You hired three Indonesian developers. They're shipping features. Team morale looks good.
Then, six months in, two of them disappear. No resignation letter, just silence. The third stays but goes quiet in meetings.
When you ask what happened, the answer comes later through a third party: they found out their employer isn't paying BPJS properly. No health insurance for their families. No pension contributions. Just invoices.
This is the story RainTech hears again and again. Not from founders who hired the wrong talent, but from founders who hired great talent but made one legal mistake: treating their Indonesian squad like freelancers instead of employees.
The brutal truth? Compliance isn't an HR problem. It's a retention crisis waiting to happen.
The Hidden Cost of Cutting Corners
When founders first hire in Indonesia, they face a choice, usually without knowing it's a choice:
Path A
Work with a compliant EOR or outsourcing partner who handles BPJS, payroll, contracts, tax filing. Everything is documented. Cost: ~$300/employee/month.
Path B
Find a cheaper vendor who handles everything "flexibly." No paperwork. Lower cost. Faster setup.
Most choose Path B. For the first few months, it works fine. Developers ship code. Deadlines hit. Everything feels efficient.
Then things start breaking, but not visibly. An engineer misses a stand-up. Another takes longer to respond to messages. A third stops asking questions and just executes tasks. Morale flattens.
When you finally dig in, you realize: they found out their employment isn't legally documented. No BPJS. Missing 13th-month salary (THR). Tax information they can't verify. And now they're job hunting.
The cost of that discovery?
- Lost engineer: 2-4 weeks to replace
- Team disruption: productivity drop for remaining teammates
- Knowledge loss: projects delayed
- Trust erosion: other developers wonder if they're next
That $300/month "savings" from the cheaper vendor just cost you $15K+ and destroyed your team's stability.
Why Indonesian Developers Care About Compliance
Here's what most founders don't understand: Indonesian developers aren't naive about employment law. Many have experienced bad vendors: promises broken, benefits missing, taxes mishandled.
By 2026, good engineers have options. They can work for global companies with proper legal structures. They know what they should get:
BPJS Ketenagakerjaan
Health insurance. Family coverage. Disability protection. This isn't optional. It's how Indonesian workers protect their families.
BPJS Kesehatan
Separate health insurance. If a developer has a family medical emergency and finds out they're not covered, they leave.
PPh21 (Income Tax) Documentation
They want proof their taxes are being filed correctly. Incorrect tax treatment haunts them during government audits or when they need to get a mortgage.
13th-Month Salary (THR)
This is legally mandated, not a bonus. If a vendor says, "we'll pay it when revenue is good," that developers knows you're not serious about compliance.
Clear Contract in Indonesian
They want a contract in their language that clearly spells out WFA framework compliance, working hours, IP ownership, and severance. A vague freelance agreement tells them you don't value their legal protection.
From their perspective: proper compliance = stability, cutting corners = risk. And when you're building a life in Jakarta or Bandung, stability matters more than an extra 5% salary from a sketchy vendor.
When developers realize their employer doesn't provide basic legal protection, two things happen:
- They start interviewing elsewhere immediately.
- They tell other engineers: "This company cuts corners on compliance."
Word spread. Your entire talent brand gets damaged.
The Anatomy of Squad Dissolution
Let's walk through how compliance failures destroy squads:
Scenario A: The Silent Departure
Engineer 1 discovers via a government SMS that they're not registered with BPJS. They panic. They start applying to other jobs. They never tell you, they just reduce their output and prepare to leave. Two weeks later, they handed in a resignation with minimal notice.
By the time you realize they're gone, you've already lost momentum on their projects.
Scenario B: The Morale Collapse
Engineer 2 learns (from casual conversation with a friend) that the "service fee" their EOR takes is way higher than industry standard. They realize, their actual earnings are less than their thought.
Now they're resentful. Not at you directly, but at the situation. They stay but become less engaged. They don't volunteer for hard projects. They clock out at exactly 5 PM instead of staying late to ship.
Your squad isn't leaving, it's just running at 60% efficiency.
Scenario C: The Competitive Exodus
Engineer 3 gets a job offer from another company, one with compliant EOR, transparent cost breakdown, and clear BPJS coverage.
Suddenly, scenario A and B become urgent. If engineer 3 leaves, that's the signal: "This company doesn't take care of us."
Engineers 1 and 2 suddenly have permission to leave too. Within a month, your squad is gone.
What happened? Not bad hiring. Not bad management. One vendor cutting corners on compliance.
The 2026 Acceleration
In 2024, compliance failures were slower to surface. By 2026, they're weaponized by:
Coretax Transparency
Indonesia's real time tax system means discrepancies are visible faster. Developers can check their tax filings directly. If their vendors is misreporting, they see it immediately.
Developers Networks
Top engineers talk. They share vendor experiences on WhatsApp group, Discord servers, and LinkedIn. A bad vendor gets a reputation in weeks.
Global Opportunity Cost
Indonesian developers know they can work for US/EU companies with proper EORs. Why stay with cutting-corners vendor when proper compliance is available?
Government Tightening
Indonesia's enforcement of labor law has strengthened. Companies with non-compliant vendors face bigger fines. Developers know this, they see regulatory news and get anxious about their own status.
How to Spot Compliance Problems Before They Become Retention Crisis
You don't need to audit your entire vendor relationship to catch early warning signs. Watch for these flags:
Red Flag 1: Vague Payslips or No Payslips
If developers aren't getting monthly payslips showing BPJS deduction, PPH21 withholding, and net-pay, that's a problem. Demand them. If your vendor resists, that's the signal to switch.
Red Flag 2: "Flexible" Benefits
Any vendor saying "BPJS is optional" or "we'll handle THR when the budget allows" is cutting corners. These aren't optional in Indonesia. Move on.
Red Flag 3: Developers Asking Legal Questions
When your developers start asking "Am i properly registered?" or "Where can i verify my tax filing?", that's anxiety leaking through. They're worried. They're probably job hunting.
Red Flag 4: Sudden Communication Drops
Engineers go silent in Slack. Slower to respond to messages. Less engaged in meetings. This often precedes departure. Get ahead of it: ask directly about their concerns. Many will tell you about compliance issues if you ask.
Red Flag 5: Turnover in Competitive Roles
If your senior engineers or specialist developers are leaving, it's not random. They're the most employable. And they're the most aware of employment law. They leave when they realize compliance is weak.
The Retention Framework
Here's the truth: compliance is your strongest retention tool. Stronger than perks. Stronger than flexible hours. Because compliance communication one message: "We care about your legal security."
A retention framework around compliance looks like this:
1.Start with Compliance, not Culture
Culture matters but if the legal foundation is broken, culture doesn't matter. Fix compliance first, build culture second.
2.Choose the Right Partner
An EOR isn't just a vendor, they're part of your team's sense of security. Choose one that:
- Provides transparent monthly payslips
- Handles BPJS registration and proof
- Files PPh21 accurately
- Enforces WFA framework in contracts
- Responds quickly to employee questions
3.Communicate Clearly
Tell your developers: "Here's how we handle BPJS. Here's your payslips. Here's your tax filing status."
Transparency kills anxiety. Silence breeds suspicion.
4.Stay Informed
You don't need to be a tax expert. But you should:
- Review payslips quarterly
- Verify BPJS enrollment
- Understand your vendor's tax process
- Stay updated on Indonesian labor law changes
5.Audit Periodically
Don't wait for problems. Every 6-12 months, ask your vendor to walk you through their compliance checklist. If they can't explain it simply, switch.
Conclusion
Your Indonesian squad doesn't dissolve because they find better jobs elsewhere. They dissolve because you made them feel unprotected.
Compliance might seem like an administrative detail. It's not. It's the foundation of trust. When developers know their BPJS is secure, their taxes are correct, their contracts are legal, they relax. They focus on the work, they stay.
Cut corners on compliance, and you're not saving $300/month. You're spending $15K+ on replacement costs and destroying your team's trust.
In 2026, the question isn't "Can we hire Indonesian developers?". It's "Can we keep them?", and the answer depends entirely on whether you threat them like partners or like a cost to minimize.
Book a 30-minute consultation with RainTech, for a confidential vendor compliance review. We'll walk through your current setup, identify gaps, and help you understand what's putting your squad at risk.
Subscribe to our newsletter for monthly updates on Indonesian labor law changes, tax requirements, and hiring best practices from founders who've solved this.
For a deeper look at the cultural practices that actually retain talent, read our fundamental guide: Building a Remote-Friendly Culture for Indonesian Tech Talent
For other essential frameworks on building resilient Indonesian teams, explore these RainTech resources:
- How to Audit Your EOR or Outsourcing Partner in Indonesia
- Stop Waiting 6 Months: Why EOR is Crushing PT PMA for Indonesian Tech Hiring in 2026
- Indonesia Remote Team: 2026 HR & Payroll Compliance Guide
- How Established Companies & Startups Use Indonesian Remote Teams Differently
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