Achieving The Optimal Delivery of Unemployment Insurance Program

20 September 2021, Penulis : Frenda Nic Qomar Ernanto

The Omnibus Law on Job Creation Number 11 Year 2020 has mandated the implementation of new social security program known as unemployment insurance or Jaminan Kehilangan Pekerjaan (JKP). This mandate was followed by the issuance of Government Regulation (PP) Number 37 Year 2021 in February 2021 which governs the detail of the program. In accordance to this regulation, the government provides social security to workers who experience layoffs by providing cash transfer, job training, and access to labor market information. This social security program will be managed under BPJS Ketenagakerjaan.

 

To be eligible for this JKP program, the participant must be a worker, an Indonesian citizen, and below 54 years old at the time of registration. A further qualifying condition is for large and medium-sized businesses, the workers must also participate in the healthcare security program in BPJS Kesehatan and pension security program, work accident security or employment injury program, death benefits program, and old day security program in BPJS Ketenagakerjaan. Meanwhile, employees in micro and small businesses must at least take part in the last three programs of BPJS Ketenagakerjaan mentioned earlier as well as in the healthcare security program.

 

JKP program is designed based on social insurance principle and is financed through a contribution shared by the government and employers. The contribution fee is 0.46 percent of the worker’s monthly salary with the upper wage ceiling of Rp5.000.000,00. From this rate, the government will pay 0.22 percent of the total contribution through APBN, and the employers will pay the remaining 0.24 percent through the recomposition of the currently existing work accident security program and death benefits program. The work accident security program contribution is recomposed at 0.14 percent, while the death benefits program contribution is recomposed at 0.10 percent of wage.

 

The primary objective of JKP program is to provide adequate protection against the risk of job loss so that employees can maintain their standard of living. When people are unemployed, there should be a replacement for their lost income to prevent them and their family from falling into bad economic condition. There should also be assistance for them to return to employment as quick as possible by upgrading their skills and capabilities. Thus, an integrated and comprehensive system of JKP that combine both financial assistance and training support are required to successfully implement this program.To achieve the objective, the JKP program offers three types of benefits. First, the participants will get a maximum six-month cash transfer, divided into 45 percent of wages for the first three months and 25 percent for the following three months. Second, the government provides access to labor market by giving information and job guidance, which may include assessments or career counseling. Third, the participants will also get job training benefits that can be delivered online or offline through institutions owned by the government, private sector, or verified companies. Professional bodies and training institutions can also collaborate to provide a competency certification for the worker. 

 

As required in the PP Number 37 Year 2021, it is crucial to integrate the data of participants of social security program between BPJS Kesehatan and BPJS Ketenagakerjaan to ensure the validity of eligible participants in this JKP program. This mechanism is also useful for mitigating the risk of noncompliance such as nonpayment. From the government perspective, participant validity is critical for accurately allocating and disbursing the contribution fee in the government budget. Related to this data integration, another factor to consider is how to align and simultaneously differentiate between the JKP program and the pre-employment card program (Kartu Prakerja). Although the pre-employment card program appears to be temporary policy, if JKP participants are able to register for the pre-employment card program, there will be duplication of funding and benefits. Also, the coverage of the current JKP program is still intended for formal workers. Hence, it is important for the government to have a clear design of the programs so that the overall framework to support workers in either formal or non-formal sector can be seen comprehensively. 

 

Furthermore, the government needs to continuously monitor the availability of funds for this JKP program. From an insurance perspective, a program financed entirely or partially through contributions can only be sustainable if it is based on a sufficiently broad pooling of risks. Thus, by extending coverage to the vast majority of workers, this will ensure that as many unemployed people as possible are compensated, while expenses will be spread out across a wide pool of contributors. However, if the pandemic continues to cause further layoffs, the risk becomes even greater that will possibly result in a significant amount of financing that may exceed the allocated funding. 

 

The government should also be meticulous in designing the job training benefits of this JKP program. If the job trainings are not properly designed, this program will only provide 6-month cash benefits continuously with no significant intended result and consequently, the affected workers will not gain an improvement in their skills or competencies and they will still have difficulty to return to work as soon as possible.

 

Finally, the government must also assess the impact of JKP program on other social insurance program such as death benefits program due to the recomposition of fee. As calculated from the 2020 BPJS Ketenagakerjaan financial statement, the ratio between the death benefits investment return and death benefits payment is only 0.8, indicating that a portion of the death benefits is paid directly from participant contributions. Furthermore, the claim ratio for the death benefits program in 2020 is 73.8 percent, which is significantly higher than the previous year's figure of 30.7 percent. This condition will be even more worrying when the death benefits contribution fee is reallocated to finance JKP program since this may potentially disrupt the funding for the former program in the long run. Considering the impact, the implementation of JKP requires a thorough examination and evaluation of the entire social insurance system in the BPJS Ketenagakerjaan to ensure the programs’ long-term sustainability.

The views expressed here are those of the writer and do not necessarily reflect the policy in the Ministry of Finance. 

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