By Indrawan Dwi Yuriutomo
In 2011, the Indonesian Government reformed its National Social Security System and passed Law No. 24 on the Social Security Organizing Body (Badan Penyelenggara Jaminan Sosial or BPJS) (the "BPJS Law") to help meet the basic needs of the country's population.
The types of social security programs mandated under the BPJS Law are (i) Health Care Security (ii) Work Accident Security (iii) Old-Age Security (iv) Pension Security and (v) Death Security.
BPJS of Employment: Employment Security, including work accident, old-age, pension, and death benefits, is managed by BPJS of Employment. All employees in Indonesia were required to register with BPJS by January 1, 2015. Everyone else must register by January 1, 2019.
Employer Required Retirement Plans/Schemes
Employers are required to enroll employees in the old-age security and pension programs under BPJS of Employment. Also, employees are entitled to enhanced statutory minimum termination benefits upon reaching the retirement age. No other retirement plans/schemes are required.
Given the mandatory old-age security and pension programs under BPJS of Employment, and the additional generous statutory minimum termination benefits upon reaching the retirement age, supplementary private pension plans are not commonly provided by employers in Indonesia.
Retirement Plan/Scheme Benefits
The principal statute governing the BPJS program is Law No. 40 of 2004 dated October 19, 2004 regarding National Social Security System.
Pension security: Another benefit is pension security, which provides regular payments to participants or participants' beneficiaries after participants retire, suffer a permanent total disability, or pass away. Initially, the pension benefit paid to a participant will be between IDR 300,000 and IDR 3,600,000 per month, or between USD 22 and USD 270 at current exchange rates. The benefit is payable until the participant passes away.
Participants can begin receiving payments only after they have: (i) been enrolled in the program for at least 15 years, or 180 months and (ii) reached retirement age. Retirement age is currently 56, but will rise to 57 beginning 1 January 2019. The retirement age will then gradually increase by one year every three years until it reaches 65.
If an employee has reached retirement age but has not been enrolled in the pension security program for 15 years, the employee is entitled to the total accumulation of contributions paid with its additional yield (if any).
Dewan Jaminan Sosial Nasional or "DJSN") monitor the BPJS for compliance.
Foreign Employees and BPJS
All employees in Indonesia, including expatriates who have worked in Indonesia for a minimum of six months, must register with and participate in BPJS.
Employee Benefits on Sale of Business
Despite any change in the shareholders of the employer entity including a change of control, the employer entity must continue to participate in BPJS for all employees on its payroll.
In the case of a business sale, there is no automatic transfer of employment rules. The seller entity would continue to be the employer and required to continue participation in BPJS for all employees on its payroll, and to the extent any employees voluntarily transfer their employment to the buyer, the buyer would be required to continue participation in BPJS for all such transferred employees.
This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user's own risk. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.