Introduction
An expatriate compensation package is designed to ensure that an employee who is sent to work in another country is able to maintain a comparable standard of living to what they would enjoy in their home country, while also compensating them for the challenges of living and working abroad.
In Indonesia, expatriate compensation packages can vary significantly depending on the employer, the industry, and the level of the employee.
In recent years, the structure of expatriate packages has evolved. While traditional full packages are still offered at senior levels, many companies now provide more flexible or reduced benefits, often referred to as “local plus” packages. Understanding what is typically included, and what may need to be negotiated, is essential for anyone considering a move to Indonesia.
Base Salary
The base salary is the foundation of any expatriate compensation package.
While expatriate salaries are often still higher than local equivalents, the gap has narrowed in many industries as companies localise roles and manage costs more carefully.
Some companies now structure salaries as a combination of local salary plus allowances, while others provide a single consolidated salary. It is important to understand how your package is structured, as this can affect taxation and benefits.
Cost of Living Allowance (COLA)
A cost of living allowance is intended to offset the difference in the cost of living between the expatriate’s home country and Indonesia.
While Indonesia can still be relatively affordable, costs for expatriates can be high depending on lifestyle choices, especially in areas such as housing, schooling, and imported goods.
Jakarta, Bali, and other major expat hubs have seen rising living costs, particularly for accommodation and international schooling. COLA policies vary widely and are not always included in modern packages.
Housing Allowance
Housing is typically one of the largest components of an expatriate package.
Many companies provide either company-leased accommodation or a housing allowance.
Housing costs in Jakarta and other major cities have increased over the years, particularly for properties in expat-preferred areas.
In some modern packages, housing is no longer fully covered and may be capped or partially subsidised. It is important to clarify whether utilities, maintenance, and service charges are included.
In Indonesia, it is common practice for rent to be paid in a lump sum in advance, often for one or two years. This can come as a surprise to many expatriates. If the company is not covering housing directly, expats should ensure they are financially prepared for this significant upfront cost or negotiate support as part of their package.
Note: Rental prices vary widely by city and neighbourhood. Readers are advised to verify current market rates.
Transportation
Transportation benefits may include a company car, driver, or a transportation allowance.
Having a driver remains a common benefit in Indonesia due to traffic conditions in major cities. However, some companies now provide transport allowances instead, especially for mid-level roles.
Ride-hailing apps such as Gojek and Grab are widely used and have influenced how transportation benefits are structured.
Education Allowance
For expatriates with children, education is often a major concern.
Many expatriate packages include allowances for international school fees.
International school fees in Indonesia have increased significantly and can represent one of the largest expenses for families.
There are very good international schools in major cities such as Jakarta, Bali, and Surabaya. In many cases, the quality of education and facilities can be equal to or even better than what some expatriates are used to in their home countries. However, this comes at a high cost.
It is crucial to negotiate clearly with your employer to ensure that education expenses are covered as part of your package, as these fees can be substantial and may increase annually.
Some companies now cap education allowances or limit them to a certain number of children or specific schools.
Note: School fees and admission policies change frequently. It is advisable to confirm current costs and availability directly with the school.
Medical Benefits
Medical insurance is typically included in expatriate packages.
This may include coverage for treatment in Indonesia as well as evacuation to another country if necessary.
Access to high-quality private hospitals has improved significantly in Indonesia, particularly in Jakarta and Bali, although many expatriates still prefer evacuation coverage for serious conditions.
Tax Equalisation
Tax equalisation policies are designed to ensure that the expatriate does not pay more or less tax than they would have in their home country.
Indonesian tax regulations can be complex and may change over time. It is important to clarify whether your employer provides tax assistance or advisory services.
The terms of taxation often depend on how many days you spend in Indonesia, as this can determine your tax residency status. In addition, some countries have tax treaty agreements with Indonesia, while others do not, which can significantly affect how income is taxed.
Because of this, tax arrangements for expatriates can become highly complex. Many expatriates rely on professional assistance from accountants or international firms such as PwC or Ernst & Young to ensure their tax obligations are calculated correctly and remain compliant.
Home Leave
Many expatriate packages include home leave benefits, allowing employees and their families to return to their home country periodically.
Some companies have reduced the frequency or coverage of home leave as part of cost-control measures. The number of trips allowed per year, whether spouses or dependents are included, and the class of travel are now often more tightly controlled than in the past.
Despite these changes, home leave remains a common component of many expatriate packages and is an important factor to clarify when negotiating your terms.
Other Benefits
Other benefits may include relocation assistance, shipment of household goods, temporary accommodation on arrival, club memberships, and hardship allowances.
In modern packages, some of these benefits are being reduced or replaced with one-time relocation payments or flexible allowances.
Language training is sometimes offered to help expatriates and their families adjust more easily to life in Indonesia. In addition, some companies provide support for the spouse, particularly if they have had to give up their career in order to relocate. This may include education or training opportunities, or in some cases, a form of spousal compensation.
These types of benefits vary widely and often depend on the generosity of the company as well as the seniority of the employee. They can also become important negotiation points, particularly when the company is trying to encourage an expatriate to accept a posting in Indonesia.
Changes in Expatriate Packages
Over the past decade, expatriate compensation in Indonesia has undergone noticeable changes.
Traditional “full expat packages” that included housing, schooling, driver, and multiple allowances are now less common outside of senior executive roles.
Many companies are moving towards local plus packages, short-term assignments, project-based contracts, and greater localisation of roles. These changes reflect both cost considerations and the increasing availability of skilled local talent.
Important Considerations
When reviewing an expatriate package, it is important to consider the total value of the package, not just the base salary. You should also understand whether allowances are fixed or adjustable, and what benefits are guaranteed versus discretionary.
It is also important to understand what happens at the end of the assignment, including repatriation terms and any impact on long-term career progression.
Compensation Package Conclusion
An expatriate compensation package can significantly impact your experience living and working in Indonesia.
Understanding the components of the package and how they align with your personal and family needs is essential.
Given the changing landscape of expatriate employment in Indonesia, careful review and negotiation of your package is more important than ever.
Frequently Asked Questions Compensation Package
What is included in an expat package in Indonesia?
Typically, an expat package may include salary, housing, transportation, medical insurance, and education allowances. However, modern packages vary widely and may not include all of these components.
What is a local plus package?
A local plus package usually offers a local salary with some additional benefits such as housing or schooling support, but fewer benefits than a traditional expatriate package.
Are expat packages decreasing in Indonesia?
Yes, many companies are reducing expatriate benefits and moving towards more cost-efficient structures, especially for mid-level roles.
Is housing still provided for expats in Indonesia?
Housing is often provided or subsidised, but full housing coverage is less common than in the past.
Do companies still provide drivers for expats?
Some companies do, particularly for senior roles, but many now provide transportation allowances instead.
