The Social Security (BPJS Ketenagakerjaan) in Indonesia
Indonesia’s rapid economic growth continues to attract foreign investors, entrepreneurs, and global professionals seeking opportunities across sectors such as real estate, property development, hospitality, F&B, manufacturing, and services. However, entering the Indonesian market involves more than company registration and tax compliance it also requires a clear understanding of mandatory workforce protection systems. One of the most critical obligations for businesses and employers is participation in BPJS Ketenagakerjaan, Indonesia’s national employment social security program.
BPJS Ketenagakerjaan is not merely a regulatory requirement; it is a strategic risk-management tool that protects businesses from labor disputes, ensures employee welfare, and strengthens corporate credibility in Indonesia’s regulatory ecosystem. This article provides a comprehensive guide to help foreign investors and professionals understand how the system works, why it matters, and how to implement it effectively.
What Is The Social Security (BPJS Ketenagakerjaan)?
BPJS Ketenagakerjaan is Indonesia’s mandatory employment social security program managed by the government under Law No. 24 of 2011 and reinforced by Law No. 40 of 2004 on the National Social Security System (SJSN). The program aims to protect workers from financial risks related to workplace accidents, death, old age, and retirement. All employers operating in Indonesia including foreign-owned companies (PT PMA), representative offices, and local entities are legally required to register their employees in BPJS Ketenagakerjaan. This obligation applies to Indonesian nationals and foreign employees who hold valid work permits.
Why The Social Security (BPJS Ketenagakerjaan) Matters for Foreign Businesses
For foreign investors and executives, BPJS Ketenagakerjaan is more than compliance it is a foundation for sustainable operations. Companies that fail to comply may face administrative sanctions, operational restrictions, or reputational risks that hinder business expansion.
Key strategic benefits include:
- Legal protection against labor disputes.
- Enhanced employee retention and loyalty.
- Reduced liability exposure for workplace incidents.
- Compliance with licensing and OSS-RBA requirements.
- Improved corporate governance and ESG reputation.
In Indonesia’s increasingly regulated investment environment, BPJS compliance is often reviewed during audits, licensing renewals, and due diligence processes.
Who Must Register for The Social Security (BPJS Ketenagakerjaan)
Foreign investors and employers should understand that BPJS coverage applies broadly across employment structures.
Mandatory registration applies to:
- Full-time employees.
- Part-time employees.
- Contract workers.
- Local hires.
- Foreign expatriates with work permits (KITAS).
- Directors receiving salary or employment benefits.
Even startups and newly established companies must register employees immediately after onboarding.
Employer Contribution Structure
Indonesia updates BPJS contribution parameters periodically to reflect wage trends and economic conditions. While rates remain relatively stable, employers should budget approximately:
- 4%–6% of monthly payroll for employer contributions.
- 3% of salary for employee contributions.
These costs are tax-deductible business expenses, making BPJS both a compliance and financial planning consideration.
Penalties for Non-Compliance
Failure to register employees in BPJS Ketenagakerjaan may result in serious consequences under Indonesian law, including:
- Written warnings and fines.
- Suspension of business licensing approvals.
- Restrictions on government services.
- Legal disputes or employee lawsuits.
- Blacklisting in procurement or tender processes.
For foreign investors, non-compliance can also trigger red flags during corporate restructuring, mergers, or investment exits.
How Indoned Consultancy Helps
Navigating BPJS Ketenagakerjaan compliance requires local expertise, regulatory interpretation, and operational execution. Indoned Consultancy provides end-to-end solutions tailored for foreign investors and businesses, including:
- BPJS registration and company onboarding.
- Payroll compliance structuring.
- Expatriate workforce assessment.
- Monthly reporting and contribution management
- Regulatory risk audits and advisory.
Our consultants work closely with business owners, directors, property developers, and investors to ensure compliance while optimizing operational efficiency.
If you are planning to invest, hire employees, or expand operations in Indonesia, ensuring BPJS Ketenagakerjaan compliance should be your top priority. Contact Indoned Consultancy today for a FREE consultation and let our legal and compliance experts help you structure your workforce strategy legally, efficiently, and strategically.
Disclaimer
The information provided here is based on our long experience. The process or requirement may vary depending on the specific facts and conditions. Besides, the law and regulations in Indonesia subject to frequent changes. Please contact us as your consultant to get an up to date information and accurate advice. More Information click here and You can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.
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FAQ
In general, PMA stands for Foreign Direct Investment while PMDN stands for Domestic Direct Investment. From the perspective of the meaning, in short, PMA is an investment activity to conduct business in the territory of the Republic of Indonesia which carried out by foreign investors, both those who use foreign capital wholly or in joint ventures with domestic investors. Then, PMDN is an investment activity to conduct business in the territory of the Republic of Indonesia which carried out by domestic investors using domestic capital.
Basically, subjects in domestic investors are Indonesian citizens (WNI), Indonesian business entities, the Government of Indonesia, or regions that make investments in the territory of Indonesia. Meanwhile, foreign investors are foreign citizens, foreign business entities, and/or foreign governments making investments in the territory of the Republic of Indonesia.
With the new regulations and system changes, the process of establishing a company, both PT PMDN or PT PMA, does not take a long time. It takes at least 10-15 working days after the complete document requirements are fulfilled.
Yes. To be able to carry out the establishment process of PT PMA, the authorized capital that must be written in the deed of establishment is Rp. 10 billion excluding the value of land and buildings. In making the deed of establishment, the Notary appointed by us will provide a statement letter to the shareholders who sign that they will deposit the said amount of capital. However, the statement will usually not include the fulfillment period. After the company is established, the company will carry out investment reporting on a regular basis which will later become one of the proofs for the company's activities with its capital.
Generally, the set-up company process is divided into 2 stages. Where, the first stage is the establishment stage. Where at this stage, you will process your company's basic documents and permits, such as: deed of establishment, legalization document, Company NPWP (Taxpayer ID Card), Business Identification Number, Company Bank Account Opening and other documents according to your sector and business field. Furthermore, the second stage is the operational stage. At this stage, before and/or during your company's operations, you are required to fulfill the company's obligations. Such as, payment of related taxes, fulfilling operational permits, reporting LKPM (Investment Activity Report), BPJS Employment and Health Registration, and other obligations according to the sector and business field.
BPJS stands for Social Security Administering Board, which is a special institution tasked with administering health and employment insurance for the public, civil servants, and private employees. BPJS has 2 types, namely: BPJS Healthcare and BPJS Employment. Where every registered company that has employees is required to register its employees in the BPJS program, both BPJS Healthcare and BPJS Employment.
LKPM stands for Investment Activity Report. It is a report on the progress of investment realization and problems faced by business actors that must be prepared and submitted periodically.
Yes, you do. When you do the establishment of a company, a correspondence address is fundamental. It is needed because later all correspondence documents from the government or related agencies will be sent to your company's office/correspondence address. In addition, a company is required to have a domicile which is one of the requirements for making a deed of establishment.
Do you have a location in mind where you plan to establish your company in general? For example, are you planning to do it in Bali, such as in Kuta, Ubud, Sanur or Jimbaran area? We have several specific place references that may help you determine the location of your company office. Just please let us know.
At the stage of the company establishment process, you are not required to come to Indonesia. Although it is no required to come, you may visit Indonesia with the visa which the service we can assist you to have it.
Some process in the establishment company can be carried out by giving your power of attorney to one of our team whom handles the process of establishing your company. Our team is experienced enough in their field therefore the necessary matters will be prepared and informed to you.
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