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Salary Deferral Agreement

Salary Deferral Agreement Template for Indonesia

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Key Requirements PROMPT example:

Salary Deferral Agreement

"I need a Salary Deferral Agreement for our technology startup in Jakarta, allowing employees to defer 20% of their monthly salary until March 2025, with an option for early withdrawal in case of medical emergencies."

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Document background
The Salary Deferral Agreement is a crucial document used in Indonesian business contexts when an employer and employee agree to postpone the payment of a portion of the employee's salary to a later date. This arrangement may be implemented for various reasons, including company cash flow management, tax planning, or as part of a broader compensation strategy. The agreement must comply with Indonesian Manpower Law, wage regulations, and tax legislation, making it essential to include specific provisions about payment terms, employee rights, and employer obligations. It's particularly relevant during economic uncertainties or when companies implement strategic compensation plans. The document provides legal protection for both parties by clearly defining the terms of deferral, repayment schedules, and the treatment of deferred amounts in various scenarios such as employment termination or company restructuring.
Suggested Sections

1. Parties: Identifies the employer and employee entering into the agreement

2. Background: Explains the context and purpose of the salary deferral arrangement

3. Definitions: Defines key terms used throughout the agreement

4. Deferral Terms: Specifies the amount or percentage of salary to be deferred and the deferral period

5. Payment Schedule: Details when and how the deferred salary will be paid out

6. Tax Implications: Addresses the tax treatment of deferred salary under Indonesian law

7. Employee Rights: Outlines the employee's rights regarding the deferred salary

8. Company Obligations: Specifies the employer's obligations regarding the deferred amounts

9. Termination Provisions: Explains what happens to deferred salary if employment terminates

10. Governing Law: Confirms Indonesian law governs the agreement

11. Signatures: Space for both parties to execute the agreement

Optional Sections

1. Investment Provisions: Optional section for arrangements where deferred salary may be invested

2. Social Security Impact: Details impact on BPJS contributions when applicable

3. Early Withdrawal Rights: Terms for accessing deferred salary before scheduled payment date

4. Company Financial Guarantees: Additional security provisions for deferred amounts

5. Change in Control Provisions: Addresses what happens to deferred salary if company ownership changes

6. Dispute Resolution: Specific dispute resolution procedures beyond standard court jurisdiction

Suggested Schedules

1. Schedule A - Deferral Schedule: Detailed schedule showing amounts to be deferred from each pay period

2. Schedule B - Payment Timeline: Timeline for when deferred amounts will be paid back

3. Schedule C - Calculation Method: Formula or method for calculating deferred amounts and any applicable interest

4. Appendix 1 - Employee Notice Form: Template for employee to notify changes or make elections regarding deferrals

5. Appendix 2 - Tax Illustrations: Examples of tax implications under different scenarios

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 Industries

Banking and Financial Services

Technology

Manufacturing

Mining and Resources

Professional Services

Retail

Telecommunications

Construction

Energy

Healthcare

Education

Transportation and Logistics

Relevant Teams

Human Resources

Legal

Finance

Payroll

Compliance

Executive Leadership

Corporate Governance

Risk Management

Tax

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Human Resources Director

Legal Counsel

Finance Manager

HR Manager

Compensation and Benefits Manager

Payroll Manager

Financial Controller

Department Heads

Senior Executives

Managing Director

Country Manager

Regional Director

Industries
Law No. 13 of 2003 on Manpower (Undang-Undang Ketenagakerjaan): The primary employment law in Indonesia that governs employment relationships, including wage provisions and employment agreements
Government Regulation No. 78 of 2015 on Wages: Regulates wage structures, payment methods, and timing of wage payments, which is crucial for salary deferral arrangements
Law No. 36 of 2008 on Income Tax: Governs the taxation of employment income, including provisions related to timing of income recognition and deferred compensation
Law No. 24 of 2011 on Social Security Administrative Bodies (BPJS): Regulates social security contributions which may be affected by salary deferral arrangements
Minister of Manpower Regulation No. 1 of 2017: Provides guidelines on wage structure and scale, which must be considered when structuring salary deferrals
Civil Code (KUHPerdata): Contains general provisions on contracts and agreements that apply to employment-related agreements
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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