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Employee Compensation Agreement

Employee Compensation Agreement Template for Indonesia

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Key Requirements PROMPT example:

Employee Compensation Agreement

"I need an Employee Compensation Agreement for a senior software engineer in Jakarta, including stock options and performance bonuses, with the agreement starting from January 2025."

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Document background
The Employee Compensation Agreement is a crucial document used to formalize the financial relationship between employers and employees in Indonesia. It becomes necessary when hiring new employees, promoting existing staff, or updating compensation arrangements to ensure compliance with Indonesian labor laws. The agreement includes comprehensive details about all forms of compensation, from basic salary to variable components, while ensuring alignment with Law No. 13/2003 on Manpower and related regulations. This document is particularly important in the Indonesian context due to specific requirements regarding mandatory benefits, religious holiday allowances, and social security contributions. The agreement serves to protect both employer and employee interests by clearly documenting all compensation elements, payment terms, and conditions, while providing a foundation for future compensation reviews and adjustments.
Suggested Sections

1. Parties: Identification of the employer and employee, including their legal details and addresses

2. Background: Context of the employment relationship and purpose of the agreement

3. Definitions: Definitions of key terms used throughout the agreement

4. Base Salary: Details of the employee's basic salary, payment schedule, and calculation method

5. Mandatory Benefits: Statutory benefits including BPJS (social security), health insurance, and religious holiday allowance (THR)

6. Working Hours and Overtime: Standard working hours and overtime compensation calculation

7. Leave Entitlements: Annual leave, sick leave, and other statutory leave entitlements and their impact on compensation

8. Tax Obligations: Responsibilities regarding income tax and other applicable taxes

9. Payment Method: Details of how and when compensation will be paid

10. Term and Review: Duration of the agreement and provisions for periodic salary review

11. Confidentiality: Obligations regarding compensation confidentiality

12. Governing Law: Confirmation of Indonesian law application and jurisdiction

13. Amendment and Termination: Processes for modifying the agreement and handling termination-related compensation

Optional Sections

1. Performance Bonus: Details of performance-based incentives, applicable for roles with variable compensation components

2. Commission Structure: For sales or similar roles where commission is part of compensation

3. Stock Options/Share Schemes: For companies offering equity-based compensation, typically for senior positions

4. International Assignment Compensation: For expatriate employees or those with international responsibilities

5. Additional Allowances: Optional allowances like housing, transportation, or education benefits

6. Retention Bonus: Special bonus arrangements for key employee retention

7. Non-Compete Compensation: Compensation related to post-employment restrictions

8. Severance Package: Enhanced severance terms beyond statutory requirements

Suggested Schedules

1. Schedule A - Compensation Structure: Detailed breakdown of all compensation components

2. Schedule B - Bonus Calculation Method: Specific formula and criteria for calculating variable compensation

3. Schedule C - Benefits Summary: Comprehensive list of all benefits and their monetary values

4. Schedule D - Payment Schedule: Timeline for different compensation components

5. Appendix 1 - Performance Metrics: KPIs and targets linked to variable compensation

6. Appendix 2 - Allowances Calculation: Detailed calculation methods for various allowances

7. Appendix 3 - Tax Treatment Summary: Overview of tax treatment for different compensation components

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Base Salary
Benefits
BPJS
Company
Confidential Information
Effective Date
Employee
Fixed Allowances
Government
Gross Salary
Holiday Allowance (THR)
Indonesian Rupiah
KPI
Leave Entitlements
Mandatory Benefits
Net Salary
Optional Benefits
Overtime Pay
Payment Date
Performance Bonus
Performance Period
Performance Review
Provincial Minimum Wage (UMP)
Sectoral Minimum Wage (UMK)
Social Security Contributions
Take Home Pay
Target Bonus
Tax Year
Term
Variable Compensation
Working Day
Working Hours
Relevant Industries

Manufacturing

Technology

Financial Services

Retail

Mining

Energy

Healthcare

Education

Professional Services

Telecommunications

Construction

Agriculture

Hospitality

E-commerce

Logistics

Relevant Teams

Human Resources

Legal

Finance

Payroll

Compliance

Senior Management

Operations

Administration

Relevant Roles

Chief Executive Officer

Managing Director

Department Head

Senior Manager

Manager

Supervisor

Sales Representative

Software Engineer

Financial Analyst

HR Manager

Marketing Executive

Operations Manager

Account Executive

Project Manager

Research Analyst

Technical Specialist

Administrative Officer

Production Manager

Customer Service Representative

Business Development Manager

Industries
Law No. 13/2003 on Manpower: The main employment law in Indonesia that regulates employment relationships, including provisions on wages, work hours, overtime, leave entitlements, and other basic employment terms
Government Regulation No. 78/2015 on Wages: Specific regulation governing wage structures, minimum wage implementation, and payment procedures
Minister of Manpower Regulation No. 6/2016: Regulation concerning Religious Holiday Allowance (THR) which is mandatory for employers to pay to employees
Law No. 40/2004 on National Social Security System: Regulates mandatory social security and health insurance contributions for employees
Law No. 36/2008 on Income Tax: Governs the taxation of employee compensation and benefits, including calculation of income tax and reporting obligations
Provincial/Regional Minimum Wage Regulations: Local regulations determining minimum wage rates specific to different provinces and sectors
Government Regulation No. 35/2021: Implementation regulation for work agreements, outsourcing, working hours, rest periods, and termination of employment
Law No. 11/2020 on Job Creation (Omnibus Law): Recent reform law affecting various aspects of employment including compensation calculation and severance pay
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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