Business Advice
October 21, 2024

Understanding take-home pay in Indonesia: What it means and how to calculate it

Written by
Galih Gumelar
Last Modified on
October 21, 2024

Take-home pay is a crucial element of human resource management that has a direct impact on employee satisfaction and company financial planning. A clear understanding of this concept ensures that companies not only maintain the well-being of their employees but also streamline payroll and optimize budgeting.

As a business owner or financial professional, it is important to have a thorough understanding of the term take-home pay. This article will guide you through the definition, typical components of take-home pay in Indonesia and calculation method to help you gain clarity on this important payroll term.

What is take-home pay?

Take-home pay refers to the amount an employee actually receives each month after various earnings components have been added to the base salary and the necessary deductions have been made.

In simpler terms, take-home pay (THP) is the net salary an employee brings home. The amount can vary each month, depending on the additional earnings and deductions made.

The difference between take-home pay and base salary

It is important to distinguish between the take-home pay and the base salary. To better understand the difference between THP and base salary, you will find a detailed explanation of both terms here.

Base salary is the fundamental wage received by an employee based on their position and rank. It is the most important component of income, but it is not the final amount that the employee takes home.

Each company has its own formula for determining an employee’s base salary. Generally, it is influenced by skills, position and work experience. However, Government Regulation (PP) No. 51 of 2023 on Wages stipulates that the base wage must be at least 75% of the total base wage and fixed allowances if the company grants fixed allowances to employees.

Meanwhile, take-home pay is the actual amount of money that employees receive after various deductions from their gross income. In this case, gross income usually consists of base salary, fixed allowances and non-fixed allowances. Meanwhile, deductions can include income tax (PPh), social security contributions, health insurance premiums and other deductions.

In essence, the base salary is therefore only one component of an employee’s income, while the take-home pay is the final salary amount that the employee receives after the base salary, allowances and deductions have been taken into account.

Components of the take-home pay

The final take-home pay calculation is influenced by several key components that can vary from company to company. But generally, in Indonesia, these components fall into three broad categories.

1. Regular income

This includes income that employees receive on a regular basis each month, such as:

Base salary: the most important component of employee compensation.

Meal allowances: Are usually granted to cover daily expenses.

Travel allowances: Are offered to cover the cost of commuting.

Housing allowance: Assistance with accommodation costs.

2. Irregular income

This is additional income that employees receive occasionally, such as

Performance bonuses: Rewards based on individual or team success.

Overtime bonuses: Compensation for working beyond regular working hours.

Project commissions: Earnings tied to specific tasks or performance.

Allowances for religious holidays (THR): Special allowances for religious holidays.

3. Deductions

These refer to amounts deducted from gross earnings, including:

  • Personal income tax (PPh): Income tax deducted in accordance with the law.
  • Contributions to the National Health Program (BPJS Kesehatan): Generally 1% of the employee’s gross earnings.
  • Contributions to the Employee Security Program (BPJS Ketenagakerjaan), which generally includes:some text
    • Pension Insurance (JP): 1% of gross income.
    • Old age security (JHT): 2% of gross income.
  • Loan repayments: If the employee has a company loan.
  • Penalties for late payments: For tardiness or other violations.

How to calculate the take-home pay

To calculate take-home pay, you need to subtract all deductions from total income (regular and irregular). Here is the formula:

THP = (Regular Income + Irregular Income) - Deductions

To better understand the take-home pay calculation, let us look at the example below, which shows how much an employee earns from their employer in June 2024.

Regular Income:

  • Base salary: Rp7,000,000
  • Food allowance: Rp600,000
  • Travel allowance: Rp600,000

Total: Rp8,200,000

Irregular income:

  • Overtime allowance: Rp300,000
  • Performance bonus: Rp1,000,000

Total: Rp1,300,000

Deductions:

  • Income tax: Rp250,000
  • BPJS contributions for Health and Employment: Rp200,000
  • Loan repayments: Rp1,000,000
  • Penalties for late payments: Rp100,000

Total: Rp1,550,000

To find out how much money the employee will take home, we can use the formula:

THP = (Regular Income + Irregular Income) - Deductions

THP = (Rp8,200,000 + Rp1,300,000) - Rp1,550,000

THP = Rp7,950,000

While this is just an example, the actual calculation depends on each company’s policies and legal requirements.

Simplifying payroll management with Aspire

In reality, payroll is far more complex than this example. Companies need to process their payroll with precision to ensure accuracy and timeliness. That’s where Aspire’s bulk payment solution comes in, providing a streamlined approach to payroll.

With Aspire Bulk Payment, you can schedule, synchronize and automate bulk transfers for employee salaries, eliminating the need for manual payments. Aspire ensures your employees are paid on time, every time.

In addition to payroll, Aspire also simplifies invoicing by sending scheduled invoices to clients and helping you manage your company’s cash flow and financial situation in real-time. Integration with accounting software makes financial reporting easier and more efficient.

Curious about how Aspire can transform the way you do business? Contact our team today to find out more!

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Global payments are offered by various providers through business accounts. Read our article to know more about types of business accounts and how to choose the best one for your business. There are many banks and fintech companies offering business accounts to businesses in Singapore. We have covered them all in our blog, you can click the links to view accounts offered by various banks such as DBS, OCBC, Maybank etc.

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No minimum balance is required to keep your SGD, USD, EUR, GBP and IDR Accounts activated.

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For a business account in Singapore, Aspire is an excellent choice. With a focus on startup and SME needs, Aspire offers a seamless and transparent banking experience.

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Is there a minimum balance required for Aspire Business Accounts?

No minimum balance is required to keep your SGD, USD and IDR* Accounts activated.

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Galih Gumelar
is a seasoned writer specialising in macroeconomics, business, finance and politics. With a writing history at CNN Indonesia, The Jakarta Post, and various other reputed organisations, Galih leverages his broad range of experiences to create insightful resources for those wanting to start a business.
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