Pensions Law in Indonesia

Practical Law

SSEK Indonesian Legal Consultants partner Fahrul S. Yusuf and Maria Yudhitama, an associate at the firm, have contributed the Indonesia chapter of the new Practical Law global guide to pension schemes.

The following is an excerpt from the Indonesia chapter of the Practical Law global guide to pension schemes.

State pensions

1. Do employers and/or employees make pension contributions to the government in your jurisdiction?

Contributions paid to the government

Employers and employees are required to participate in the Manpower Social Security Jamsostek program (a government-operated pension fund). The contributions that must be made by employers and employees to the fund are as follows:

  • 3.7% of the employee’s monthly salary paid by the employer.
  • 2% of the employee’s monthly salary paid by the employee.

Taxation of contributions

Jamsostek contributions are tax deductible.

Monthly amount of the government pension

The monthly amount of the pension contributions to the government will depend on the salary of the employee. The overall amount paid is the total Jamsostek contributions made plus interest.

Employees are entitled to the pension benefit when they either:

  • Reach 55 years of age.
  • Are permanently disabled, as confirmed by a physician.

An employee who resigns from a company before reaching 55 years of age and who has made contributions under the Jamsostek program for at least five years can claim the payment of their pension. The payment can be made in a lump sum or in several instalment payments, as requested by the employee.

To read the full guide to pension schemes in Indonesia, click here.

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