How to increase JKK coverage to workers in informal employment?

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This note was prepared to respond to a media enquiry from KOMPAS.COM.

BPJS Ketenagakerjaan (BPJS Employment) increased the number of non-wage members who contribute (pay contribution) to Jaminan Kecelakaan Kerja (JKK: employment injury insurance) and Jaminan Kematian (JKM: death benefit). This upward trend was driven by administrative/implementation efforts rather than legal/policy changes, because there was no major policy reform that would affect JKK/JKM coverage (Government Regulation No. 49/2023 reformed JKK/JKM benefits but did not change coverage provisions).

How to increase JKK coverage to workers in informal employment? ‘Informal workers’ are not clearly defined in Indonesia. Instead, let’s divide them into two categories: 1. workers who have employers (Pekerja Penerima Upah: PPU); and 2. self-employed workers who do not have employers (Bukan Penerima Upah: BPU).

First, employers must register all their employees with JKK (Category 1). Only 30 million PPU out of 50 million in 2022 were registered with JKK. Employers of the remaining 20 million PPU did not comply with their obligation. To close the coverage gap in PPU, enforcement is needed. What happens if employers do not register their employees? Will their business license be suspended? Other than penalties, in Japan, social security attorneys certified by the Government assist employers of small and micro enterprises in registering their employees with social security. This is helpful for small companies because these companies do not have the administrative capacity to deal with social security registration and salary reporting to the social security agency on time.

Second, an extension of JKK to BPU can be achieved by changing JKK policies and improving implementation.

  1. Policy change: We need to rethink the definition of BPU. There are millions of taxi drivers in Indonesia, not only platform drivers but also drivers who work for well-known companies. Most of them may be categorised as BPU. If the definition of PPU is amended to include ‘any workers who work for companies’, their companies will have to register their workers with JKK. In this way, BPJS Ketenagakerjaan can close the coverage gap.
  2. Implementation: Some countries allow formulating an intermediate association of self-employed workers. The Government certifies such an association to help self-employed workers register with JKK.

Lastly, it is important for Indonesia to consider extending coverage of old-age benefits to all citizens. To create a sustainable and adequate pension fund, any country will take a lot of time. Indonesia, which started ageing (age 65+: 7% of the population), will be an aged society (14%) in 2045. To extend pension coverage, an integrated pension system of social insurance and subsidy scheme is needed.