Introduction
The practice of outsourcing in Indonesia has developed alongside business demands for efficiency and flexibility in workforce management. the foundation of outsourcing is stipulated under Article 64 paragraph (1) Law Number 13 of 2003 as amended by Law Number 6 of 2023 concerning Job Creation. The derivative regulation of outsourcing was stipulated through Government Regulation No. 35 of 2021, which provided greater flexibility for companies in utilizing outsourced workers. However, such flexibility also raised concerns regarding the protection and job security of workers.
As a follow-up measure, the government subsequently issued Minister of Manpower Regulation No. 7 of 2026, which serves as a technical implementing regulation to clarify the provisions under the Government Regulation. This regulation further defines the scope of outsourcing work, strengthens employment agreement mechanisms, and enhances supervision and labor protection measures.
1. Types and Sectors of Outsourcing Work
Government Regulation No. 35 of 2021 does not expressly limit the types of work that may be outsourced. Consequently, companies are granted broad discretion in determining which functions may be carried out through an outsourcing system in accordance with their operational needs.
In contrast, Article 3 of Minister of Manpower Regulation No. 7 of 2026 provides stricter limitations. Outsourcing is only permitted for supporting activities and not for the company’s core business activities. Such supporting activities include:
- cleaning services;
- food and beverage services;
- security personnel;
- drivers and employee transportation services; and
- operational support services, as well as supporting work in certain sectors such as mining, oil and gas, and electricity.
Accordingly, the regulation emphasizes that outsourcing may not be used for work constituting the company’s core business.
2. Outsourcing Agreements
Under Article 18 paragraph (1) of Government Regulation No. 35 of 2021, the employment relationship between an outsourcing company and its workers may generally be established through either a Fixed-Term Employment Agreement (Perjanjian Kerja Waktu Tertentu/“PKWT”) or an Indefinite-Term Employment Agreement (Perjanjian Kerja Waktu Tidak Tertentu/“PKWTT”), both of which must be executed in writing. This demonstrates that employment relationships remain subject to formal labor law requirements.
Meanwhile, Article 4 of Minister of Manpower Regulation No. 7 of 2026 further specifies the minimum content required in outsourcing agreements. Such agreements must not only be made in writing, but must also include essential elements such as the type of outsourced work, the duration of implementation, the work location, the number of workers assigned, and the rights and obligations of the parties. This requirement is intended to provide legal certainty and minimize potential disputes among the parties involved.
3. Registration of Outsourcing Agreements
Government Regulation No. 35 of 2021 generally regulates the registration mechanism for employment agreements in relation to PKWT arrangements, without providing specific technical provisions concerning outsourcing arrangements. Accordingly, the regulation remains general within the broader labor law framework.
On the other hand, Article 5 of Minister of Manpower Regulation No. 7 of 2026 specifically requires every outsourcing agreement to be registered with the local manpower office at the work location. Such registration must be completed no later than 3 (three) working days after the agreement is signed by the parties. This provision aims to ensure administrative certainty and facilitate government supervision.
4. Obligations of Outsourcing Companies
In Government Regulation No. 35 of 2021, the obligations of outsourcing companies are not consolidated under a single specific provision, but rather dispersed throughout general labor law provisions. In principle, companies are required to execute written employment agreements, fulfil workers’ rights such as wages and social security, and provide protection in the event of termination of employment in accordance with applicable laws and regulations.
Meanwhile, Article 6 of Minister of Manpower Regulation No. 7 of 2026 clarifies such obligations through a more systematic approach. Outsourcing companies are required to implement occupational health and safety (Keselamatan dan Kesehatan Kerja/“K3”), register outsourcing agreements, comply with business licensing requirements in the outsourcing sector, and conduct business activities within the validity period of the licenses granted.
5. Supervision
Under Article 60 of Government Regulation No. 35 of 2021, supervision is generally carried out by Labor Inspectors under the ministry responsible for manpower affairs or provincial manpower offices. This mechanism forms part of the general labor inspection system applicable to all aspects of employment relationships.
Under Article 7 of Minister of Manpower Regulation No. 7 of 2026, supervision likewise remains under the authority of Labor Inspectors. Accordingly, there is no fundamental change in the supervisory structure. However, the Ministerial Regulation emphasizes that supervision is more specifically focused on the actual implementation of outsourcing practices in the field. Therefore, the distinction lies not in the supervisory institution itself, but rather in the refinement of supervisory focus to ensure a more operational and effective enforcement mechanism.
6. Administrative Sanctions
Pursuant to Article 61 of Government Regulation No. 35 of 2021, administrative sanctions for violations of outsourcing provisions may take the form of written warnings, restrictions on business activities, temporary suspension of part or all production equipment, or suspension of business activities. Such sanctions are imposed progressively depending on the severity of the violation.
Meanwhile, Article 8 of Minister of Manpower Regulation No. 7 of 2026 simplifies the form of administrative sanctions into written warnings and gradual restrictions on business activities. This simplification reflects a more administrative and measurable approach in the enforcement of the regulation.
