The implementation of the new Job Creation Act has brought significant changes to financial management, particularly concerning pension costs. Severance payments and pension funds have also been affected, including changes in payment frequency and the company’s financial obligations. How does the new Job Creation Act impact these policies for companies?
Pension Fund Regulations under the Job Creation Act
One of the major impacts of the new Job Creation Act on post-employment benefits is the removal or modification of clauses emphasizing companies’ financial obligations.
This stems from the removal of Article 167, which previously stated that if an employee retires, the company is not required to provide severance pay if the employee is already enrolled in a pension program.
A key concern with the removal of this article is the potential decline of the pension fund industry. However, the Job Creation Act also mandates that companies employing more than 10 people enroll them in social security programs, including the Old Age Guarantee (Jaminan Hari Tua).
Severance Pay and Pension Funds under the Job Creation Act
In terms of pension costs and severance pay, the Job Creation Act requires companies to pay severance to employees who leave, regardless of whether they retire or are terminated.
The act mandates severance and compensation for years of service, though companies can choose to provide either or both. This is reflected in Article 156, Section (1):
“In the event of employment termination, employers must pay severance and/or compensation for years of service, as well as any entitlements due.”
The use of “and/or” reduces the obligation for companies to provide both severance and compensation at the same time, allowing them to choose one or the other.
Severance Pay Amount for Retiring Employees
Under the Job Creation Act, the amount of severance pay for employees is based on their years of service. This applies to both those retiring and those laid off.
The breakdown is as follows:
- One month’s salary for less than one year of service
- Two months’ salary for one year but less than two years of service
- Three months’ salary for two years but less than three years of service
- Four months’ salary for three years but less than four years of service
- Five months’ salary for four years but less than five years of service
- Six months’ salary for five years but less than six years of service
- Seven months’ salary for six years but less than seven years of service
- Eight months’ salary for seven years but less than eight years of service
Finally, employees who have worked for eight years or more are entitled to nine months’ severance pay.
Risiko terkait Perubahan Aturan Dana Pensiun
As noted, the Job Creation Act may potentially reduce the pension fund industry. This could affect the amount of pension funds employees receive, leading to significant adjustments in long-term financial planning for both companies and employees. Although there are other forms of compensation such as severance pay, long service pay, and social security programs, it is crucial for businesses to account for these changes when designing pension and severance schemes.
Moreover, companies need to be mindful of how these reforms could introduce new complexities into pension fund management. Unexpected regulatory shifts could increase compliance costs and potentially expose the company to legal risks if pension obligations are not met. Therefore, proactive planning is essential.
Companies seeking to ensure the welfare of their employees through well-structured pension plans should consult with an actuarial expert. Detailed pension fund calculations, based on current and projected regulatory changes, will help mitigate financial risks and ensure long-term sustainability. Modern actuarial consultants are well-versed in current financial standards such as PSAK 24 and the Job Creation Act, enabling them to provide accurate, forward-looking advice.
Furthermore, changes related to the Job Creation Act will inevitably affect company policies regarding pension funds, severance structures, and retirement benefits. Therefore, it is essential to engage an actuarial consultant to design robust funding systems, manage financial risks, and ensure employee welfare after retirement. Regular consultations with actuarial experts will help businesses stay compliant, financially secure, and equipped to handle future legislative changes.”
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