On 30 April 2026, the Indonesian Minister of Manpower issued Minister of Manpower Regulation No. 7 of 2026 on Outsourced Work (“MOM Regulation No. 7/2026”) which establishes a more specific framework for the implementation of outsourcing arrangements in Indonesia. In particular, the new regulation: (i) responds to the Constitutional Court’s decision which stipulates that the permitted scope of outsourced work must be determined by the Minister of Manpower; (ii) strengthens the governance of outsourcing arrangements by limiting outsourcing to specified supporting activities; and (iii) reinforces the protection of workers employed under outsourcing arrangements.
Outsourcing Arrangements under MOM Regulation No. 7/2026
Under MOM Regulation No. 7/2026, outsourcing involves the transfer of part of the performance of work from a company requiring the work (the “User Company”) to an outsourcing company (the “Outsourcing Company”). The arrangement takes the form of the provision of workers or labour services. As a general principle, a User Company may assign part of the performance of its work to an Outsourcing Company under a written outsourcing agreement.
The employment relationship remains between the Outsourcing Company and the outsourced workers. The Outsourcing Company therefore acts as the employer and is directly responsible for complying with the applicable employment requirements. However, as discussed below, MOM Regulation No. 7/2026 also imposes an oversight obligation on the User Company in relation to the protection of outsourced workers.
Activities That May Be Outsourced
Article 3 of the MOM Regulation No. 7/2026 limits outsourcing to supporting activities. The permitted categories are:
- cleaning services;
- food and beverage services;
- security services;
- the provision of drivers and transportation for workers;
- operational support services; and
- supporting work in the mining, oil and gas, and electricity sectors.
The regulation provides that an outsourcing arrangement must relate to one of the supporting activities identified under the regulation. Companies should assess the substance of the relevant function, rather than relying solely on the title assigned to the service or the outsourcing agreement. Particular attention may be required when assessing whether a function falls within the category of “operational support services”, given the potentially broad range of activities that may be described as operational support. The classification should be considered in light of the company’s business activities, the actual duties performed by the outsourced workers and the role of those duties within the company’s operational structure.
Minimum Contents of an Outsourcing Agreement
An outsourcing arrangement must be documented in a written agreement between the User Company and the Outsourcing Company. At a minimum, the outsourcing agreement must specify:
- the work to be outsourced to the Outsourcing Company;
- the term of the outsourcing agreement;
- the location at which the outsourced work will be performed;
- the number of outsourced workers;
- the protections and entitlements of the outsourced workers; and
- the respective rights and obligations of the User Company and the Outsourcing Company.
The protections and entitlements addressed in the outsourcing agreement must include, at a minimum:
- wages;
- overtime pay;
- working hours and rest periods;
- annual leave;
- occupational health and safety rights;
- social security;
- religious holiday allowance, commonly referred to in Indonesia as tunjangan hari raya or “THR”; and
- entitlements arising from the expiry or termination of employment, including termination of employment by the employer.
Allocation of Responsibility for Worker Protection
The Outsourcing Company is responsible for providing the outsourced workers with the protections and entitlements required under applicable laws and regulations. As the employer, it remains responsible for matters including employment documentation, payment of wages and overtime, working conditions, social security enrolment and statutory employment entitlements.
MOM Regulation No. 7/2026, however, also requires the User Company to ensure that the Outsourcing Company fulfils its obligations relating to the protection and entitlements of the outsourced workers. The regulation therefore provides the User Company in an oversight role, although the Outsourcing Company remains directly responsible as the employer.
Requirements Applicable to Outsourcing Companies
An Outsourcing Company must hold the relevant business licence for outsourcing activities. Under Article 6, it is also required to: (i) implement applicable occupational health, safety and environmental standards; and (ii) register the outsourcing agreement with the manpower office of the relevant regency or municipality in which the outsourced work is performed.
Registration of Outsourcing Agreements
The registration of the outsourcing agreement must be submitted no later than 3 (three) business days after the outsourcing agreement is signed. To register an outsourcing agreement, the Outsourcing Company must submit an application to the manpower office of the regency or municipality in which the outsourced work is performed. A copy of the outsourcing agreement must be enclosed with the application. The relevant manpower office will examine the outsourcing agreement and may: (i) issue evidence of registration if the application and agreement satisfy the applicable requirements; or (ii) suspend the issuance of evidence of registration if the application cannot yet be accepted. The review process provides the manpower office with an opportunity to examine whether the arrangement, including the outsourced activity and the terms of the agreement, complies with MOM Regulation No. 7/2026.
Administrative Sanctions
A User Company that outsources work outside the permitted types of supporting activities specified under Article 3 may be subject to progressive administrative sanctions, consisting of a written warning followed by restrictions on its business activities. Such restrictions may include a temporary limitation on its production or service capacity and/or a delay in the issuance of business licences at one or more locations.
An Outsourcing Company that fails to comply with the obligations under Article 6, including licensing, occupational health, safety and environmental requirements, and registration of the outsourcing agreement, may be subject to sanctions under Indonesia’s risk-based business licensing regulations.
Conclusion
User Companies and Outsourcing Companies should review their existing and proposed outsourcing arrangements to ensure that the outsourced activities are permitted, the service provider is properly licensed, the agreement contains the required terms, worker protections are adequately addressed, and all registration requirements are satisfied.
Businesses entering into new outsourcing arrangements after 30 April 2026 should structure those arrangements in accordance with MOM Regulation No. 7/2026 from the outset. As for the existing arrangements, the outsourcing agreements remain valid until their expiry, however, the companies should use the transitional period to implement the necessary contractual and operational adjustments before 30 April 2028.
For further information, please contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
general@metalaw.id
