Employer Contribution in Indonesia
Indonesia, a vibrant archipelago situated in Southeast Asia, encompasses a diverse cultural heritage, stunning natural landscapes, and a rapidly emerging market economy. As the world’s fourth most populous nation and the largest economy in Southeast Asia, Indonesia has prioritized enhancing its business climate through progressive economic reforms, fostering investment opportunities, and attracting multinational corporations for expansion. These concerted efforts have propelled Indonesia as a favorable destination for businesses seeking to tap into its vast potential and dynamic market.
Expanding to Indonesia necessitates a comprehensive understanding of the country’s labor regulations. Employers must adhere to their obligations, which include contributing to national social security programs administered by the Social Security Management Agency (BPJS Ketenagakerjaan) and the Social Security Administrator for Health (BPJS Kesehatan). These contributions are essential in providing employees with social protections encompassing health insurance, work-related accident insurance, and pension benefits. By fulfilling their contributory obligations, employers can ensure the well-being and security of their workforce in Indonesia.
Employer and Employee Payroll Contribution
The following rates are applicable to locals and foreigners who have lived (or expected to work) in the country for at least 6 months.
|Employer’s contribution rate||Employee’s contribution rate|
|Health Insurance (JKN)||4% (calculated based on the employee’s monthly salary of up to IDR 12M)||1% (calculated based on the employee’s monthly salary of up to IDR 12M)|
|Work Accident Insurance (JKK)||0.24%–1.74%||–|
|Old Age Pension (JHT)||3.7%||2%|
|Death Insurance (JKM)||0.3%||–|
|Pension Insurance (JP)||2% (calculated based on the employee’s monthly salary of up to IDR 9,559,600)||1% (calculated based on the employee’s monthly salary of up to IDR 9,559,600)|
Health Insurance in Indonesia: BPJS Kesehatan
Badan Penyelenggara Jaminan Sosial Kesehatan, or BPJS Kesehatan, began its official operation in 2014. It serves to operate Indonesia’s national health insurance program (Jaminan Kesehatan Nasional or JKN) under the principle of social security, and requires employers to contribute and deduct a portion of their employees’ salaries–the rates of which are indicated above–to finance the comprehensive and affordable healthcare services for those insured. Under this program, the insured and their eligible dependents are entitled to numerous benefits, including, but not limited to:
|Primary health care (non-specialist health service)||1. Administration of service|
2. Promotive and preventive services
3. Examination, treatment and medical consultation
4. Non-specialist medical measures, both operative and non-operative
5. Care drugs and consumable medical materials
|Outpatient care||1. Administration services |
2. Examination, treatment and specialist consultation by a specialist and subspecialist medicine
3. Medical treatment in accordance with a medical specialist, medical indications
4. Drugs and medical consumable materials
|Inpatient care||1. Non-intensive inpatient treatment Inpatient care in intensive care |
2. Other health services specified by the Minister
Other Insurances: BPJS Ketenagakerjaan
Badan Penyelenggara Jaminan Sosial Ketenagakerjaan, or BPJS Ketenagakerjaan, is responsible for managing employment-related insurances and social security programs in Indonesia. This agency administers various important programs, including the work accident insurance (Jaminan Kecelakaan Kerja or JKK), old-age insurance (Jaminan Hari Tua or JHT), pension insurance (Jaminan Pensiun or JP), and death insurance (Jaminan Kematian or JKM). Each program has its own set of rules and regulations, which are applied based on specific circumstances and cases. For instance, employers are required to pay different rates for work accident insurance, which are directly influenced by the level of risk associated with the nature of the work or industry, while disability benefits are paid out based on the percentage of disability suffered by the individual. Moreover, some of these programs also provide lump-sum payments to their beneficiaries.
A relatively new unemployment insurance program (Jaminan Kehilangan Pekerjaan or JKP) has also been introduced by BPJS Ketenagakerjaan. While this program is said to be funded with 0.46% of the insured’s monthly salary, it does not make any changes to the amount of employer and employee contributions. Instead, this program is partially financed by the government (0.22%) and by the transfer of resources from other BPJS Ketenagakerjaan programs (0.14% from JKK and 0.10% from JKM). This ensures that the JKP operates efficiently while maintaining a balanced contribution structure for employers and employees.
Slasify, your trusted partner for payroll in Indonesia
The aforementioned responsibilities and contributions serve as crucial aspects that employers must address when hiring employees in Indonesia. The social security contributions in Indonesia can be intricate and nuanced, making it essential to properly handle employer contributions and salary calculations. To ensure compliance with Indonesian labor laws and minimize the risk of payroll errors, it is advisable to seek assistance from experts in the field. With Slasify’s expertise, you can navigate the complexities of Indonesia’s labor landscape and receive comprehensive payroll solutions tailored to your specific needs. Connect with our team of professionals today to benefit from their knowledge and guidance on Indonesian labor regulations and seamless payroll processing.
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