2014-2016 impact: Looking at the new Indonesian Social Security: interview with Rekson

In the past three years and thanks to continued pressure from the trade unions, Indonesia has set up a historical system of universal social security and health with a tripartite structure. We met with Rekson Silaban, Commissioner BPJS Ketenagakerjaan (Employment), one of the two elected board members on behalf of the trade unions to discuss the achievements and challenges of this system.

History
After independence, Indonesia had only a couple of limited specific schemes, only for formal and public sector. In 2004, Indonesia passed law n°40 for a social security institution, Jamsotek, which was trying to expand social security schemes to the private sector but which faced many challenges in its implementation, with limited payouts and where any profits went to the state. After three annual general strikes demanding social security, legislation n° 24 was passed in 2011, which organized social security related to work, BPJS Ketenagakerjaan.
BPJS Employment was established in January 2014 and is fully operational since July 2015 with 336 offices countrywide. Their philosophy is based on the independency philosophy and pride to settle socio-economic risks. Independency means no dependence on other people in financing healthcare treatment, senior age life, and family following a death. Pride means such security is obtained as a right instead of other people's act of sympathy. To accomplish optimal financing and benefits, the BPJS Ketenagakerjaan programme is conducted collectively, in which the younger generation assists the older generation, healthy people assist ill persons, and higher-income persons assist lower-income people. This system was newly non-for-profit, which for the first time doesn’t return profit to government but is being re-invested in the social security (in 2015, profit of almost 40 million€ or 624 billion IDR). By end 2015, 2.000 companies and 20 million workers were covered, out of Indonesian total workforce of 100 million people. In 2015, they have seen a 15% increase from 16,79 million to 19,27 million workers affiliated, which is still only one out of five workers.

What is today’s coverage
Almost 50 million workers are or were registered, but half are non-active and not contributing anymore. The main problem remains the informal sector: with 63 million workers (around half of total active population), only 1,5 million registered at BPJS as non-wage earners. Rekson also challenges the government definition of the informal economy as “non-paid”.
There are four main schemes:

1. Work accident: 110.000 people received these benefits in 2015, 
2. Provident fund: 1,7 million people with total of nearly 10 billion € or 16 trillion IDR benefits paid out in 2015, 
3. Pension: 250 people in 2015, which is just starting up,
4. Death: with 36.000 families benefiting in 2015.

The contributions (with 17 billion€ or 273 trillion IDR as contributions) come as around 13% of monthly wages, paid by both employee and employer. From this, all benefits are paid, but also the management and offices of the BPJS Employment and this even leaves money (the so-called profit, which is only now re-invested). So the Indonesian government does not have to contribute to these schemes, but it does have to make up for the deficit in the health system budget (BPJS Kesehatan), which is the other leg of the social security system.

Challenges
Unlike in Malaysia, there is no system of fines or imprisonment for companies which do not contribute. BPJS has no fining power, but can only inform other officials from labour inspection and justice department, which could apply administrative sanctions, but this never happens in practice. The employers’ representatives inside tripartite structure are also resisting attempts to be stricter, fearing it would chase foreign investment. However, the one window policy for investors has helped to ensure foreign companies to ensure affiliation to social security. As a challenge to the Tripartite structure, Rekson mentions that employers fight for competitiveness or skill training, while the trade unions have to defend workers’ rights and advantages, like ensuring housing for workers.

Role of trade unions
Reksons also underlines the role of Trade Unions, which can promote the social security system towards workers. Rekson has just visited seven provinces to promote this system towards KSBSI federations or affiliations. But he also highlights a worrying trend, where trade unions are mostly present in the manufacturing sector, which is decreasing in Indonesia as it is worldwide, while the services sector expands but has less unionizing. Rekson feels KSBSI should open a community based federation, not per sector, but also for online shopping, using IT etc. Trade unions can also help increase the coverage by verifying the number of workers inside each company, so employers don’t hide workers in their declarations. Many of the issues of social security relate directly to trade union issues, like pushing back the age at which workers can retire, which determines if the size of the workforce and thus the potential membership. Many formal workers retire at 56 and then, while receiving benefits, start working in the informal economy since the pension isn’t enough. This means that if they have a work related accident or death, they aren’t covered anymore. Rekson suggested to increase the age to 60 or 61 years and increase claims, so they can remain covered.

Informal sector
To get the informal workers registered, they collaborate with NGOs, agencies, trade unions and others, to have their members join, paying the minimum, and BPJS pays the agency 7,5% of the fees and 31€ or 500.000IDR monthly if they have at least 40 participants contributing per month. Informal sector and construction have specific schemes and contributions. A non-wage earner can affiliate to specific schemes who has to affiliate to at least two (work related accidents and death) with monthly 1,2€. link Building companies (considered formal) need to include work related accidents and death when being contracted by authorities and contribute a percentage varying from 0,01 to 0,21% of total value of project.

Migrant workers
Since 1st August 2017, BPJS Employment also covers migrant workers and 53.000 people registered in only two months. In this case, the recruitment agencies pay the contribution from employers, though this is often simply deducted from the salary, which is a practice which also happens at the national level. This decision to put migrant workers under the general BPJS Employment system is however controversial: previously, 13 benefits were being provided to migrants, which also covered specific issues like sexual harassment, but now under BPJS Employment, only the legal four categories can be applied, so some have been cut, like the repatriation of the remains in case of death, or sexual harassment had to be included under the work related accident. This system is to be re-evaluated in a couple of months, since it is new.

Way forward
Their goal is to cover all regions of the country by opening more offices and to cover all workers from the formal sector by end 2019. Increased interest rates on schemes should attract more workers, 9,2% in 2016, which is more than private banks (5 to 6%). Currently a debate is ongoing to launch unemployment scheme for six months, with training, placement etc. but it remains to be determined who would pay for this scheme? Rekson feels it remains important to show and demonstrate that the system works, with recognizable testimonies, so other people also join.