Indonesia, the largest economy in Southeast Asia, is a diverse country that has shown huge economic growth.
Today, it’s a popular outsourcing hub mainly due to its low average salary.
The average annual salary in Indonesia is 146,000,000 Indonesian Rupiah (IDR) or 9,872 US Dollars (according to the exchange rates in May 2023). This figure is relatively low when compared to the average salaries of other countries.
Table of Contents
- What is the average salary in Indonesia?
- Average salary comparison in Indonesia
- Average salary in Indonesia vs. the world
- Top 5 benefits of outsourcing to Indonesia
Let’s dive in.
What is the average salary in Indonesia?
According to Salary Explorer, the average monthly salary in Indonesia is 12,100,000 Indonesian Rupiah or 818 US Dollars. This salary parameter considers benefits like housing, insurance, commutation compensation, etc., along with the average wage.
What’s an average wage?
The average wage is the base salary of an employee. It doesn’t include benefits like transportation fees, medical insurance, etc., unlike the average salary.
In other words, an average monthly wage only considers the remuneration employees receive per month. In comparison, the average monthly salary includes all the benefits employees receive from their job in a month.
And while the average salary is one of the best measures of economic growth, you can’t conclude the strength of a country’s economy just with its average salary.
You need to consider other aspects:
1. Median salary
The median salary in Indonesia is 10,500,000 IDR (710 USD).
This means that 50% of the Indonesian population earns more than 10,500,000 IDR, and the other 50% earns less than 10,500,000 IDR.
2. Salary range
The country’s average salary ranges from 3,070,000 IDR (minimum salary) to 54,200,000 IDR (maximum salary). The least salary in Indonesia will be lower than the lowest average, and the highest salary in the country will be higher than the highest average.
3. Salary percentile
Percentile is a comparison score of a particular value with the others.
In Indonesia, the 25th percentile is 7,560,000 IDR (511 USD). This means that 25% of the country’s population earns less than 7,560,000 IDR, which automatically implies that 75% of the population earns more than 7,560,000 IDR.
Similarly, the 75th percentile of the country is 15,900,000 IDR (1,075 USD).
4. Minimum wage
The minimum wage of a country is the least wage an employer can pay an employee. This parameter varies from one city to another due to changing cost of living, local wages, availability of labor, etc.
As a result, the minimum wages of different provinces in Indonesia are different. The provincial wage council, a board that consists of the government, trade unions/labor unions, and employers, determines the minimum wages of the provinces.
Here’s a list of the minimum wages in the different provinces of Indonesia:
|Provinces||Minimum Wage per Month|
|DKI Jakarta||4,416,186 IDR|
|West Java||1,810,350 IDR|
Average salary comparison in Indonesia
The average salary of Indonesia also varies largely depending on employees’ education, experience, job, and employment city.
Let’s compare the average salary based on these parameters:
Just like in other countries, the basic salary of a fresh graduate will be the lowest.
Generally, the salary of employees with two to five years of experience will be 32% more than at an entry level employee.
Employees with experience of more than five years receive 36% more than those with work experience of five years and under.
Professionals with over 10 years of experience have 21% higher salaries than those with more than five years of work experience. And once an employee crosses the 15 years mark, their salary usually increases by 14% from their 10-year salary.
A worker with a certificate or diploma earns 17% more than someone who has only graduated high school.
Professionals with a Bachelor’s degree receive 24% more than those with a certificate or diploma. And an employee with a Master’s degree earns 29% higher salaries than their peers with a Bachelor’s degree.
Usually, Ph.D. holders get 23% more than Master’s degree holders for the same job.
3. Increment and bonus
Most Indonesian employees are likely to get a salary increment of 8% every 18 months. This is high compared to the world’s average increment rate of 3% every 16 months.
But the increment rate varies across industries and increases with the employee experience.
Here’s a list of the average increment rates of few prominent industries:
|Industry||Increment Rate (%)|
Here’s a list of the average salary increase rate by experience level:
|Experience Level||Salary Increment Rate (%)|
Apart from annual salary increments, Indonesian employees receive bonuses. 49% of them received a monetary bonus that ranges from 3% to 5% of their annual salary.
Employees who have a job in marketing, architecture, and sales fields receive high bonuses when compared to those who work in the construction or hospitality industries.
The average salary for different professions varies due to the difference in their demand.
Some services are more essential than others in the country.
Here’s a list of the average monthly salaries of different professions:
|Job Title||Average Monthly Salary|
|Vice President||22,500,000 IDR|
|Marketing Manager||22,400,000 IDR|
|Human Resources Manager||19,000,000 IDR|
|Software Engineer||12,000,000 IDR|
|English Teacher||9,730,000 IDR|
|Graphic Designer||8,010,000 IDR|
In Indonesia, the average salary changes from one city to the other due to varying levels of industrialization. Cities with fewer businesses tend to have low salaries.
Here’s a list of the average monthly salary in different cities in the country:
|City||Average Monthly Salary|
Note: These figures are averages derived from salary reports of employees in Indonesia, including expats. Consequently, they may vary depending on factors such as experience, location, industry, etc., and are only to be used as a general guideline.
Now that we have seen the various average salary comparisons in Indonesia, let’s fare it against the average salaries of other countries.
Average salary in Indonesia vs. the world
The average monthly salary of Indonesia is way lower than that of developed countries like Switzerland and Germany.
One of the biggest reasons for this is the abundance of labor in the country.
Thailand, Qatar, and a few other developing countries have higher average salaries than Indonesia. But others like India and the Philippines have a lower average salary.
The average salary in these developing countries varies based on the difference in economic stability, industrialization, cost of living, and other factors.
Since Indonesia is a growing economy with many skilled workers, labor costs are lower than in most developing countries.
Here’s a list of the average monthly salaries of other countries:
|Country||Average Monthly Salary|
|Hong Kong||4,698 USD|
|South Korea||3,308 USD|
Top 5 benefits of outsourcing to Indonesia
Indonesia has a lot to offer the world economy as a desirable outsourcing location.
Let’s look at some of the southeast Asian nation’s biggest selling points:
1. Low labor costs
Indonesia had a total labor force of 134,616,083 in 2020 – which is higher than Malaysia (15,904) and Thailand (38,483). This leads to the law of averages that pushes down the wages.
Also, Indonesia’s minimum monthly wage (305 USD in Jakarta) is lower than that of developed countries like the USA (1,160 USD) and Germany (1792 USD).
Moreover, the country has a lower daily minimum wage than neighboring countries like Malaysia (9 USD) and Singapore (36 USD). In fact, the minimum wage in South Korea (19 USD) is approximately four times higher than that in Indonesia.
The cost-saving features of Indonesia act as a favorable environment for startups to flourish. This further increases the availability of cheap services.
2. High digital growth And industrialization
Indonesia is aiming to become the largest digital economy in ASEAN (Association of Southeast Asian Nations). The country has taken several steps to achieve the target.
Its digital growth initiatives have helped it:
- Rank 38th in broadband affordability, above Thailand (74th) and Malaysia (91st).
- Increase the total number of people using the internet by 25 million between 2019 and 2020.
- Attain a technology adoption rate of 55, securing 72nd place in the world.
Along with digital growth, Indonesia has established a National Cybersecurity Agency to identify, prevent, and solve cybersecurity crimes.
Also, the Competitive Industrial Performance Index (CIP) 2019 reported that Indonesia is more industrialized than Mexico and Vietnam. Major industry sectors in the country are services, manufacturing, agriculture, fishing, mining, and construction.
An outsourcing company can leverage Indonesia’s growing digital economy and industrialization to expand its business and stay on top of its industry.
3. Tax incentives
The Indonesian government has established Special Economic Zones (SEZs) and has offered tax incentives to attract foreign investment.
Some of the incentives include:
- Import duties exemption or restitution for goods needed for the processing, assembly, or installation of export products.
- Businesses in SEZs get 50% to 100% reduction, relief, or exemption from regional taxes by the local government.
- Businesses that import certain goods for tourism in SEZs are eligible for import duty exemption.
4. High economic growth
The Indonesian GDP had sharply increased from 95 billion to 1.1 trillion between 1998 and 2019. However, the country’s economy took a slight blow during the Covid 19 pandemic.
In 2020, the country had a GDP of around 1 trillion – implying it wasn’t much affected by the pandemic.
Additionally, in March-April 2021, retail sales increased by 11%, and manufacturing processes expanded due to increased external demand and commodity prices.
5. Low cost of living and operations
Indonesia has a reasonably low living cost, which is around 116,193 IDR, excluding the rent.
The cost of living indices for prominent cities like Bali and Jakarta are 43 and 41, respectively. This is quite low when compared to New York (100) or Paris (87).
Generally, the cost of business functioning decreases with the cost of living of a country. The cost of commodities necessary for the smooth operation of a business like corporate real estate, electricity, water, raw materials, etc., are lower in a country with a low cost of living.
Indonesia is a promising outsourcing destination due to its low labor costs, high availability of talent, strong digital background, high tax incentives, and other factors.
However, you should keep in mind that outsourcing depends on your business requirements. You can refer to this article for all details of the average salary in Indonesia and understand outsourcing to the country better.