Indonesia’s Omnibus Law: The New Unemployment Benefit Program
- Indonesia’s GR 37/2021 introduces the country’s first ever unemployment benefit program, which provides cash stipends and training to the unemployed.
- To be eligible, participants must have participated in the government’s social security programs the Social Security Administrator for Health (BPJS Kesehatan) for healthcare and the Workers Social Security (BPJS Ketenagakerjaan) for pensions.
- Employers who fail to register their employees to the program have to pay cash compensation to the employee as a lump sum.
In our fifth article on Indonesia’s Omnibus Law, we examine Government Regulation 37 of 2021 (GR 37/2021) on the new unemployment benefit program (Job Loss Security program (JLS) — the first of its kind in the country.
The JLS scheme does not however, provide universal coverage as only employees who are already registered with the Workers Social Security program will be eligible. It is the task of employers to enroll any new employees into the program.
Employees who have been made redundant and are eligible for unemployment benefits will receive cash stipends for up to six months, further skills training, and career guidance information.
Indonesia’s social security program is run by two organizations — the Social Security Administrator for Health (BPJS Kesehatan) for healthcare and the Workers Social Security (BPJS Ketenagakerjaan) for pensions. The universal healthcare program is already considered one of the largest single-payer national health insurance scheme, covering over 83 percent of the country’s 270 million people.
Who will be eligible for the unemployment scheme?
GR 37/2021 states that 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 Kesehatan and BPJS Ketenagakerjaan programs at least six months before the termination of employment.
How are the new premiums calculated?
Employers will contribute 0.46 percent of their monthly wages to the JLS program, in which 0.22 percent is contributed by the government and the remaining 0.24 percent from the employer.
Importantly, the employer’s contribution is taken from the re-composition of the life insurance and work compensation components of the pension program.
The pension program under BPJS Ketenagakerjaan 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.
Under GR 37/2021 the employer’s contribution to the life insurance component has been reduced by 0.1 percent from 0.3 percent of the employee’s monthly wage to become 0.2 percent. Further, the work compensation contribution has also been reduced by 0.14 percent from 0.24 – 1.74 percent to produce the new range 0.10 – 1.60 percent.
The maximum salary used as the basis for the calculation is capped at six months’ salary of 5 million rupiah (US$352).
What are the benefits of the program?
The program offers participants the following benefits:
Cash stipend — the participant can receive 45 percent of the monthly wage (capped at 5 million rupiah (US$352)) for the first three months, and then 25 percent the following three months.
The program will also provide career counselling as well as online and offline training.
Sanctions for employers
Employers who fail to register their employees to the program have to pay cash compensation to the employee as a lump sum in addition to providing job training.
Our Omnibus Law series
Please view our other articles in our Omnibus Law series by clicking the links below:
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