Design and financing of SJSN employment benefits (English)

The Government of Indonesia will implement a new National Social Security System (Sistem Jaminan Sosial Nasional or SJSN) over the course of the next four years that will radically change the country's social protection structure. The new social protection...  See More + The Government of Indonesia will implement a new National Social Security System (Sistem Jaminan Sosial Nasional or SJSN) over the course of the next four years that will radically change the country's social protection structure. The new social protection program will cover all Indonesians, including formal and informal sector workers, for five benefits-healths, pension, old-age savings, death benefits and worker accident and provide the same benefits for all. The legal structure and governance structure of the new system also differs substantially from the current social protection system. The policy note focuses on the key issues that should be considered in the design and financing of the SJSN employment programs (pension, old-age savings, work accident and death benefits), with particular emphasis on the two retirement programs-the pension and old-age savings programs. It provides a brief overview of the: 1) legal framework; 2) the relationship between design, cost and contribution rates; 3) the program design process; 4) the impact of payroll contributions on the labor market and foreign direct investment; and 5) the interrelationship of the pension and old-age savings programs as two components of a single retirement income protection program. The design process is critical to the development of a robust and fiscally sustainable system of social protection. Design, cost and contribution rates must be directly related through proper actuarial analysis; they cannot be determined independently. Failure to follow a proper process can result in large contingent liabilities for the state budget.  See Less -

Document also available in : Bahasa (Indonesian)