The payroll software industry in Indonesia has been affected by several macroeconomic changes of late.
Apart from the recent local data compliance regulations in Indonesia and elsewhere that have influenced how firms process data, there has also been an accelerated adoption from spreadsheets to a digitized payroll to ensure a consistent employee experience.
The sudden shift from in-office to a hybrid environment due to the pandemic has also affected several aspects of payroll, including payroll processing, answering payroll queries, and so on.
If you are a payroll specialist from Indonesia reading this, here are some of the trends to watch out for:
Migration to cloud-based technologies
According to the 2021 Payroll Complexity Index, 40% of companies still use spreadsheets, and 18% continue to use high-risk and largely non-compliant manual and paper-based activities as part of their payroll processing.
But this is changing.
According to a survey commissioned by Alibaba Cloud, 83% of the firms surveyed in Indonesia believe that cloud-based tools will help them cope with their business needs in a post-pandemic era.
This is because organizations have realized the benefits of having a centralized repository of information that HR teams and employees can access anytime and anywhere.
Having the entire payroll data on the cloud allows employees to access their payroll information, including pay slips, tax information, leave status, etc., in a centralized hub. Managers can also directly approve leaves on the system, and the information is continuously updated in real time, improving the system’s accuracy.
Another key benefit of cloud-based payroll software in Indonesia is scalability. A cloud-based payroll system should easily weather scalability challenges.
In summary, cloud-based payroll software can help Indonesian firms overcome payroll processing and management challenges, such as miscalculating payrolls, tax-related errors, and overdue deadlines, to make organizations future-proof.
The emergence of mobile-first systems
Like the consumer experience they are already used to, employees now expect a similar employee experience where they can access all payroll-related information via their mobile phones.
A mobile app frees managers from logging into their desktop/laptop each time for every approval and gives employees access to their personal information at their fingertips.
The pandemic has also fueled a rise in the gig economy, with several contract workers joining the workforce. In their case, a mobile app is crucial in helping them view pay slips, fill in their shift/overtime details, and so on.
Mobile apps are also expected to be instrumental in personalizing the employee experience and creating a better employer brand.
Increasing use of AI in Payroll
The future of work is paved by artificial intelligence-powered technologies like Face ID and chatbots that make it seamless for HR teams to track timesheets and collect data on various parameters.
When it comes to payroll, chatbots or conversational AI allows employees to strike up a dialogue and swiftly find answers to their queries.
For instance, instead of asking HR to pull out records and answer questions about payroll or unused leave, employees can get instant answers for commonly asked queries from a chatbot.
Besides answering payroll-related questions, a chatbot can also provide employees with personal documents that they might need without having to rope in the HR team.
On-demand pay is a payroll service that allows employees to access some or all their wages.
Rather than waiting to receive a bi-weekly or monthly paycheck with wages earned from the previous payroll period, employees using on-demand pay can have more control over their finances — choosing when to access their earned income before the next payroll cycle.
With the rise in the gig workforce, on-demand pay is increasingly becoming common, especially in countries such as Indonesia, where super apps such as Gojek, Grab, and others are employing tens of thousands of workers that cater to the burgeoning middle class.
Even amongst the salaried class, on-demand pay is increasingly becoming a feature that helps them tide over unexpected financial situations.
Firms leveraging features such as on-demand pay with their payroll management software can have an edge in employee experience over their peers.
Use of HR analytics to make business decisions
Data is the new oil.
Although using data in HR to take strategic decisions is familiar, it will become a necessary part of running the people department in the future.
When the payroll team is well-versed in data, it can also help the HR leaders make crucial decisions related to expansion from a payroll point of view. The former can help provide accurate figures for employee expenditure, labour costs, and so on, thus helping HR teams make the right decisions affecting a company’s bottom line.
Enterprise-grade data security becoming mainstream
Off late, new laws have emerged in the last few years, requiring Indonesian payroll softwares to be PDPA (Personal Data Protection Act) compliant.
Modern payroll systems make it easier to comply with emerging regulations through automatic updates and robust security features like dual authentication on top of the traditional security questions to keep your data safe.
Such security features automatically encrypt any sensitive information you enter in the system, using the highest cybersecurity standards possible.
Need for payroll softwares that complies with local regulations
In a country as complex as Indonesia, payroll softwares need to consider local legislation and rules carefully. The law also mandates that payroll data needs to be stored by the payroll program for a period of 5 years.
There is a need to adhere to Indonesia-specific requirements such as –
Other local compliances that need to be adhered to include and are not limited to –
Like any other country, Indonesia too imposes an array of taxes on individuals and corporate taxpayers.
The following reports must be filed monthly by 5th:
Social benefit report (ND-7)
Social benefit payment computation sheet (ND-8)
Payroll softwares in Indonesia should also enable employers to deduct insurance from the monthly earnings of their employees and remit it to social insurance authorities on the latter’s behalf.
The following reports need to be submitted to tax authorities on a quarterly/yearly basis*:
Report on withholding Tax Return for Wage, Salary, and other Comparable Income – TT-11
Information on Withholding Tax Return for Wage, Salary, and other Comparable Income – TT-11(1)
*For the quarterly report, 20th of April, July and October are the final submission dates; For the annual report, 10th of February of next year is the final submission date.
It is important to note that all reports and returns can be submitted by both parties, either the client or payroll system/service provider, if it is approved by the former.
In Indonesia, it is mandatory for all companies to register their employees in health and employment social security programs called Jamsostek.
While the employer’s contribution to basic salary is 3.7%, the employee’s contribution is 2.0%. Delay in payments to social security programs might result in suspension of benefits, the need to get a new membership and a penalty of 2% from the total contribution originally intended.
Jamsostek reports and payments are due by the 15th of the following month but settling at the month-end is ideally recommended.
The pension scheme also caps –
Employers’ contribution at 3.7% of basic salary + fixed allowances
Employees’ contribution at 2.0 % of basic salary + fixed allowances
Companies with less than 10 employees are not mandated to register for social security payments.
While not mandatory, it is highly recommended that companies make payroll payments to employees and authorities from a bank account located within Indonesia.
Check out PeopleStrong
Given the changing technological landscape and demands of employees, payroll is set to change in the coming few years.
An advanced payroll system is necessary for any organization that plans to invest in employee experience and productivity. However, besides focusing on the technology aspect, the usability and flexibility of the platform need to be considered.
PeopleStrong’s local legal expertise will guide you through Indonesia’s complicated labor and tax requirements so you can run payroll without hassle.
The robust platform will help you create a smarter workplace through intelligent payroll management. If you are looking to upgrade your payroll process or grappling with building enhanced transparency around a distributed workforce and operations, PeopleStrong Payroll could be the solution you’re looking for.
Find out how you can enhance your digital HR transformation journey with PeopleStrong