National Social Security System (SJSN) (Law No. 40 of 2004)

National Social Security System (SJSN) Law

(Law No. 40 of 2004)

In 2004, there was a major legislative achievement in the development of national social
security system in Indonesia. In 2002, a Task Force was created under Presidential
Decree No. 29 of 2002 to prepare draft legislation and a supporting academic paper for
a national social security system to provide more effective social security to all. Over
three years’ discussion, the Task Force developed a draft bill and submitted it to the
Parliament (DPR) in early 2004. On 28 October 2004, the Parliament approved the bill
after having made a number of revisions during the Parliament discussion.

The law provides a basic framework for the development of the social security and social
assistance and the detailed rules will be specified in the subsequent Presidential
Regulations. Key features of this law are summarised as follows:

• The law stipulates the principles and goals of the National Social Security
System. For the implementation of the National Social Security System, the law
stipulates the establishment of a National Social Security Council under the
President. The Council will be composed of 15 members representing the
Government, social security experts and employers’ and workers’ organisations
and its main function is to formulate the policies and provide supervision for the
implementation of the National Social Security System.

• The law anticipates the achievement of the universal coverage in a phased
manner. The law only states that it is mandatory for employers to enrol their
employees to the social security schemes and that the Government will provide
social assistance to the poor. The explanation notes to the law states that
“Although membership is mandatory for all citizens, its implementation will take
place in accordance with the economic capacity of the people and the
Government as well as the feasibility of the programme. The first stage will start
with workers in the formal sector, in parallel with voluntary membership of the
informal sector workers, including farmers, fishermen and the self-employed.”

• The existing four social security schemes (Jamsostek, Taspen, Asabri and Askes)
will continue to operate as social security carriers but the legal status of these
schemes will be changed from Persero (profit-oriented limited liability state
enterprise) to a not-for-profit, social security fund within 5 years transition period
i.e. by 2009. Additional social security carriers can be created as needed. The
law requires that the financial accounts of different benefit programmes should
be managed separately and prohibits the inter-programme fund transfer.

• The scope of the law covers five social security programmes, namely: (i) health
insurance, (ii) employment injury, (iii) old-age (provident fund), (iv) pensions,
and (v) death benefits. Furthermore, the law states that the government will
develop the social assistance for the poor and economically disabled, but its
details are entrusted to the Presidential Regulations that follow.

• With respect to financing, the law only stipulates that the contributions for the
social security programmes should be paid jointly by the employers and
employees but does not specify the contribution rates or how contributions are
shared between employers and workers.

The Government will subsidise the contributions concerning the social assistance
for the poor and the economicallydisabled.

In the first phase, the Government provides health insurance for the
poor and alike (the government allocated Rp. 3.9 trillion for 2005).

Taken from : ILO

Posted in: SJSN