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Indonesia – Social Security Reforms.

8 April, 2014

 


Under new rules, employers in Indonesia are required to enroll their employees onto a government social security programme that provides coverage for both health and employment. The initiative is intended to extend the reach of social security benefits among the working population in Indonesia and will consume and expand upon the existing Jamsostek scheme.

 
The rules apply to all employees, including foreigners, who have been employed in Indonesia for at least six months. Employees must be covered by both programmes, and must be registered with the Badan Penyelenggara Jamain Social (“BPJS”) of Health and the BPJS of Employment.

 
Staggered Start

 
The implementation date has been staggered; employees currently covered by Jamsostek will have their health coverage transferred to the BPJS of Health from 1st January 2014. For those employers who have contracted out of Jamsostek by providing company health benefits, that coverage can continue until 2019. New employees, however, will have to be registered with the BPJS of Health from 1st January 2014.

 
Employees must be registered with the BPJS of Employment by 1st July 2015 at which date any existing Jamsostek employment benefits will transfer to the BPJS of Employment. The coverage under the BPJS of Employment will be expanded to include pensions.

 

The Devil Is In the Detail

 
It is not yet clear what the government intends to happen to employers’ existing schemes, including those which offer greater protection to employees than the BJPS’. Larger employers may wish to run parallel schemes, keeping their employer funded benefits whilst concurrently contributing to the BPJS’.

 
There are also no clear rules as to whether foreigners will be able to withdraw their contributions upon leaving Indonesia.

 
Although the detail is yet to be fleshed out, employers must start to look at their current social security offering, including whether they have the right to cancel or vary, and start to make provisions for transferring into the government schemes by the relevant implementation dates. Failure to comply may lead to employers finding that their business licenses/applications to hire foreigners are refused, and employees who are not registered with the BJPS’ will be unable to obtain certain official documents such as a driver’s license.

 

herbert smith Freehills

 

For further information, please contact:

 

Fatim Jumabhoy, Herbert Smith Freehills

[email protected]

 

Labour & Employment Law Firms in Indonesia

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