Labour Law to Regulate Severance Pay Reserve Funds: What is the Difference with BPJS?
The newly passed Law on Labour Protection by the House of Representatives (DPR RI) will introduce new regulations regarding severance pay for employees facing termination of employment (PHK).
The Minister of Manpower, Yassermli, revealed that one of the new provisions in the law is the establishment of a severance pay reserve fund. This scheme is being prepared as a legal umbrella to ensure that the availability of funds can be anticipated when companies are required to pay severance to workers.
So, what is the difference between this severance pay reserve fund and BPJS?
Severance Pay Reserve Fund is Not BPJS
Yassierli emphasised that the severance pay reserve fund to be regulated in the Labour Protection Law is different from BPJS.
According to him, the background for this provision relates to the current situation faced when companies are required to pay severance to employees. “The reality we see now is that when companies intend to pay severance, the reason (often) is that they no longer have the funds, and so on,” Yassierli stated after attending a plenary session of the DPR in Jakarta on Tuesday, 6 October 2026.
To address this issue, the Labour Protection Law will serve as the legal framework for the regulation of the severance pay reserve fund.
However, the technical mechanisms regarding these funds have not yet been explained in detail within the newly passed law. Yassierli noted that more detailed regulations regarding the severance pay reserve fund will subsequently be established through Government Regulations (PP).
“Therefore, this Law serves as the umbrella; there will be a severance pay reserve fund, and the details will be regulated later in the PP (Government Regulation),” he said.
Thus, based on Yassierli’s explanation, the severance pay reserve fund relates to a company’s readiness to provide funds to meet severance payment obligations when workers undergo layoffs.
Not a Replacement for BPJS
When asked about the difference with BPJS, Yassierli firmly stated that the two are different.
“They are different,” said Yassierli.
Nevertheless, the government has not yet disclosed the detailed management form, the managing party, the reservation mechanism, or the procedures for withdrawing the severance pay reserve funds. These technical aspects are awaiting derivative regulations in the form of Government Regulations.
Consequently, the severance pay reserve fund mentioned in the Labour Protection Law cannot be equated with the BPJS programme. The regulation of these funds specifically arises in the context of ensuring a company’s ability to fulfil its severance obligations to workers.