Indonesia’s New Outsourcing Rules: Key Compliance takeaways for Employers

The Ministry of Manpower, Indonesia has introduced a new framework for outsourcing through the Regulation of the Minister of Manpower Number 7 of 2026 on Outsourcing Work, which came into force on 30 April 2026 (“Regulation 7/2026”).

Regulation 7/2026 appears to have been introduced in response to concerns raised by the Petitioners in Constitutional Court Decision Number 168/PUU-XXI/2023[1], which involved a judicial review of Law Number 6 of 2023 concerning the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation into Law against the 1945 Constitution of the Republic of Indonesia.

The key concerns raised by the Petitioners were as follows:

1. the absence of a clear and definite legal basis identifying the types of work that may be outsourced;
2. the need for clearer legal protection for outsourced workers/labourers in relation to their employment status and basic rights, including wages, social security and decent working conditions, particularly where the types of outsourced work are determined through employment agreements; and
3. the need for strict limitations on outsourced work to prevent misuse of outsourcing arrangements, reduce legal uncertainty, and minimise potential disputes between companies and workers/labourers.

Regulation 7/2026 sets out clear statutory obligations on the part of an Employing Company[2] and an Outsourcing Company. [3] In this blogpost we bring to you the key compliance obligations on the part of Employing Companies in the light of Indonesia’s latest regulation on Outsourcing Work.

Execute Outsourcing Agreement[4] in writing to outsource work in the form of providing worker/labour services

Only the following kinds of work in the form of providing worker/labour services are permitted to be outsourced:

a. cleaning services

b. food and beverage services

c. security services

d. provision of drivers and transportation for workers

e. operational support services and

f. supporting services in the mining, oil, gas and electric power sectors.

The Outsourcing Agreement must contain the following information:

a. Work outsourced to an Outsourcing Company

b. Term of the Outsourcing Agreement

c. Location of work implementation

d. Number of outsourced workers/labourers

e. protection and rights of outsourced workers/laborers at least include wages, overtime pay, working hours and rest time, annual leave, rights to occupational safety and health, social security, religious holiday allowances, and rights to the end of the employment relationship or termination of employment and

f. rights and obligations of the Outsourcing Company and the Employing Company that outsources part of the work.

Ensure Outsourcing Company fulfils legal protection and rights of outsourced workers/labourers

The Employing Company is responsible for ensuring that the Outsourcing Company fulfills the protection and rights of outsourced workers/ labourers including:

a. Wages and overtime pay

b. Working hours and rest periods

c. Annual leaves

d. Rights to occupational safety and health

e. Social security

f. Religious holiday allowance (THR)

g. Rights to the end of the employment relationship of termination of employment.

Adjust existing outsourcing work in compliance with Regulation No. 7 of 2026 on Outsourcing Work by 30 April 2028

Existing Outsourcing Agreements remain valid until the end of the Outsourcing Agreement period

Ensure the outsourced work aligns with Regulation 7 of 2026 i.e. outsource only permitted work in the form of providing worker/labour services as detailed in the blogpost by 30^th April, 2028.

Penalties for non-compliance:

An Employing Company which violates the requirement to outsource only permitted work will be subjected to administrative sanctions in the form of written warning and restrictions on business activities. The restrictions could be in the form of restrictions on the production capacity of goods and/or services within a certain time and/or postponement of granting business permits in one or more locations for companies that have projects in several locations.

Compliance takeaways for companies using outsourced manpower

• Make a list of all the activities that you outsource and check whether they fall within the 6 permitted categories i.e. a. cleaning services; b. food and beverage services; c. security services; d. provision of drivers and transportation for workers; e. operational support services; and f. supporting services in the mining, oil, gas, and electric power sectors. If not, take steps accordingly.

• Require business units to obtain legal or HR approval before outsourcing any new activity to ensure it falls within the categories permitted under Regulation 7/2026.

• Evaluate your existing Outsourcing Agreements and make plans to align it as per the requirements of Regulation 7/2026 by 30^th April 2028.

• Conduct due diligence on outsourcing vendors before executing the Outsourcing Agreement as Employing companies need to verify that the Outsourcing Company will be able to comply with wage, overtime, social security, occupational safety and health, THR, leave and termination-related obligations.

• Establish a process for ongoing monitoring by obtaining evidence for wage payments, overtime, social security, occupational safety and health, THR, leave and termination-related obligations.

• Employing Companies must maintain and retain records/copies of outsourcing agreements, records of registration and correspondence with the Outsourcing Company in case of manpower inspection or dispute.

• Impart training to teams within your organization on the new outsourcing restrictions highlighting that outsourcing is now a key labour compliance for the business.

Conclusion

Regulation 7/2026 appears to be a step in the right direction to address the ambiguities surrounding permissible outsourcing activities in Indonesia. The underlying intent seems to be to ensure that companies do not outsource activities that are core to their business operations. Article 3 of Regulation 7/2026 clearly restricts the type and field of work that may be outsourced by an Employing Company to the provision of worker/labour services in specified areas, namely: cleaning services; food and beverage services; security services; provision of drivers and transportation for workers; operational support services; and supporting services in the mining, oil, gas, and electric power sectors. Accordingly, Employing Companies should review their existing and proposed outsourcing arrangements to ensure that the activities they outsource fall within the categories expressly permitted under Regulation 7/2026.

How can Komrisk, our compliance management software can help?

Komrisk is one of the best AI-enabled compliance management software that helps organisations track regulatory obligations, assign compliance tasks, monitor due dates and maintain evidence through a centralised dashboard. For the new outsourcing obligations, Komrisk can help Employing Companies in Indonesia convert legal requirements into actionable compliance tasks, assign ownership to HR, legal and business teams, generate automated reminders, track completion status and maintain supporting records such as outsourcing agreements, compliance confirmations and statutory records. This enables better oversight of outsourcing arrangements and reduces the risk of non-compliance.

Author: Antara Dasgupta

Researched by: Snigdha Sanganeria

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[1] https://en.mkri.id/download/summary/summary_2192_1734681705_8892cf8db1ffbc991c68.pdf

[2] An Employing Company is a company that hands over part of the work to an Outsourcing Company

[3] An Outsourcing Company is a business entity in the form of a legal entity that meets the requirements to carry out certain work based on an agreement agreed with the Employing Company

[4] An Outsourcing Agreement is a written agreement between the Employing Company and the Outsourcing Company which contains the rights and obligations of the parties in the transfer of work implementation.