Indonesia Introduces Wage Subsidy Program for Employees

• Indonesia’s Ministry of Manpower issued Reg 14/2020, which provides wage subsidies for employees in the private sector.
• Those eligible must earn less than 5 million rupiah (US$342) per month and are making contributions to the Social Security Administration Body for Employment (BPJS Ketenagakerjaan), which is the state pension program.
• The government hopes this incentive will benefit some 15.7 million workers and improve household consumption.

Indonesia’s Minister of Manpower issued Regulation 14 of 2020 (Reg 14/2020) on August 14, 2020, which introduces a new wage subsidy program for selected employees in Indonesia’s private sector.

Eligible employees will receive a total of 2.4 million rupiah (US$164), disbursed over four months, divided by payments of 1.2 million rupiah (US$82) every two months. The incentive is available to employees with a monthly income of less than 5 million rupiah (US$342) and are registered and active with the Social Security Administration Body for Employment (BPJS Ketenagakerjaan) – the state pension program.

Civil servants are not eligible for this incentive.

With the economy at near-certain recession, the government hopes this initiative can boost household consumption for some 15.7 million workers throughout the archipelago. The government has allocated some 37 trillion rupiah (US$10.7 billion) towards the program.

 

What are the requirements to obtain wage subsidies?

There are several criteria that employees in the private sector must follow to receive the wage subsidies. These are:

• Must be an Indonesian citizen and possess a national identification number;
• Must be registered as active participants of the government’s social security for employment program (BPJS Ketenagakerjaan);
• Must have been a participant of this program up until June 2020;
• Must receive a monthly salary of no more than 5 million rupiah (US$342) per month; and
• Must have an active bank account.

How to apply for the wage subsidies?

It will be the task of the human resources department of the company to provide the correct data to the BPJS Ketenagakerjaan organization. The organization will then directly transfer the funds to the employees’ bank account.

Indonesia’s social security programs are run by two organizations – the Social Security Administrator for Health (BPJS Kesehatan) and the Social Security Administration Body for Employment (BPJS Ketenagakerjaan).

The pension program covers the following:

• Work compensation – provides protection for accidents occurring during or as a result of work;
• Old age benefits – provides protection for participants that are in retirement, laid off;
• Pension benefits – provides guaranteed income in retirement; and
• Life insurance – upon the death of the participant, their heirs can claim the benefits.

The contribution to the pension fund is three percent of the employee’s monthly wages, which is divided between the employer (two percent) and the employee (one percent).

If the company is found to have purposefully given the wrong data, it will be issued administrative sanctions from reprimands to fines to the termination of their business permits.

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