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Indonesia – Social Security Reforms Update.

12 May, 2014

 

 

Indonesia has introduced a new regime of national social security. Under the new regime, there are two social security administrators, which are the Manpower Social Security Administrator (BPJS of Employment) and the Health Social Security Administrator (BPJS of Health). Answerable to the President of the Republic of Indonesia, both administrators commenced their operations on 1 January 2014.

 

Key Changes

 

Law No. 24 of 2011 on Social Security Administrators

 

mandates that both BPJS of Employment and the BPJS of Health must be able to provide their full service by 1 July 2015.

 

Key changes under the new regime include:

 

  • The BPJS of Employment administers work accident, old age, pension and death benefits. This role was previously carried out by, amongst others, PT Jamsostek Persero.
  • The contribution amount payable to the BPJS of Employment is the same as the contribution amount under the old regime calculated by reference to an employee’s wage. The contributions are calculated as follows:

 

Benefit Provided % Of Monthly Salary Contributed Paid By
Occupational accident between 0.24% to 1.74%, depending on the type of business of the employer employer
Death benefit 0.3% employer
Old age benefit 5.7%
  • 3.7% by the employer; and
  • 2% by the employee.

 

  • The BPJS of Health administers health benefits that were previously administered, amongst others, by PT Jamsostek Persero and further enhances Indonesia’s health benefit system.

 

The idea is for the Social Security Administrators Law to replace the Jamsostek Law, although it is not entirely clear when this will happen. Our initial view is that the Jamsostek Law will effectively be replaced by the Social Security Administrators Law (and will no longer prevail) as of 1 July 2015.

 

More Details

 

To comply with the new regime, employers should take note of the following:

 

  • all employers must enrol themselves and their employees in the health security program. This applies to all employers, not just those who employ at least 10 employees or pay a salary of at least 1 million Rupiah, as previously mandated by the Jamsostek Law;
  • all residents in Indonesia, including unemployed individuals, veterans, and members of the State Police of the Republic of Indonesia will now be covered;
  • similar to the previous regime, the amount contributed to the BPJS of Health to cover employees for general health care is calculated by reference to the amount the employees actually receive in wages;
  • the mandatory contributions payable are:

 

Participant Contribution Amount Paid By
Employees in private sector Starting from 1 July 2014, 4.5% of the employee’s salary. Starting from 1 July 2014, 4% paid by the employer

 

  • State hospitals with adequate facilities are required to cooperate with the BPJS of Health in implementing the new regime by entering into a written cooperation agreement. Private hospitals however, have the option of participating in the BPJS of Health if they wish, but are not required to do so.

 

Uncertainty

 

This regime is relatively new and therefore some sub-areas remain unclear. For example, whether employers are obliged to enrol expatriates in the new health security system. Details as to the payment mechanism of the health security system have also not yet been made clear.

 

herbert smith Freehills

 

For further information, please contact:

 

Fatim Jumabhoy, Herbert Smith Freehills

fatim.jumabhoy@hsf.com

 

Labour & Employment Law Firms in Indonesia

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