In brief
In February 2022, the Minister of Employment issued Regulation No. 2 of 2022 on the Procedure and Conditions for the Payment of Old Age Security Benefits. This regulation raised a number of questions, particularly from employees and unions, as it only allows employees who voluntarily resign to receive their Old Age Security (Jaminan Hari Tua or “JHT“) benefits payout when they reach the age of 56, regardless of their age when they resign. In response to these objections, the Minister revisited the February regulation. On 26 April 2022, in the week before the Idul Fitri holidays, the Minister issued Regulation No. 4 of 2022 on the Procedure and Conditions for the Payment of Old Age Security Benefits (“Regulation 4“), replacing Minister of Employment Regulation No. 2 of 2022.
When are the JHT Benefits provided?
The table below summarizes when BPJS Manpower (the agency that administers the manpower social security programs, including the JHT program) will provide the JHT benefits to a participant under Regulation 4.
| Event | Payment of JHT Benefits |
|---|---|
| Reaching the applicable retirement age | Paid in lump sum when the participant reaches the retirement age or reaching 56 years of age |
| Contract expiry (for definite period employee) | Paid in lump sum upon contract expiry |
| Voluntary resignation | Paid in lump sum after a waiting period of one month from the date the employer issues a statement confirming the resignation |
| Terminated by employer | Paid in lump sum after a waiting period of one month from the effective date of termination |
| Leaving Indonesia for good (for foreign national employees) | Paid before or after departure from Indonesia |
| Permanent total disability suffered before reaching retirement age | Entitlement to JHT benefits calculated one month after the participant is confirmed to have permanent total disability |
| Death | Paid to the surviving spouse or child.If there is no surviving spouse or child, paid according to the following order:Participant’s blood lineage according to a straight line up and down to the second degree (e.g., grandparent or grandchild)Participant’s siblingsParticipant’s parents-in-lawBeneficiary appointed under the Participant’s willBalai Harta Peninggalan (Indonesia’s state public trustee office) |
What does it mean for employers in Indonesia?
Although employers must pay their portion of JHT contributions and deduct from an employee’s salary that employee’s portion of the contributions, the JHT benefits are paid by BPJS Manpower, not the employer, to the participating employee (or the relevant heir/beneficiary in case of the employee’s death). As long as all contributions have been paid, employers do not need to pay anything in relation to the JHT benefits.
However, under Regulation 4, if there are still outstanding contributions when the JHT benefits need to be paid to the participating employee, the employer will still need to pay those outstanding contributions to BPJS Manpower. BPJS Manpower will notify the employer of the outstanding contributions after it has paid the current JHT benefits to the participant (or the relevant recipient in case of death). Once BPJS Manpower receives payment of the outstanding contributions, it will remit the remaining balance of the JHT benefits to the participant (or the relevant recipient in case of death).
While an employer might not need to incur additional cost in terms of the JHT benefits, it still has some role in allowing employees to be paid their JHT benefits by BPJS Manpower. First of all, an employer must ensure that it has distributed the BPJS Manpower Participant Card to each employee as soon as the employer receives it from BPJS Manpower. The Participant Card is needed when processing social security benefits that are administered by BPJS Manpower, including the JHT benefits.
If an employee is cashing out the JHT benefits due to resignation, under Regulation 4, the employee will need to submit to BPJS Manpower an employer’s statement letter confirming the employee’s resignation. This reflects an obligation for the employer to issue that statement letter after receiving the employee’s resignation letter. Other than confirming receipt of the employee’s resignation letter, the statement letter should also confirm the effective date of resignation.
If the employee was terminated, the employer also needs to ensure that the termination was processed in line with the applicable termination process under Indonesian law. This means that the termination should be properly documented as documents relating to the employee’s termination must be submitted to BPJS Manpower when the employee is cashing out the JHT benefits. Under Regulation 4, one of the following documents can be submitted to BPJS Manpower when an employee is cashing out the JHT benefits after being terminated:
- Receipt of termination report issued by the relevant employment office
- Termination report from the employer to the relevant employment office
- Notice of termination issued by the employer to the employee and the employee’s confirmation of no objection to the termination
- Joint agreement on termination of employment signed by the authorized representative of the employer and the employee
- Copy of the decision of the Industrial Relations Court (or Supreme Court) approving the termination of employment
Finally, an employer must also ensure that each employee has been given an original set of his/her employment agreement as well as a copy of the company regulations or collective labor agreement. This is not just in relation to cashing out JHT benefits (or accessing the benefits under other mandatory social security programs). In general, an employee needs to be given an original set of the employment agreement. In addition, under the Indonesian labor law and regulations, an employer must provide employees with a copy of the company regulations or collective labor agreement.
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