Workers’ Salaries to be Cut Again, Government Prepares Additional Pension Program

JAKARTA – Chief Executive of the Insurance, Guarantee and Pension Fund Supervisory Agency of the Financial Services Authority or OJK Ogi Prastomiyono said, currently a Government Regulation (PP) is being prepared regarding the program mandatory retirement for the workers.

The program is a derivative regulation of Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector.

Ogi explained that the new program was designed as an effort by the government to increase the replacement ratio, aka the income ratio. employee when retired compared to the salary received while working. Because according to him, the replacement ratio in Indonesia is currently still below the international labor organization (ILO) standard.

“There is a mandatory and voluntary pension program initiative which will be regulated later in the Government Regulation (PP) in order to increase the replacement ratio,” said Ogi at the 39th ADPI Anniversary event in Jakarta, Tuesday (3/9/2024).

Technically, Ogi revealed that in the PP that is currently being drafted, there will be criteria for employees with certain incomes who will pay mandatory contributions taken from their salaries to participate in the government pension program.

“Workers who have income exceeding a certain value are asked to make additional voluntary pension contributions, additional but mandatory, this will be regulated in the PP and POJK that are currently being prepared,” he added.

Furthermore, Ogi explained that the program is indeed additional in nature, but must be followed by workers outside of the BPJS Employment deductions that workers have previously followed.

“Who will organize the mandatory additional pension program, it is definitely not at BPJS TK, so it could be at DPPK (Employer Pension Fund) or DPLK (Financial Institution Pension Fund,” he continued.

Ogi added, the international labor organization or ILO has made a replacement ratio standard of 40%, aka the basic income of retired workers is at least 40% of the salary received while working. While currently in Indonesia the replacement ratio is still relatively low or around 15-20%.

It is hoped that with this mandatory government pension program policy, the replacement ratio of retired workers in Indonesia can be gradually increased.

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