Indonesia: New Regulation on Outsourcing Work

On 30 April 2026, the Minister of Manpower (“MoM”) issued MoM Regulation No. 7 of 2026 on Outsourcing Work (“MoM Reg. 7/2026”), as a follow-up to Constitutional Court Decision No. 168/PUU-XXI/2023. In the decision, the Constitutional Court held that Article 64 (2) of Law No. 13 of 2003 on Manpower, as amended by Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation, which was subsequently stipulated as law by Law No. 6 of 2023 (“Manpower Law”), is conditionally unconstitutional and has no binding legal force unless interpreted to mean that the MoM shall determine the types and fields of work that may be outsourced as agreed in a written outsourcing agreement.

MoM Reg. 7/2026 was issued to provide certainty and strengthen the protection of outsourced workers by setting out further technical rules on outsourcing arrangements. The regulation establishes a more restrictive framework by explicitly limiting the types and fields of work that may be outsourced. Pursuant to Article 3 (2) of MoM Reg. 7/2026, the eligible outsourced work must constitute supporting activities, comprising:

1. cleaning services;
2. food and beverage provision;
3. security;
4. provision of drivers and workers’ transportation;
5. operational support services; and
6. supporting work in the mining, oil, gas, and electricity sectors.

The assignment of outsourced work must be based on a written agreement (“Outsourcing Agreement”). Pursuant to Article 4 (1) of MoM Reg. 7/2026, the Outsourcing Agreement must contain provisions on:

1. the outsourced work;
2. the term;
3. the work location;
4. the number of outsourced workers;
5. the rights and protection of outsourced workers, including wages, overtime pay, working hours and rest periods, annual leave, occupational safety and health rights, social security, religious holiday allowance, and rights upon expiry of the employment relationship or termination of employment; and
6. the rights and obligations of the company assigning the outsourced work and the outsourcing company.

Moreover, the Outsourcing Agreement shall subsequently be recorded by the outsourcing company with the relevant local Manpower Office (Dinas Tenaga Kerja) no later than 3 (three) working days after the Outsourcing Agreement is signed by the parties (Article 5 of MoM Reg. 7/2026).

A company assigning outsourced work that violates the permitted types and fields of outsourced work may be subject to administrative sanctions in the form of written warning and restrictions on business activities, including limitation of production capacity and/or postponement of the issuance of business licensing (Article 8 of MoM Reg. 7/2026).

Key Takeaways

MoM Reg. 7/2026 narrows Indonesia’s outsourcing regime by confining outsourced work to specified supporting activities and imposing clearer documentation and recordation requirements. Employers should review existing and future outsourcing arrangements to ensure that the outsourced work falls within the permitted categories and is supported by a compliant Outsourcing Agreement. Outsourcing companies should likewise strengthen worker protection, contractual documentation, and licensing compliance, as non-compliance may trigger administrative sanctions under the new framework.