Ultimate THR Guide 2025: Ensure Your Employees Get Their Rights While Staying 100% Compliant

Understanding the Holiday Allowance in Indonesia

Every year, millions of employees across Indonesia look forward to receiving their holiday allowance, a mandatory financial benefit that employers must provide before major religious celebrations. This additional income helps employees cover holiday expenses, making it an essential part of workplace benefits. However, many employers face challenges in complying with the regulations, which can lead to penalties, legal issues, and dissatisfaction among workers.

For businesses operating in Indonesia, understanding the rules surrounding this allowance is crucial. Non-compliance can result in fines, business sanctions, or even lawsuits. This guide provides a comprehensive overview of the holiday allowance, covering eligibility, payment calculations, deadlines, employer responsibilities, and the consequences of non-compliance.

If you’re an employer or an HR professional, this guide will ensure you stay compliant while keeping your employees satisfied.

What is the Holiday Allowance?

The holiday allowance, commonly known as Tunjangan Hari Raya (THR), is a mandatory financial benefit that employers in Indonesia must provide to their employees before major religious holidays. This payment helps workers manage additional expenses related to their celebrations, such as travel, gifts, special meals, and charitable contributions.

The obligation to provide this bonus is regulated under Minister of Manpower Regulation No. 6 of 2016, ensuring employees receive fair financial support based on their religious beliefs. Employers must distribute it before the following major holidays:

• Eid al-Fitr (Idul Fitri) – For Muslim employees
• Christmas – For Christian employees
• Nyepi – For Hindu employees
• Vesak (Waisak Day) – For Buddhist employees
• Chinese New Year (Imlek) – For Confucian employees

Businesses are required to issue the payment at least seven days before the religious holiday to give employees enough time for preparations. The amount given depends on the worker’s tenure and employment status, which will be explained in more detail later in this article.

Failure to provide this allowance on time or in full can lead to penalties, including fines, sanctions, or legal action. To maintain compliance and a positive work environment, employers must ensure timely distribution.

Why is the Holiday Bonus Important?

The main purpose of this benefit is to provide financial relief during religious holidays. Many Indonesians incur extra costs for travel, gifts, and festive preparations, making this allowance a crucial part of their holiday budget.

Beyond financial assistance, this mandatory bonus also plays a significant role in maintaining employee satisfaction and loyalty. Workers who feel valued and supported are more likely to stay engaged and committed to their jobs. For employers, ensuring fair and timely distribution helps create a positive workplace culture while complying with Indonesian labor regulations.

Who is Eligible for the Holiday Allowance?

Indonesian labor laws require companies to provide this financial benefit to employees who meet certain criteria. The regulation applies to various types of workers, ensuring fair treatment across different employment statuses.

Here’s a breakdown of those entitled to receive this allowance:

1. Permanent Employees (PKWTT)
   Workers with an Indefinite Work Agreement (Perjanjian Kerja Waktu Tidak Tertentu or PKWTT) automatically qualify. Since they hold long-term positions, their entitlement is calculated based on their monthly salary and length of service.

2. Fixed-Term Contract Employees (PKWT)
   Employees under a Fixed-Term Employment Agreement (Perjanjian Kerja Waktu Tertentu or PKWT) are also eligible, provided they have worked continuously for at least one month. The amount is adjusted based on their period of employment.

3. Daily Workers
   Freelance employees with structured working hours are entitled to this benefit if they have been employed for at least one month without interruption. The calculation is typically based on their average wages over the past 12 months.

4. Foreign Employees (Expatriates)
   Expatriates working in Indonesia under valid work permits and formal contracts must also receive this financial support. The amount is determined in the same way as for local employees, ensuring fair treatment under Indonesian labor laws.

By ensuring compliance with these regulations, businesses can maintain positive employee relations and avoid potential legal issues.

Who Does Not Receive THR?

Although many employees qualify for this benefit, certain individuals are not legally entitled to receive it:

1. Freelancers and Independent Contractors

Freelancers who work on a project basis or independent contractors without formal employment contracts are not entitled to this holiday allowance. Since they do not have a structured employer-employee relationship, they do not fall under the regulations governing this payment.

2. Interns or Trainees

Interns or trainees who are undergoing non-paid training programs within a company are not covered under the labor laws for this allowance. However, if their internship agreement specifically mentions a financial benefit during the holidays, companies may voluntarily provide it.

3. Part-Time Workers

The eligibility of part-time workers depends on company policy. If a part-time worker has a structured employment contract and has been consistently working for at least one month, they may be entitled to this benefit, depending on the employer’s discretion.

Even though some workers are not legally required to receive this holiday bonus, many businesses choose to provide it as a goodwill gesture. Offering a holiday allowance, even to non-eligible workers, can boost employee morale, enhance loyalty, and strengthen the company’s reputation as a fair and supportive employer.

How is THR Calculated?

The Tunjangan Hari Raya (THR) amount varies based on an employee’s length of service and salary structure. Indonesian labor regulations provide clear guidelines on how employers should calculate this religious holiday allowance to ensure fair and transparent payments.

Below are the standard methods used to determine THR payments based on different employment situations:

1. Employees with More Than One Year of Service

Employees who have worked continuously for at least 12 months are entitled to one full month’s salary as THR. The salary used for the calculation includes:

✅ Basic Salary – The fixed monthly salary agreed upon in the employment contract.
✅ Fixed Allowances – Any regularly provided benefits such as housing, meal, or transportation allowances that do not change from month to month.

Example Calculation:

• Basic Salary: IDR 10,000,000
• Fixed Allowances: IDR 2,000,000
• THR Payment: IDR 12,000,000

Thus, an employee earning a total of IDR 12,000,000 per month (basic salary + fixed allowances) will receive IDR 12,000,000 in THR.

2. Employees with Less Than One Year of Service

Employees who have worked for less than 12 months are still eligible for THR, but the amount is calculated proportionally based on their working period.

Formula:

THR = (Months Worked ÷ 12) × One Month’s Salary

Example Calculation:

An employee has worked for 6 months with a monthly salary of IDR 10,000,000:

THR = (6 ÷ 12) × 10,000,000
THR = 0.5 × 10,000,000
THR = IDR 5,000,000

If the employee also receives a fixed allowance of IDR 2,000,000 per month, then:

THR = (6 ÷ 12) × (10,000,000 + 2,000,000)
THR = 0.5 × 12,000,000
THR = IDR 6,000,000

3. THR for Daily Workers

Daily workers are also entitled to THR, provided they have worked continuously for at least one month. However, the calculation method differs depending on their length of service:

Daily Workers with More Than 12 Months of Service

The THR amount is calculated based on the average daily earnings over the last 12 months, multiplied by 30 days.

Example Calculation:

A daily worker earns an average of IDR 400,000 per day over the past 12 months:

THR = 400,000 × 30
THR = IDR 12,000,000

Daily Workers with Less Than 12 Months of Service

If a daily worker has been employed for less than a year, their THR is based on the average daily wage over the past three months, multiplied by the number of months worked.

Example Calculation:

A daily worker has been employed for 6 months and has earned an average of IDR 350,000 per day over the past three months:

• Total Monthly Earnings Estimate: 350,000 × 30 = IDR 10,500,000
• THR Calculation: (6 ÷ 12) × 10,500,000
• THR = IDR 5,250,000

Key Takeaways for THR Calculation:

✔ Employees with one year or more of service receive one full month’s salary as THR.
✔ Employees who have worked for less than 12 months receive proportional THR based on their working period.
✔ Daily workers have their THR calculated based on their average earnings over the past 3 or 12 months.
✔ Fixed allowances that are consistently provided must be included in the THR calculation.

By following these rules, businesses can ensure fair and accurate THR payments, keeping employees satisfied while maintaining compliance with labor regulations.

When Should THR Be Paid?

Employers are required to provide the holiday allowance at least seven days before the employee’s religious holiday. This ensures that workers have sufficient time to prepare for their celebrations, including travel arrangements, purchasing gifts, and covering other festive expenses. Distributing this financial benefit on time not only helps employees manage their budgets but also strengthens trust and goodwill within the workplace.

Timely payments also help businesses avoid unnecessary administrative issues and legal complications. Employers should plan in advance, ensuring payroll processes are in place to meet the deadline, especially for companies with a large workforce.

Consequences of Late Payment

Failing to provide this mandatory allowance on time can lead to significant consequences for employers, including:

1. Fines and Financial Penalties
   Companies that delay payment are subject to a 5% fine on the total amount owed. This penalty does not reduce the employee’s entitlement, meaning the full holiday allowance must still be paid in addition to the fine.

2. Labor Disputes and Legal Risks
   Employees who do not receive their holiday bonus on time have the right to file complaints with labor authorities. This can lead to formal investigations, potential lawsuits, or other legal actions that could disrupt business operations.

3. Reputational Damage and Employee Dissatisfaction
   Delays in payment can harm a company’s reputation, leading to decreased employee morale and trust. A failure to meet legal obligations may result in a negative work environment, increased turnover rates, and difficulties in attracting new talent.

To avoid these risks, businesses must ensure compliance with Indonesian labor regulations and maintain transparent payroll management. Providing the holiday allowance on schedule not only fulfills legal requirements but also fosters a positive and motivated workforce.

Employer Obligations: Ensuring Proper THR Payments

To comply with Tunjangan Hari Raya (THR) regulations and maintain a positive work environment, employers must ensure proper planning and execution of these mandatory payments. Fulfilling this obligation not only strengthens employee trust but also protects businesses from legal consequences.

Here are key steps employers should take:

✔ Budget for THR Payments in Advance
Allocating funds ahead of time helps businesses avoid financial strain when the payment deadline approaches. Employers should incorporate holiday allowance expenses into their annual financial planning to ensure smooth distribution.

✔ Verify Employee Tenure and Salary Data
Accurate calculation is crucial to avoid underpayments or disputes. Employers should regularly update payroll records, confirming each worker’s tenure, employment status, and salary details to determine the correct allowance amount.

✔ Distribute THR Payments via Bank Transfer
Using bank transfers or other official payment methods ensures proper documentation, reducing risks of payment disputes. Transparent transactions also help businesses maintain compliance with labor authorities.

✔ Keep Records of THR Payments
Maintaining proper documentation of all holiday allowance transactions is essential. Payroll teams should store proof of payments, acknowledgment receipts, and relevant employee records in case of future audits or complaints.

✔ Communicate Clearly with Employees
Informing employees about payment timelines, calculation methods, and eligibility criteria helps prevent misunderstandings. Employers should provide clear explanations and be prepared to address any concerns workers may have.

By ensuring these steps are followed, HR and finance teams can work together to facilitate a smooth and compliant THR distribution process. Proper planning and execution will help businesses uphold their responsibilities while fostering a motivated and satisfied workforce.

What Happens If a Company Fails to Pay THR?

Failure to provide THR can result in:

1. A fine of 5% of the total THR amount (must be paid to the employee).
2. Legal action filed by employees through the Ministry of Manpower.
3. Temporary suspension of business operations in severe cases.

Employees can report THR violations via the Ministry of Manpower’s complaint system.

Common Misconceptions & Employer Mistakes About Holiday Allowance

Misunderstandings about Tunjangan Hari Raya (THR) can lead to non-compliance and unnecessary disputes. Employers must be aware of their obligations to avoid legal risks and maintain a fair workplace. Below are some of the most common misconceptions:

• “Only Muslim employees receive THR.” – False! The holiday allowance applies to all employees, regardless of their religion. Workers must receive it before their respective religious holidays, whether it’s Eid al-Fitr, Christmas, Nyepi, Vesak, or Chinese New Year.
• “Small businesses don’t have to pay THR.” – False! All registered companies, regardless of size, must comply with this requirement. There are no exemptions based on company scale, meaning even startups and small enterprises must provide this financial benefit to their workers.
• “Employees on probation are not eligible for THR.” – False! The law states that any employee who has worked for at least one month is entitled to receive this benefit. Probationary status does not exclude a worker from their right to this financial support.
• “Freelancers and contract workers don’t qualify.” – False! While truly independent freelancers may not be eligible, daily workers and contract employees (PKWT) are entitled to the allowance as long as they have been employed for at least one continuous month.
• “THR can be replaced with other incentives.” – False! Employers cannot substitute this mandatory allowance with performance bonuses, gift vouchers, or any other form of incentive. The payment must be made in cash or direct bank transfer, ensuring full compliance with labor laws.

By understanding these common misconceptions, employers can avoid penalties, maintain positive employee relations, and ensure their business remains legally compliant. Proper planning and adherence to regulations will help foster a supportive and motivated workforce.

Why THR Compliance Matters

Providing Tunjangan Hari Raya (THR) is more than just a legal requirement—it plays a vital role in boosting employee morale, enhancing job satisfaction, and fostering stronger employer-employee relationships. For many workers, this financial support helps ease the burden of holiday expenses, allowing them to celebrate important religious occasions with peace of mind.

Ensuring timely and accurate THR payments not only helps businesses comply with Indonesian labor laws but also demonstrates a company’s commitment to fair employment practices. Employers who fulfill this obligation build a positive workplace culture, increase employee loyalty, and reduce the risk of disputes that could lead to legal and reputational issues.

By properly planning for THR distribution, keeping detailed records, and maintaining open communication with employees, businesses can avoid financial penalties and administrative complications. A well-managed THR process reflects a company’s professionalism and dedication to employee well-being.

If your business needs assistance with THR calculations, compliance strategies, or dispute resolution, SynergyPro is here to help. Our team of experts can ensure that your company remains compliant while maintaining a motivated and satisfied workforce.