On 2 February 2022, the Minister of Manpower ("MoM") issued MoM Regulation No. 2 of 2022 on Procedure and Requirement for Payment of Old Age Security Benefits ("MoM Regulation 2/2022"), which would initially come into effect on 4 May 2022, and revoke MoM Regulation No. 19 of 2015 on Procedure and Requirement for Payment of Old Age Security Benefits ("MoM Regulation 19/2015").
The issuance of MoM Regulation 2/2022 has caused many controversies in the majority of Indonesian workforce. They are against some provisions under MoM Regulation 2/2022, particularly Article 3 stating that the Old Age Security (Jaminan Hari Tua or "JHT") benefits can be collected by the Participants when they reach the age of 56 .
After the ongoing controversies and protests, Minister of Manpower Ida Fauziyah announced on 2 March 2022 that MoM Regulation 2/2022 would be revised and the currently prevailing MoM Regulation 19/2015 would remain effective.
MoM Regulation 2/2022 is under the revision process with the expected outlook to circle back to the provisions under MoM Regulation 19/2015. Minister Ida Fauziyah stated that the amended provisions, in principle, would provide an easier procedure of JHT collection even for workers who are terminated or resigned, and have not reached the retirement age of 56. However, since the amendment to MoM Regulation 2/2022 is still in process, MoM has ensured that disbursements of JHT will follow the procedure under MoM Regulation 19/2015, whereby, terminated employees who have not reached the stipulated retirement age will still be able to claim their JHT benefits.
Considering the recent development, we provide the key points of presently prevailing provisions on pension fund and JHT benefits.
General Overview on Pension and JHT Benefits
Pursuant to Government Regulation No. 45 of 2015 on Enforcement of Old Age Benefit Program, as lastly amended by Government Regulation No. 60 of 2015 ("GR 45/2015"), JHT Benefits are given to all employees who are salary or non-salary earners, which means, they, including foreigners, have worked for a minimum of six months in Indonesia ("Participants"). Under this framework, the Participants are required to pay contribution in the amount of 5.7% of their pre-tax monthly salary to the pension program. JHT is payable by the employees and employers. An employee pays 2%, while the employer pays 3.7% of JHT contribution. The pension program is organized by and paid to the Social Security Organizing Agency (Badan Penyelenggara Jaminan Sosial or "BPJS").
Based on Article 2 of MoM Regulation 19/2015, JHT benefits shall be paid to Participants when they:
- have reached the retirement age (i.e., 56 years old);
- have become permanently and totally disabled;
- are deceased.
Article 3 of MoM Regulation 19/2015 further provides that the retirement age would also include conditions in which the Participants stop working because of:
- resignation;
- termination of employment;
- leaving Indonesia indefinitely.
The above provision is the one being amended by MoM Regulation 2/2022. Whereas, under MoM Regulation 2/2022, Participants who have resigned or have been terminated can only receive their JHT benefits when they have reached 56 years old.
Based on Article 8 of MoM Regulation 2/2022, Participants who have become permanently disabled may collect their JHT benefits before they reach 56 years old.
For Participants who pass away before the retirement age, their JHT benefits are given to the heirs (i.e., widows/widowers or children).
Closing Remark
As mentioned above, changes of the JHT rules under MoM Regulation 2/2022 are controversial as many terminated or resigned employees, particularly during Covid-19 pandemic, have struggled to find new jobs. The JHT benefits have been a safe harbour for these people.
The recent announcement by MoM has shed some lights and the public in general will definitely pay close attention to the amended version of MoM 2/2022 that has promised to provide easier access to JHT benefits.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
