With an ever-growing workforce and evolving labor market dynamics, the implementation of social insurance schemes has significant implications for businesses operating in the archipelago nation. All employees in Indonesia, including expatriates and their families, must mandatorily participate in the National Social Security System (Sistem Jaminan Sosial Nasional or "SJSN"). Social security programs in the country are run by two organizations – the Social Security Administrator for Health (BPJS Kesehatan) for healthcare and the Workers Social Security (BPJS Ketenagakerjaan) for socio-economic protection.
This guide explores:
Overview of the social security rates
|
Types of Social Security |
Contribution (as a % of regular monthly salary/wages) |
Remark |
|
|
|
Borne by employer |
Borne by employee |
|
|
Health Security |
4% |
1% |
Up to a maximum monthly salary of IDR 12 million. An employee’s monthly salary includes wages plus all fixed employment benefits. |
|
Work Accident Security (Jaminan Kecelakaan Kerja or “JKK”) |
|
Employees do not make payments to JKK |
No maximum monthly salary applies. |
|
Death Security (Jaminan Kematian or “JKM”) |
0.30% |
Employees do not make payments to JKM |
No maximum monthly salary applies. |
|
Old Age Security (Jaminan Hari Tua or “JHT”) |
3.7% |
2% |
No maximum monthly salary applies. |
|
Pension Security (Jaminan Pension or “JP’) |
2% |
1% |
Up to a maximum monthly salary of IDR 10,547,400*.
An expatriate is not eligible for pension security. |
|
Job Loss Guarantee (JKP) |
0.36% |
- |
Reduced from 0.46% to |
|
*The maximum salary threshold is adjusted annually, and the retirement age will increase by one year every three years until it reaches 65 in 2043. |
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Five percent of an employee’s monthly salary will go towards paying for the healthcare premium, with a salary cap of 12 million rupiahs (US$839) while the maximum salary used as the basis for the calculation for other premiums is capped at six months’ salary of 5 million rupiahs (US$319).
Social security scheme
The BPJS Ketenagakerjaan program, or social security scheme, is mandatory for all businesses, and employers must register their employees.
The social security scheme covers the following:
- Accident compensation – provides protection for accidents occurring during or as a result of work;
- Old age benefits – provides protection for participants that are in retirement, laid off;
- Pension benefits – provides guaranteed income in retirement; and
- Life insurance – upon the death of the participant, their heirs can claim the benefits.
The total JKP contribution has been reduced from 0.46 percent to 0.36 percent of monthly wages. Contributions are fully sourced from the employer and the government; employees do not contribute. The 0.36 percent contribution is funded as follows:
- 0.22 percent is paid by the central government.
- 0.14 percent is reallocated from the employer’s contributions to the JKK program.
Eligible employees will receive 60 percent of their last drawn salary, capped at a maximum salary of 5 million rupiah (approximately USD 302). The maximum payout is 3 million rupiah per month (approximately USD 181). Benefits are provided for a maximum of six months.
Beneficiaries now have six months after termination to submit their claims, extended from the previous three months. Contract workers (PKWT) who are terminated before the end of their contract are now explicitly eligible for JKP benefits.
In cases where the employer becomes bankrupt or insolvent, BPJS Ketenagakerjaan will continue paying JKP benefits directly to affected employees, although employers remain liable for any unpaid contributions or penalties.
What are the benefits of the program?
The program offers participants a cash stipend - the participant can receive 60 percent of the monthly wage (capped at 5 million rupiah (US$319)) for the first three months, and then 25 percent for the following three months.
The program will also provide career counseling as well as online and offline training.
Sanctions for employers
Employers who fail to register their employees to the program must pay cash compensation to the employee as a lump sum in addition to providing job training.
Who is eligible for the unemployment scheme?
Employees must meet the following conditions to be eligible for unemployment benefits:
- Must be an Indonesian citizen;
- Have not yet reached 54 years of age when registering for the benefits;
- Must be formally employed; and
- Must be registered in both BPJS Kesehatanand BPJS Ketenagakerjaan programs at least six months before the termination of employment.
Healthcare program
Indonesia's healthcare program is said to be the world’s largest single-payer national health insurance program, covering 83 percent of the country’s 280 million population. Those registered with the program, both Indonesians and expatriates, are eligible for free health services ranging from dental care to medicines to physiotherapy. Patients are also eligible for free emergency and chronic care, in addition to organ transplants.
What are the premiums for employees?
Five percent of an employee’s monthly salary will go towards paying for the healthcare premium, with a salary cap of 12 million rupiah (US$821).
Workers in the private sector will pay one percent, and the remaining four percent will be paid by their employer. For civil servants, the government contributes three percent, and for the employee, two percent. Further, the premium covers the employee’s spouse and three dependent children up to the age of 21.
How to calculate the healthcare premiums for employees?
The premium for employees is calculated as five percent of the monthly salary, with a salary cap of 12 million rupiah (US$766).
In the private sector, the employer must pay four percent and the employee the remaining one percent. For civil servants, the government contributes to three percent while the employee contributes two percent.
In addition to the employee, the premium also covers their spouse and up to three dependent children up to the age of 21.
Employees earning less than 4 million rupiah (US$255) per month are eligible to receive Class I room facilities at the hospitals. Employees earning lower than this can receive Class II and III room facilities.
Classification of healthcare class facilities
The BPJS healthcare system is divided into three classes. This does not determine the level of treatment a patient receives, but it does determine the type of hospital room they will be given. Hospital rooms in Indonesia come with varying levels of comfort and size.
- Class I patients are provided rooms with two to four other patients;
- Class II patients have to share with three to five others; and
- Class III patients will have to share with five to six.
How to calculate the healthcare premiums for non-employees?
The premiums for individuals who are classified as non-employees/self-employed /non-formal workers are as follows:
- Class I – 150,000 rupiah (US$10) per person, per month;
- Class II – 100,000 rupiah (US$6.8) per person, per month; and
- Class III – 42,000 rupiah (US$2.2) per person, per month (for this specific class, the government will pay 16,600 rupiah (US$0.44) of the total amount, per person, per month).
Religious holiday allowances
The payment of the religious holiday allowance (Tunjangan Hari Raya – THR) by employers to their employees is mandatory in Indonesia.
The THR is a yearly bonus given to employees at least one week before the start of the religious holiday observed by the employee (based on the employee’s religion), equivalent to one month’s salary (based on the period of employment). The recognized religious holidays for THR payment are:
- Eid-il-Fitri for Muslims;
- Christmas for Catholics and Protestants (considered as two different religions in Indonesia);
- Nyepi for Hindus;
- Vesak for Buddhists; and
- Chinese New Year for Confucianism.
It is common for many businesses in the country to provide the THR (religious holiday allowance) to non-Muslim employees ahead of the Christmas holidays, while Muslim employees typically receive theirs before the Eid al-Fitr celebration.
Who is eligible to receive THR and how is it calculated?
All employees, whether permanent or contract-based are eligible for THR and it must be paid using Indonesian rupiah.
The amount paid is based on the employees’ service period. For employees working for more than 12 continuous months, they are entitled to THR equivalent to one month’s salary.
For employees who have served one month or more but less than 12 months, the THR is calculated on a pro-rata basis using the following formula:
(Service period/12) x 1 month’s salary
Freelance workers are also entitled to THR. Those working for more than 12 continuous months must receive the equivalent of one month’s salary, which is calculated on the average salary they received throughout this period.
For those working more than one month and less than 12 months, the THR is calculated based on the average monthly salary throughout the employment period.
Fines for non-compliance
The businesses that fail to pay the THR will be fined five percent of the THR amount, which will be used for the employees’ welfare. Further, this sanction does not waive the employer’s obligation to pay the THR.
In addition to financial sanctions, employers will be subject to administrative sanctions for failure to pay the THR. These are:
- Restriction of business activities;
- Permanent or temporary suspension of production facilities; or
- Suspension of business activities.
