Business groups in Indonesia are expressing significant concerns over a proposed mandatory pension program slated to impact companies across various sectors. The initiative, introduced by the Ministry of Manpower, aims to enhance financial security for retirees but has ignited a wave of apprehension among industry leaders.
The proposed regulation mandates that all companies, regardless of size, contribute a set percentage of employees’ salaries to a government-managed pension fund. According to the Ministry, the move is designed to address the growing gap in retirement savings and ensure that all workers have access to adequate post-employment income.
However, business associations argue that the new program could impose substantial financial burdens on companies, particularly small and medium-sized enterprises (SMEs) that are already struggling with economic pressures. The Indonesian Employers Association (APINDO) has voiced concerns that the mandatory contributions could lead to increased operational costs and potentially force some businesses to reduce their workforce or curtail investment in other critical areas.
“While we understand the importance of securing employees’ futures, the proposed mandatory pension contributions could be a double-edged sword,” said APINDO Chairman, Budi Santoso during a press briefing. “Many businesses are already grappling with rising operational costs, and this new requirement could exacerbate financial strain.”
The government has argued that the pension program is a necessary step to address the country’s low retirement savings rates and ensure broader social security.
The Ministry of Manpower has highlighted that, despite the concerns, the program is designed with a gradual implementation timeline to ease the transition for businesses. The government in response to the backlash, has announced plans to hold a series of consultations with business leaders and other stakeholders.