T

he Indonesian Employers Association (Apindo) has welcomed the government'€™s decision to set the contribution rate for the mandatory pension scheme for workers at a moderate level of 3 percent, saying the rate is acceptable although it is still higher than they requested.

Apindo leader Sofjan Wanandi said on Tuesday that his association lauded the government'€™s move in taking a middle way for both workers and employers.

'€œWhile 3 percent is actually still higher than we previously expected, it is a tolerable level for most employers to still grow amid pressure from the economic downturn,'€ he told The Jakarta Post.

After a long delay, President Joko '€œJokowi'€ Widodo finally issued a regulation on Tuesday setting the contribution rate for the mandatory pension scheme at 3 percent of workers'€™ basic salaries.

According to the regulation, of the 3 percent premium, 2 percent will be covered by employers, while workers will contribute 1 percent of their monthly wages.

Previously, the Manpower and Transmigration Ministry and the Workers Social Security Agency (BPJS Ketenagakerjaan) proposed a pension premium rate of 8 percent to provide greater benefit for employees.

However, the proposed rate was opposed by Apindo, who said that it was too high and would hurt employers. The association then asked to lower the rate to 1.5 percent. The Finance Ministry, meanwhile, proposed the premiums be set at 3 percent, given the country'€™s weak economic condition.

Indonesia, Southeast Asia'€™s largest economy, has seen its economy decelerate to 4.7 percent year-on-year in the first quarter of this year '€” the slowest pace in nearly six years. The economic slowdown has resulted in widespread layoffs and operational shut downs, particularly in labor-intensive industries.

Around 200 footwear manufacturers in Tangerang, Bandung and Surabaya had laid-off about 40,000 workers as of May, according to the Indonesian Footwear Association (Aprisindo).In addition, 120 textile producers in Bandung also took similar measures, firing at least 6,300 workers, according to the Indonesian Textile Association (API)

'€œWithin the next three years, the pension scheme'€™s premiums will be revised and will be gradually increased to 8 percent,'€ BPJS Ketenagakerjaan president director Elvyn G Masassya said in a press conference after President Joko '€œJokowi'€ Widodo launched the four occupational social security programs at Turtle Bay in Cilacap, Central Java, on Tuesday.

Attended by around 1,000 local fishermen, Jokowi announced that the full operation of the social security system would consist of an occupational accident program, old-age risk program, life insurance program and a pension program.

Elvyn said his agency would make sure that the implementation of the social security system would reach across the nation as the agency already had 11 regional offices at provincial level, 121 branch offices and 203 sub-branch offices.

'€œSo far, BPJS Ketenagakerjaan also has a network of 200,000 fishermen across the country, including those in partnership with banks and agencies,'€ he said.

Elvyn went on to say that the security system had netted 17.16 million participants as of May, with total managed pension funds amounting to around Rp 203 trillion (US$15.2 billion).

The full implementation of the workers security system will also raise benefits from the life insurance program to Rp 24 million from the current Rp 21 million.