Payroll Compliance Updates-Indonesia
A. Update

The Indonesian Parliament on October 6, 2020 approved the draft Omnibus Law on Employment Creation 1 . As per the draft law, there are changes on the Manpower law which may affect the employees’ compensations and benefits.  The draft law covers the following themes related to the employees’ compensations and benefits:

  • The increase of maximum overtime hours
  • The minimum wage will only be determined by the Provincial Government
  • Change in the formula in calculating severance payment
  • In case of work termination, the employee is entitled to receive a Security Contribution for Loss of Profession/Job (“Jaminan Kehilangan Pekerjaan”). The implementation of the Security Contribution will be stipulated further in a Government Regulation

The draft Omnibus Law on job creation would amend 73 laws and consists of 15 chapters and 174 articles. This draft Law has not been signed by the President and therefore it is not yet effective as on date. Any further developments on the above will be published as and when released by the authorities.

B. Statutory Compliance Release Date: October 06, 2020
C. Effective Date: N/A
A. Update

Regulation number 49/ 2020 provided the following clarifications in relation to new joiners:

For employees, who were only registered after July 2020, the Company can still obtain incentive for these employees if the first two months of their contributions are fully paid. This means that in the first two months, the normal rate will be used and then in the third month, the revised rate will be applied.

Further the board published a clarification on September 10, 2020, to depict how the adjustment of JKK/JKM will take place. As per the clarification:

For payroll calculation period of September 2020, the Company needs to include the adjustment of BPJS Contribution (i.e. 99% excess payment from August 2020). Please see below for the illustration:

Type of contribution Tariff Wage/ month JKK and JKM Contribution / month/ person
Normal Discount To be paid based on GR 49
JKK 0.24% 3,000,000 7,200 7,128 72
JKM 0.30% 3,000,000 9,000 8,910 90
Total Contribution     16,200 16,038 162
%     100% 99% 1%

In this case, the assumption is that the Company has paid full amount for BPJS contribution amounting to IDR 16,200.

Description Tariff Gross income Remarks
Salary   3,000,000 Wage/ Sept 2020
JKK 0.0024% 72 JKK Sept/ 2020
JKM 0.0030% 90 JKM Sept/ 2020
Adjustment JKK -0.2376% (7,128) Adjustment JKK Aug/ 2020- 99% excess payment
Adjustment JKM -0.2970% (8,910) Adjustment JKM Aug/ 2020- 99% excess payment
Total gross income – Sept 2020   2,984,124  
B. Statutory Compliance Release Date: September 08, 2020
C. Effective Date: August 01, 2020
A. Update

The Indonesian Government issued a Regulation for Housing Savings program (Tapera) on May 20, 2020.

The highlights of the program are encapsulated below:

  • 1. Employer is obliged to register its employees, facilitate the employee’s saving collection, pay to the Housing Savings Agency, and update the Agency for any change of data (e.g. salary increase, employees’ resignation).
  • 2. There are few conditions, for employees who are required to participate in this program:
    • Employee should be minimum age of 20 year old or already married;
    • Monthly salaries should equal to or above the minimum wage.
  • 3. The total saving is 3% from the compensation (i.e. salary + allowances) with below allocation:
    • Employer 0.5%;
    • Employee 2.5%.
  • 4. The Employee participants to include local workers and expatriate workers working in Indonesia for at least six months.
  • 5. The savings should be remitted to the Agency by the 10th of the following month.
  • 6. Failure to meet the payment deadline will be subject to 0.1% administrative sanction per month of the savings which need to be paid.
  • 7. The participation program will be over if:
    • Employee is retired;
    • Employee is passed away; or
    • Employee does not receive salary for 5 year in row.
    • If the employee’s participation to this program is already over, they will receive a refund from the savings amount plus any growth from the savings.

This is currently mandatory only for Government Companies and shall become mandatory for private companies once they register for this scheme. Currently they have an option to register within 7 years since the date regulation is signed i.e. May 20, 2027.

The detailed guidelines for the implementation of the same are still awaited from the authorities, therefore the impact and coverage of the same needs to be analyzed.

B. Statutory Compliance Release Date: May 20, 2020
C. Effective Date: May 01, 2020
A. Update

Indonesia BPJS Ketenagakerjaan Board vide Government Regulation Number 45 of 2015 (enclosed below) concerning the Implementation of the Pension Guarantee Program has revised the following:

  • The highest limit for the basic wage calculation of BPJS (JP) pension contributions is Rp. 8,939,700 for payment of contributions w.e.f March 01, 2020.
  • Pension benefits of at least Rp. 350,700 per month and a maximum of Rp. 4,207,200 per month, effective from February 1, 2020.
B. Statutory Compliance Release Date: February 12, 2020
C. Effective Date: March 01, 2020
A. Update

The Indonesian government released regulation number 49/2020 (‘regulation’) during COVID 19 relating to the adjustment of contribution to BPJS Manpower. This program is intended to provide incentive for the participants and the employers during this period.

The incentives offered are as follows:
  • a) Relaxation on the contribution payment deadline;
  • b) Discounts on JKK and JKM contribution; and
  • c) Postponement on JP contribution payment.
A. Relaxation on the contribution payment deadline

Previously, the deadline to pay the contribution is on the fifteenth (15) of the following month. Under this regulation, the payment deadline will be extended to the thirtieth (30) of the following month. If the thirtieth (30) falls on the holiday/weekend, then the payment deadline will be first (1) working day before the last date i.e. thirtieth (30).

B. Discounts on JKK and JKM contribution

The government has provided 99 percent discounts on JKK (work accident insurance) and JKM (death insurance premium) contributions to be paid by employer. Accordingly, employer will only need to pay 1 percent of the contribution. The above discount is given to all participants who have paid contributions up to July 2020.

Since 1 percent of the contributions are paid by the employer, it is necessary to report only that portion that is paid by employer.

Further clarity is still awaited on the impact to be considered for retrospective effect.

C. Postponement on JP Contribution on payment

During the incentive period, the employer can postpone the payment of 99 percent of the employer’s contribution. Thus, the company can only pay 1 percent of its original contribution and pay the remaining 99 percent of the contribution (either in lump sum or in instalment basis) from May 15, 2021 to April 15, 2022.

To apply the above incentive, employers should meet the prescribed terms and conditions. Also, the above incentive is not applicable for employee contribution.

Additional important information on this regulation are as follows:

  • This regulation is applicable for BPJS Manpower contribution
  • This regulation came into force effective from September 1, 2020 i.e. contributions payable in September 2020 for the month of August 2020
  • This regulation will remain effective till February 2020 i.e. contributions payable in February 2021 for the month of January 2021
  • Penalties will be imposed if the companies fail to meet the payment deadline.
B. Statutory Compliance Release Date: September 08, 2020
C. Effective Date: August 01, 2020
A. Update

The Indonesia Government has announced an incentive of Article 21 income tax starting from April 2020 onwards wherein the employer needs to payback the taxes withheld from the employee’s gross regular income.

Employees who are entitled to receive this incentive should fulfil the following criteria:

  • Employees whose gross regular income for a year is not more than 200 million.
  • Employees who are working for companies in business of processing industry (Category C), the list can be found on page 16-25 of the regulation.
  • Employees who are working for companies which have been designated as KITE (Ease of imports for Export purposes);
  • The incentive is only applicable for employees who have Tax ID number (NPWP).

The incentive of Article 21 is to be paid by the employer to the employee together with the tax home pay. The Article 21 income tax borne by the Govt. is not considered as taxable income for the employee. Incentive of Article 21 income tax will be valid for 6 months.

This incentive will be applicable only for certain industries such as Chemicals and chemical goods industry, Motor vehicle, trailer, and semi-trailer industry, Food industry, Rubber, rubber goods, and plastic industry, Pharmaceutical, chemical and traditional medicine industry, Other transportation device industry, Non-metal excavated goods industry, Basic metal industry, Paper and paper goods industry, Electrical device industry, Ready-to-use clothing industry, Metal goods, non-machine and equipment industry, Textile industry, Beverage industry, Machine and equipment industry that is YTDL (Yang tidak dapat diklasifikasikan di tempat lain/”cannot be classified into other segment”), Computer, electronic devices, and optic industry, Printing and recording reproduction industry, Leather, leather goods, and footwear industry and Furniture industry etc.

B. Statutory Compliance Release Date: March 23, 2020
C. Effective Date: April 01, 2020 to September 30, 2020
A. Update

Considering the COVID–19 situation, on April 27, 2020 the Ministry of Finance (MoF) has decided to expand the tax incentive to other business sectors as well, including small and medium enterprises (SMEs).

Accordingly, the MoF issued Regulation 44/ PMK. 03/ 2020 which replaced Regulation 23/ PMK.03/ 2020.

The new regulation brought the additional points provided below:

  • Extended the incentive from 440 business classification code (KLUs) to 1064.
  • Companies that have bonded zone (Kawasan Berikat) license can also apply for the incentive.
  • The realization report now needs to be submitted by the employers on monthly basis by 20th of the following month as compared to reporting required to be done every 3 months under Reg 23/2020.
  • Format of realization report has been amended to capture monthly data.
B. Statutory Compliance Release Date: April 27, 2020
C. Effective Date: April 01, 2020 to September 30, 2020
A. Update

The Indonesian Govt has replaced the Regulation 44/ PMK.03/2020 with regulation 86/ PMK. 03/ 2020.

The highlights of Regulation 86/ PMK. 03/ 2020 are as under:

  • The list of industries which can apply for the fiscal incentives is expanded from previously 1,062 business classification code (KLU) to 1,189 KLUs. Refer to the attached regulation page 26-50 for the list
  • The Government borne ‘Article 21 income tax’ was extended up to period December 2020
  • In the event that the Headquarter is included in the list KLU who can utilize the incentive Article 21, the realization report (both of Headquarter and Branch) will be reported only by the Headquarter
  • The realization report for Article 21 has undergone changes. A new section has been incorporated in the report to capture Kode billing and Jumlah.
B. Statutory Compliance Release Date: July 16, 2020
C. Effective Date: April 01, 2020 to December 31, 2020

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