had never seen an employer voluntarily reopen old THR in Indonesia calculations to correct them. The potential complaint disappeared, and the HR manager used the moment to introduce a written THR policy and payroll checklist. The founders later admitted that the cost of correcting three years of underpaid THR was lower than the business risk of fines, legal disputes, or damage to their reputation in Indonesia’s close-knit tech community.
Common Mistakes HR Teams Make
Even well-intentioned HR teams often slip up due to technicalities. A frequent error is excluding fixed allowances from the calculation. For example, if a staff member gets a basic salary plus a “position allowance” (tunjangan jabatan) that is fixed regardless of attendance, both must be included in the THR base. Excluding the allowance effectively underpays the staff member.
Another common mistake is misclassifying employees to avoid payment. Labeling a worker as a “partner” or “freelancer” does not automatically exempt them if their working reality reflects an employment relationship. Authorities look at the substance of the work—instructions, tools, and payment regularity—not just the title in the contract. Additionally, failing to document the payment is a critical error. A simple bank transfer with the description “salary” is insufficient; the transfer note must explicitly say “THR Payment” to serve as legal proof in a dispute.
Best Practices for 2026 Compliance
To ensure a smooth process in 2026, you must start budgeting early. Map out the religious affiliations of your workforce at the start of the year to predict cash flow needs for Idul Fitri, Nyepi, Christmas, and Waisak. This prevents the “cash crunch” shock when H-7 arrives.
Update your Company Regulations (Peraturan Perusahaan) to clearly state the calculation method and payment schedule. Transparency prevents disputes. When you make the payment, always issue a specific THR payslip or have the employee sign a separate receipt. Documentation is your best defense if a dispute regarding THR in Indonesia arises later. Furthermore, keep open communication lines. If the company is truly facing financial hardship, open bipartite dialogue early—though remember, financial loss does not legally eliminate the debt of THR, it only allows for a negotiated payment delay if the workers agree in writing.
FAQ's about THR in Indonesia
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Can I pay THR in installments if cash flow is tight?
No. The regulations strictly prohibit paying in installments. It must be paid in full, in cash (transfer), by the H-7 deadline. Past dispensations during the pandemic have ended, and full payment is now the strict standard.
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Do employees who resign before the holiday get THR?
Permanent (PKWTT) employees who resign within 30 days before the holiday are still entitled to THR. Contract (PKWT) employees who resign before the holiday generally are not, unless their specific contract expires naturally after the holiday date.
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Is THR subject to income tax?
Yes, THR is part of the employee's annual income and is subject to PPh 21 income tax. It is calculated cumulatively with the monthly salary, which often results in a slightly higher tax bracket for that specific month.
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What if an employee changes religion?
THR is paid based on the religion recorded in the company data. If a change occurs, the payment schedule should adjust for the following year. However, employees are not entitled to "double dip" by claiming two THRs in one calendar year for two different religions.
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How is THR calculated for daily workers?
For daily workers with more than 12 months tenure, use the average monthly wage of the last 12 months. For those with less than 12 months, use the average monthly wage of their actual tenure period to determine the base amount.
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Does a probation employee get THR?
Yes. If they have worked for at least one month continuously during their probation period, they are entitled to pro-rated THR. Probation does not negate the employment relationship or the rights attached to it.
