In recent years, Indonesia has made significant strides in reforming its social security system, with a focus on enhancing protection for workers and their families. The Government of Indonesia (GoI) has introduced a series of policy measures aimed at addressing key challenges in the areas of unemployment protection, old-age income security, and maternity benefits.
In October 2020, the GoI enacted the Job Creation Law to address concerns regarding the country’s statutory severance pay, which was one of the highest in the world (Tsuruga and Wedarantia 2020). The government and businesses viewed the reduction of severance pay as crucial to improving the business environment and attracting investors (Ruck and Tsuruga 2022). From an unemployment protection perspective, the existing employer liability scheme reportedly faced common problems of low compliance, especially among smaller enterprises and workers in informal employment (Quarina, Rahardi, and Tsuruga 2024). The Job Creation Law included provisions for the establishment of an unemployment insurance scheme (Jaminan Kehilangan Pekerjaan – JKP) based on the principle of social insurance. The JKP is designed to provide partial and temporary income replacement to the unemployed, along with access to skills training and job placement services. The implementation of the JKP was further elaborated in Government Regulation No. 37/2021, and the scheme has been operational since February 2022 through the Ministry of Manpower’s single window service (Siap Kerja). As of December 2022, the JKP covered 13 million waged employees; however, the number of active participants and claims has been lower than expected compared to 8 million unemployed workers, prompting the GoI to conduct a periodic review of the scheme to improve its effectiveness (Tsuruga, Brimblecombe, and Landry 2023).
Furthermore, Indonesia entered the aging phase in 2023 and is expected to have 14 percent of its population above age 65 by 2044, making it one of the fastest-aging countries in world history (Brimblecombe et al. 2023). However, the pension system has limited coverage. Currently, defined-benefit schemes cover only approximately 20 million waged workers across the private sector, public sector, and armed forces. Additionally, 17 million waged workers participate in the old-age saving scheme (Jaminan Hari Tua – JHT), a defined-contribution scheme, which is the only option for non-waged workers to participate in a public old-age income scheme, with only 387 thousand members. The GoI adopted Financial Sector Reforms Law in 2023, which included policy orientations for reforming the JHT to limit saving withdrawals before retirement. Although the law does not aim to reform the entire pension system, it has created momentum for discussions on a comprehensive reform plan for Indonesia’s multi-tier pension system, and in particular to extend coverage to workers in informal employment.
In June 2024, the GoI enacted Maternal and Child Welfare Law to improve protection for mothers and children. The law extends statutory maternity and paternity leave. However, low compliance with the employer liability scheme will remain a challenge, particularly for workers in smaller enterprises and those with precarious employment relationships (Setyonaluri et al. 2023). To address these challenges, stakeholders are discussing the establishment of a new maternity benefit scheme (Brimblecombe et al. 2023). Indonesia and Malaysia are only the Southeast Asian countries that do not have maternity benefits in their social security systems.
References
Brimblecombe, Simon, Pierre Plamondon, Doan Trang Phan, and Ippei Tsuruga. 2023. Republic of Indonesia: Report to the Government – Financial Assessment of the Social Security Pension Schemes Administered by BPJS Employment as of 31 December 2020 and Costing of Sickness and Maternity Benefits. Jakarta: ILO. https://www.social-protection.org/gimi/ShowRessource.action?id=58147.
Quarina, Qisha, Fandy Rahardi, and Ippei Tsuruga. 2024. Severance Pay in Indonesia: Evidence from a Small-Scale Survey during the Onset of COVID-19 Pandemic. Jakarta: ILO. https://www.social-protection.org/gimi/ShowRessource.action?id=58408.
Ruck, Markus, and Ippei Tsuruga. 2022. The Process Leading to the Establishment of an Employment Insurance Scheme in Indonesia from an ILO Perspective. Jakarta: ILO. https://www.social-protection.org/gimi/ShowRessource.action?id=57831.
Setyonaluri, Diahhadi, Flora Aninditya, Dinda Srikandi Radjiman, Eka Fasikha, Nurul Fajri, Calvin Aryaputra, and Ippei Tsuruga. 2023. Maternity Leave in Metropolitan Indonesia: Evidence on Duration, Benefits and Job Protection. Jakarta: ILO. https://www.social-protection.org/gimi/ShowRessource.action?id=58179.
Tsuruga, Ippei, Simon Brimblecombe, and Alexandre Landry. 2023. Unemployment Insurance in Indonesia: Challenges and Recommendations. Jakarta: ILO. https://www.social-protection.org/gimi/ShowRessource.action?id=58259.
Tsuruga, Ippei, and Ekaning Wedarantia. 2020. Rules and Practices of Severance Pay in Indonesia – the Labour Law Number 13 of 2003. Jakarta: ILO. https://www.social-protection.org/gimi/gess/ShowRessource.action?id=57141.
