Why Do Businesses Need a Payroll Service Provider? – After you decide to hire an employee in your company, the first step is that you have to consider how to set up a good and correct payroll system for employees in your company.

The payroll system can be a major problem in your business, if it is run incorrectly. The payroll system can be a challenge for businesses, and has the potential to put employers or companies at risk of problems with applicable legal compliance. That’s why many businesses or companies choose to work with outsourcing payroll service providers, to regulate and facilitate companies in management compliance in payroll processing for employees.

Below is some information on why you need a Payroll Service Provider for your business.

What is a payroll provider?

A payroll service provider is a company that assists or assumes all responsibility for managing employee payroll on behalf of another business.

This payroll service provider is very useful for businesses who value their time very much and want to ensure that their employees and taxes are paid accurately and on schedule and in accordance with applicable legal regulations.

Payroll outsourcing companies also offer a wide variety of services, and leverage the latest technology to help streamline and automate the payroll process.

Payroll provider service type?

Some of the services that payroll service providers usually offer include:

>  Calculation and processing of payroll.
>  Salary deductions, tax deductions and filings.
>  Integrate payroll software and business insights.
>  Expert compliance advice.
>  Detailed payroll reporting.
>  Accurate record maintenance.
>  Management of sick leave and holidays.
>  New employee registration.

automatically through a system that has been set in accordance with applicable regulations, both internal and external for the sake of following compliance and applicable rules for the company and employees.

Benefits of using payroll provider

1. Payroll tax and regulation compliance

Tax rates in the Indonesian taxation system – Payroll Income Tax and Contributions that are Mandatory in Indonesia or compliance that applies in Indonesia for expatriates. If you have recently moved to Indonesia or are an expatriate, and are not familiar with the tax regulations in Indonesia, here is the information.

Types of taxable income tax to Indonesian non-taxable income. Individual taxpayers are divided into two, namely domestic taxpayers and foreign taxpayers.

a) Individual Taxpayers as Domestic Tax Subjects

Individual taxpayers who are subject to domestic taxes according to the Income Tax Law (PPh) Number 36 of 2008 are:

>  Individuals residing in Indonesia, or
>  An individual who is in Indonesia for more than 183 days in a 12 month period, or
>  An individual who is in Indonesia during a tax year and intends to reside in Indonesia.

b) Individual Taxpayers as Foreign Tax Subjects (overseas)

Individual taxpayers who are subject to foreign taxes according to the Income Tax Law (PPh) Number 36 of 2008 are:

>  An individual who does not live in Indonesia, or an individual who does not stay in Indonesia for more than 183 days within a 12-month period who runs a business or conducts activities through a permanent establishment in Indonesia.
>  An individual who does not live in Indonesia, or an individual who does not stay in Indonesia for more than 183 days within a 12 month period who can receive or earn income from Indonesia, not from running a business or conducting activities through a permanent establishment in Indonesia.

Tax rates in the Indonesian taxation system

The tax rate is the basis for the imposition of taxes on all tax objects that are the responsibility of the taxpayer. There are 4 types of tax rates, namely progressive rates, degressive rates, proportional rates, fixed or regressive rates.

Progressive rates

Progressive tax rate is a tax levy rate where the percentage will increase in proportion to the tax base. In Indonesia itself, this progressive tax rate is applied to income tax (PPh) of individual taxpayers, such as:

>  IDR 0 – IDR 60 million PPh5% rate
>  IDR 60 million – IDR 250 million with 15% PPh rate
>  IDR 250 million – IDR 500 million with 25% PPh rate
>  IDR 500 million – IDR 5 billion with 30% PPh rate
>  IDR 5 billion and above, the tax rate is 35%

Degressive rates

A progressive rate is the opposite of a progressive rate. This means that this tax rate is a tax rate whose percentage will be smaller than the amount that is used as the basis for imposing high taxes. Or, the percentage of the tax rate will be lower as the tax base increases.

So, if the percentage is getting smaller, the amount of tax payable will not decrease. But it could be bigger because the amount that is used as the basis for taxation is getting bigger.

Proportional rates

A proportional rate is a rate whose percentage remains the same even though there is a change in the tax base. So, regardless of the number of tax objects, the percentage will remain the same.

Fixed/regressive rates

A fixed rate or regressive tax rate is a tax rate whose nominal value is fixed regardless of the amount that is used as the basis for taxation.

Social Security Program in Indonesia (BPJS Employment & Health)

In Indonesia, all companies are required to register their employees in the health and employment social security program.

BPJS is an abbreviation of the Social Security Administering Body, which is a special institution tasked with administering health and employment insurance for the public, civil servants, and private employees.

Based on the Law of the Republic of Indonesia Number 24 of 2011 concerning the Social Security Administering Body. BPJS is a legal entity formed to administer social security programs. Meanwhile, social security is a form of social protection to ensure that all people can meet their basic needs for a decent life.

Article 5 explains that BPJS itself is divided into 2 types, namely BPJS Health and BPJS Employment.

BPJS Health functions to organize a health insurance program

BPJS Employment functions to organize work accident insurance programs, old age benefits, pension benefits, and death benefits.

Rates for participating in BPJS

BPJS Health Contribution Fee for PPU 5% of Income.

BPJS Employment Contribution Fee

a) Old Age Guarantee (JHT)

The BPJS Employment rate imposed is 5.7% of the wages received. The JHT payment scheme uses a joint venture system, where workers pay 2% and the company pays 3.7%.

b) Work Accident Insurance (JKK)

The BPJS Employment rate charged varies depending on the level of accident risk, such as:

>  Very low: 0.24%
>  Low: 0.54%
>  Medium: 0.89%
>  Height: 1.27%
>  Very high: 1.74%

Even though the BPJS Employment rate charged is based on the level of accident risk, the company needs to evaluate this at least once every 2 years for each worker.

The BPJS Employment rate for this work accident insurance program is 100% paid by the company.

c) Death Insurance (JKM)

The BPJS Employment rate for this program is 0.3% of the wages received in a month and fully paid by the company.

d) Pension Guarantee (JP)

With the amount of 3% of the participant’s salary and paid by a joint venture system (2% company, 1% employees).

2. Accurate reporting

Accurate payroll reporting is very important for companies and employees. Why? Because employees depend on their paid wages to meet their own needs such as: paying all the bills, supporting the family, and creating a life for themselves. The company relies on accurate reporting so that the money received by employees is in accordance with their rights.

3. Employee self-service

Employee self-service, or ESS, is a feature available in most modern HR systems. ESS enables employees to handle various tasks related to human resources and the work that should be completed by personnel or human resource management. Employee self-service can help companies save hours and increase efficiency.

4. Verification of employee information

Requests to prove current or previous employment status to third parties. A government agency, for example, may request employment verification to confirm various details such as your salary information, current employment status, job role, training or achievements and dates of employment.

5. Secure payroll data

Payroll data security involves implementing a series of measures to protect all confidential employee data relating to employee benefits and compensation. This typically includes name, address, social security number, taxes and deductions, health insurance data (BPJS), salaries and other permanent worker compensation payments, additional benefits, and variable data including bonuses, hours worked, holidays, and illness.

Basically, this data is obviously very sensitive. Therefore, it is important that you include as many safeguards as possible in your compensation strategy to ensure confidentiality and protect you from potential hacks, leaks and data breaches.

6. Accurate paychecks

Payroll is directly related to employee compensation. If the system used to process payroll has weaknesses, it can affect salary accuracy. Payroll involves more than just employee compensation but everything else. Inaccuracies can lead to consequences other than salary errors.

7. Flexible payment options

The concept of getting access to your salary, your income, the money you are entitled to, when you need it. Instead of waiting for payment, whether weekly, fortnightly, or monthly. The main objective of the Flexi Benefit Plan is to give employees the freedom to choose.

8. Scalability

The term scalability refers to how successfully something can successfully adapt to changes over time. The word is often used in business settings to refer to a company or team that is able to adapt to expansion or increased responsibilities. Within a company, several different specific areas demonstrate its scalability.

9. Save money

Make regular savings directly from employee salaries. The employer deducts the amount the employee wants to keep directly from wages through payroll.

Tips for Choosing the Right Payroll Report Provider

1. Research your State’s Laws.
2. Consider Flexibility
3. Factor Your Business Needs

When hiring people from all over the world, both local and foreign is not easy. There are many rules that all must know and follow, both from applicable local labor laws and regulations as well as with payroll management in multiple currencies, which can cause confusion and require assistance.

Indoservice offers payroll outsourcing services centered on businesses in Indonesia. At Indoservice, we have a dedicated team of professionals who will work with the needs of a good payroll system for your business.

You can count on us to provide the quality of service that best suits your needs. You can contact us at admin@indoservice.co.id or Call/Whatsapp +62877-1449-8500 for further details.