Indonesia Introduces ‘Tapera law’: New Housing Fund that Requires Employer and Employee Contributions

June 6, 20168:15 am1229 views

Indonesia introduces new ‘Tapera Law’ that aims to provide long-term financing for housing could require employer and employee contributions to a new savings program starting in March 2018. The law on Public Housing Savings, known as the Tapera law, was signed on March 24, 2016.

Final regulations and a specific implementation date are not yet available, although both must occur within two years of the law’s signing.

Indonesia faces a significant housing shortage, with a vast proportion of the population unable to afford to buy a home. The Tapera law is one of multiple measures (including an affordable homes program) aimed at enabling more of the working population to buy a property.

Key Details

The key details currently available are:

  • Employers will need to register all employees who are at least 20 years old (or married) and who earn at least the minimum wage in the Tapera program. This also applies to all foreign workers with working visas of more than six months.
  • Independent workers earning over the minimum wage must register themselves in the program.
  • Contributions to the Tapera program will be paid into members’ individual accounts at the custodian bank. Although the initial draft law specified that the contribution rates as a percentage of pay would be 2.5% from the employee and 0.5% from the employer, the final signed law did not include any specific contribution rates. These are now under discussion and are expected as part of the final implementing regulations.
  • The Tapera Law will establish a Management Board, known as BP Tapera, which will appoint and supervise the Tapera program’s investment manager, custodian bank and financial institutions, as well as oversee the program’s general supervision and management.
  • The employee will be able to choose between conventional funds and Islamic funds.
  • Funds to construct or improve a home will be available to employees who participated in the program for at least 12 months, are below a certain income threshold, and who haven’t yet bought a home. Individuals who do not meet these requirements will receive the accumulated contribution plus investment return at the age of 58.

See: Indonesia’s Best Companies to Work For in Asia for the Year 2016

Employer Implications

Although specific implementing regulations are not yet available, it is clear that the program will increase employer costs. Employers in Indonesia have already seen significant cost increases with the implementation of the BPJS Healthcare and BJPS Employment programs, including the universal pension system, in place since January 2015.

Employers need to understand the potential financial consequences and monitor developments.

Furthermore, according to a recent development, Indonesian Vice President Jusuf Kalla has proposed the implementation of an ASEAN minimum wage for workers in the ASEAN member countries to ensure equality in the region.

Stressing on the importance to prevent unhealthy competition, Jusuf Kalla urged that “the ASEAN countries must not force workers to compete on lower wages but must work together to create a minimum standard wage to induce a healthy competition.”

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Also read: Indonesia to Be More Vigilant with Foreign Workers

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