When a company hires someone in Indonesia they need to register their new employee with BPJS – “Badan Penyelenggara Jaminan Sosial”.
This is compulsory under law and applies to both Indonesian employees and Expatriates that have worked in Indonesia for more than six months (January 2019).
BPJS is the government organisation that oversees the nations Social Security and Healthcare programmes.
In 2011, the Indonesian government reformed its National Social Security System and passed Law No. 24 on the Social Security Organizing Body (the “BPJS Law”).
There are two elements to BPJS:
BPJS Ketanagakerjaan; Social Security
The BPJS Social Security scheme provides employees with financial benefits such as pension income and life insurance. It also covers an employees hospital costs for any work related accidents.
BPJS Kesehatan; Healthcare
The BPJS Healthcare scheme provides employees with government run healthcare services (excluding the costs related to work accidents).
BPJS Social Security Explained
Companies must Register their employees with BPJS Social Security.
A Company pays BPJS Social Security a monthly premium for each of its employees. Part of the premium cost is payable by the Company itself and part is payable by the Employee.
In essence, the element paid by the Company is in addition to the employees monthly salary.
In return, BPJS Social Security provides an Employee with the following benefits:
- Work Accident Protection (JKK) – to compensate for the cost of any accident that occurs as a result of work duties;
. - Life Insurance (JKM) – upon the persons death their heirs receive a cash payment;
. - Old Age Security (JHT) – a cash benefit paid when someone retires or is laid off;
. - Pension Benefits (JP) – a guaranteed monthly cash income during retirement.
Monthly Cost – Who Pays What:
| Item | Paid by Company % of Monthly Income | Paid by Employee % of Monthly Income |
| Work Accident Protection The % will depend on the risk category of the work environment. Calculated based on the employees fixed monthly income – no maximum income limit | 0.24 to 1.74 % | – |
| Life Insurance Calculated based on the employees fixed monthly income – no maximum income limit | 0.3% | – |
| Old Age Security Calculated based on the employees fixed monthly income – no maximum income limit | 3.7% | 2% |
| Pension Benefits Calculated based on the employees fixed monthly income – up to a maximum income of IDR 8,939,700 (March 2020). This maximum is updated annually. | 2% Max Cost IDR 178,794 | 1% Max Cost IDR 89,397 |
As can be seen the largest cost item for a business is Old Age Security (JHT).
For this a Company must pay the equivalent of 3.7% of the employees fixed income each month. And there is no salary limit for JHT calculation purposes.
Calculations are based on an Employees regular fixed monthly income and Not Bonuses.
And please remember, the contributions payable by the Company are in addition to the cost of the Employees Salary each month.
BPJS Healthcare Explained
Universal healthcare is a priority for the Indonesian government. As stated in Presidential Regulation No. 12 of 2013, all Indonesians are required to register with BPJS Healthcare.
Membership currently stands at about 200 million people, making it one of the worlds largest healthcare programmes.
Registering with BPJS Healthcare is handled by the individual – not the employer.
However, for Employees, BPJS Healthcare payments are handled by the Employer.
A Company pays BPJS Healthcare a monthly premium for each of its employees. Part of the premium cost is payable by the Company itself and part is payable by the Employee.
In essence, the element paid by the Company is in addition to the employees monthly salary.
In return, the Employee receives government managed Healthcare Services for themselves, their spouse and up to three dependent children (up to the age of 21).
Monthly Cost – Who Pays What:
| Paid by Company % of Monthly Income | Paid by Employee % of Monthly Income | |
| Healthcare Cover Calculated based on the employees fixed monthly income – up to a maximum income of IDR 12,000,000 (January 2020). | 4% Max Cost IDR 480,000 | 1% Max Cost IDR 120,000 |
Calculation is based on an Employees regular fixed monthly income and Not Bonuses.
And please remember, the contribution payable by the Company is in addition to the cost of the Employees Salary each month.
Calculation Example
An Employee earns IDR 130,000,000 a month as a fixed Gross (before tax) Income. And the work environment is classified as low risk:
BPJS Cost to the Company – in addition to salary:
- Work Accident Protection – 130,000,000 X 0.24% = IDR 312,000
. - Life Insurance – 130,000,000 X 0.3% = IDR 390,000
. - Old Age Security – 130,000,000 X 3.7% = IDR 4,810,000
. - Pension Benefits – 8,939,700 (maximum) X 2% = IDR 178,794
. - Healthcare – 12,000,000 (maximum) X 4% = IDR 480,000
Total cost to the Business = IDR 6,170,794
BPJS Cost to the Employee – as a salary deduction:
- Work Accident Protection = N/A
. - Life Insurance = N/A
. - Old Age Security – 130,000,000 X 2% = IDR 2,600,000
. - Pension Benefits – 8,939,700 (maximum) X 1% = IDR 89,397
. - Healthcare – 12,000,000 (maximum) X 1% = IDR 120,000
Total cost to the Employee = IDR 2,809,397
Payment Process
Every month a company must calculate the BPJS payments that are due for all of its Employees:
1) The amount to be paid by the Company – on top of the Employees salary.
2) The amount to be paid by the Employee – as a deduction from their salary.
A Company should withhold the Employee contribution from a persons salary each month. After that, make payment for the total premium costs to BPJS.
Payment must be made on or before the 10th day of each calendar month.
While you are here, please check out This Article which gives an overview of the Personal Income Tax Rules in Indonesia.
Similarly, This Article which explains the THR Religious Holiday Allowance in Indonesia – also called “the 13th Month Bonus”.
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