Perspectives

GES NewsFlash

Indonesia–National Manpower Security Agency (BPJS Ketenagakerjaan) & National Healthcare Security Agency (BPJS Kesehatan)

23 January 2015

Overview

The Indonesian government aims to have a universal social security system in place to cover all Indonesian citizens, and not only employees as in the previous system. The transition commenced with the establishment of BPJS (the National Social Security Agency), which is in charge of administering social security matters in Indonesia. Based on Law No. 24 of 2011, BPJS will replace the following social security institutions:

  1. PT Jamsostek (Persero), to become BPJS Ketenagakerjaan (National Manpower Security Agency) – transformation to be completed in mid-2015
  2. PT Askes (Persero) to become BPJS Kesehatan (National Healthcare Security Agency) – transformation was completed in early 2014

National Manpower Security Agency – BPJS Ketenagakerjaan

Companies that have been participating in the previous programs will have their membership automatically transferred to BPJS Ketenagakerjaan. The current law does not provide an exclusion for expatriate employees; therefore, companies are encouraged to register their expatriate employees with the National Manpower Security Scheme, even if they remain covered by similar schemes overseas.

The contributions payable to BPJS Ketenagakerjaan are currently the same as the contributions to Jamsostek.
Companies are required to fund the following contributions on behalf of each employee:

  • Occupational accident security: 0.24% to 1.74% of the employee’s monthly wages (the rate varies based on the grouping of the business type).
  • Old-age security: 3.7% of the employee’s monthly wages.
  • Death (life insurance) security: 0.30% of the employee’s monthly wages.

Employees will be required to make a personal contribution to the old-age security, which is calculated as 2% of the employee’s monthly wages.

Indonesian nationals can withdraw their old-age benefit funds when they reach retirement age, or when they are no longer working (subject to conditions). Non-Indonesian nationals can withdraw their old-age benefit funds when they leave Indonesia permanently. Income tax at concessional rate of up to 5% will apply upon withdrawal.

The government will also implement pension security scheme at the latest by 1 July 2015. The implementing regulation is yet to be issued.

National Healthcare Security Agency – BPJS Kesehatan

Companies must register themselves and their employees with BPJS Kesehatan by 1 January 2015.

Once registered, companies are required to facilitate payment of the monthly contributions to the BPJS. The mandatory monthly contributions for each employee are calculated on the employee’s regular/fixed gross wages (subject to a cap of monthly wages of IDR 4.725.000), and are made up of 4% employer contribution and 0.5% employee contribution. The employee contribution portion will increase to 1% in July 2015.

Participation in BPJS Kesehatan covers up to five family members. Employees may add additional family members if required; however, they will be liable for an additional 1% contribution per family member per month.

The employee contribution portion paid by employees is not tax deductible for the employees under their personal income tax calculation, while the contributions made by the employers will be considered additional taxable income for the employees, and in most cases the employers can claim their contribution as deduction for corporate tax purposes.

Current Development

The Indonesian government has received a number of requests from insurance providers, as well as companies and entrepreneurs, to postpone the deadline for registration with the BPJS Kesehatan. They are concerned that the current public healthcare system may not be adequate as yet to offer a standard similar to what is offered by their private health plans. As a result, companies may incur double benefit costs by participating in the government scheme while also maintaining their current health benefit plans.

On 22 December 2014, the BPJS Kesehatan responded to the request, and stated that the deadline for companies to register themselves with BPJS Kesehatan remains 1 January 2015. However, they agreed to provide an extension until 30 June 2015 for companies to start making payments to the BPJS Kesehatan. Those companies that register after 1 January 2015 will be considered late and may be penalized based on the prevailing law and regulations.

Deloitte's View

The mandate to register all residents of Indonesia under the national health care security scheme, and all workers in Indonesia under the national manpower security scheme, indicates a positive development within the Indonesian social security system. However, it is expected that the transition will require some time to complete.

Companies are advised to consider the following:
 

  • Potential double coverage of social security in a case where expatriate employees remain covered in their home country social security scheme, as Indonesia currently does not have any social security agreement with other countries. Review their tax equalization policy and assignment agreements to confirm whether they provide protections from host country social security taxes, as well as the settlement arrangement between companies and employees in regard to the old-age benefits payout, where applicable.
  • A discussion with their current health insurance provider to go through available options to ensure that companies will continuously meet their objectives, and to prevent overlapping of benefits.
  • Communication to their employees concerning the implications for their net pay, as well as the benefits that they will get by participating in the government health care scheme.

Contacts

If you have any questions concerning the issues in this GES NewsFlash, please contact a GES professional at our Deloitte offices as follows:

Connie Chu
+62 21 29923100
cchu@deloitte.com

Irene Atmawijaya
+62 21 29923100
iatmawijaya@deloitte.com

Reinhard Daniel Aritonang
+62 21 29923100
redaniel@deloitte.com

Be sure to visit us at our website: www.deloitte.com/tax.

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