Indonesia’s outsourcing rules have changed—and the new requirements are not merely a proposal.

Permenaker No. 7 of 2026 on Outsourced Work was enacted and promulgated on 30 April 2026 and became effective on the same date. As of 24 August 2026, Indonesia’s Ministry of Manpower legal database continues to list the regulation as in force (“Berlaku”).

For multinational companies, PT PMA businesses, manufacturers, service companies, and investors employing outsourced personnel in Indonesia, the practical question is therefore no longer:

“Will Indonesia restrict outsourcing?”

It is:

“Does our current outsourcing structure comply with the rules already in force?”

Why Did Indonesia Change Its Outsourcing Rules?

The regulatory change follows Constitutional Court Decision No. 168/PUU-XXI/2023, issued on 31 October 2024.

In that decision, the Constitutional Court required Article 64(2) of the Manpower Law, as amended by the Job Creation Law, to be interpreted so that the Minister determines which parts of work may be outsourced according to the types and fields of outsourced work specified in a written outsourcing agreement.

Permenaker 7/2026 was subsequently issued as an implementation of that ruling.

The Ministry of Manpower stated that the regulation was intended to provide greater legal certainty, strengthen worker protection, and maintain business continuity.

This represents an important development from the broader outsourcing framework under Government Regulation No. 35 of 2021 (PP 35/2021).

PP 35/2021 continues to regulate matters including employment relationships between outsourcing companies and workers, worker protection, PKWT/PKWTT arrangements, and outsourcing company licensing.

Permenaker 7/2026 now adds a much clearer restriction on which types of manpower outsourcing may be used.

1. Outsourcing Is Now Limited to Specified Supporting Activities

This is likely the most important change for employers.

Article 3 of Permenaker 7/2026 states that the outsourced work covered by the regulation must constitute supporting activities.

The regulation identifies six categories:

1. Cleaning services
2. Food and beverage provision
3. Security services
4. Provision of drivers and employee transportation
5. Operational support services
6. Supporting work in mining, oil, gas, and electricity sectors

 

This matters because, under the post-Job Creation Law framework, employers had significantly broader room to use outsourcing arrangements.

Permenaker 7/2026 reintroduces a clear limitation based on the nature of the work.

Why foreign employers should pay attention

Companies should not assume that a position is eligible for outsourcing simply because:

• it has historically been outsourced;
• a manpower vendor offers the position;
• competitors use a similar staffing structure; or
• the employee is administratively employed by another company.

The actual function performed by the worker should be assessed against the permitted categories.

For example, foreign manufacturers using outsourced workers for production-line roles, technical functions, administration, finance, sales, engineering, or other business activities should review whether those positions can properly fall within one of the permitted categories.

Particular care may also be needed around the term “operational support services.” Permenaker 7/2026 lists this category but does not provide a detailed catalogue of every position that qualifies.

Companies should therefore avoid interpreting the category too broadly without assessing the actual job function.

2. Written Outsourcing Agreements Are Mandatory—and More Detailed

An outsourcing arrangement must be documented through a written Outsourcing Agreement (Perjanjian Alih Daya) between the company assigning the work and the outsourcing company.

Under Article 4, the agreement must contain at least:

• the work being outsourced;
• duration of the outsourcing agreement;
• work location;
• number of outsourced workers;
• protection and rights of outsourced workers; and
• rights and obligations of the outsourcing company and the company assigning the work.

The employee protection provisions must address at least:

• wages;
• overtime wages;
• working and rest periods;
• annual leave;
• occupational safety and health;
• social security;
• religious holiday allowance or THR; and
• rights arising from termination or the end of employment.

 

For employers, this means a basic vendor services agreement may no longer be sufficient if the arrangement is legally an outsourcing arrangement covered by Permenaker 7/2026.

3. The User Company Cannot Simply Shift All Responsibility to the Vendor

One of the provisions foreign companies should examine carefully is Article 4(3).

The outsourcing company remains responsible for fulfilling outsourced workers' employment rights.

However, the company assigning the work also has an explicit responsibility to ensure that the outsourcing company provides those protections and rights in accordance with Indonesian law.

This changes the practical risk assessment.

A clause stating that:

“All employment obligations are solely the responsibility of the manpower vendor”

may not, by itself, be enough from a compliance perspective.

Foreign employers should therefore conduct more active vendor monitoring.

That may include checking whether the vendor properly provides:

• statutory wages;
• overtime payments;
• BPJS participation;
• THR;
• annual leave;
• working-hour compliance;
• occupational health and safety protection; and
• termination-related entitlements.

In other words, vendor compliance is increasingly part of the user company's own compliance risk.

4. Outsourcing Agreements Must Be Recorded With the Local Manpower Office

The new regulation also introduces an important administrative requirement.

The outsourcing company must obtain evidence that the Outsourcing Agreement has been recorded.

The application must be submitted to the local manpower office (Dinas Ketenagakerjaan) where the work is performed no later than three working days after the agreement is signed.

The authority may delay issuance of the registration evidence where the agreement does not comply with the permitted job categories or mandatory contractual provisions.

For companies working with an outsourcing provider, therefore, vendor due diligence should not stop at obtaining a company profile or commercial proposal.

Employers should consider confirming that the vendor can provide:

• valid business licensing;
• the required outsourcing agreement;
• evidence of agreement registration; and
• supporting manpower-compliance documentation.

5. Outsourcing Providers Must Meet Licensing and Operational Requirements

Under Article 6, an outsourcing company must comply with obligations attached to its outsourcing business licence, including:

• implementing occupational safety, health, and environmental standards;
• registering its Outsourcing Agreements with the relevant manpower office; and
• commencing business activities no later than one year after its business licence is issued.

 

This creates another review point for foreign businesses.

Using an outsourcing vendor does not eliminate the need for vendor legal due diligence.

Before appointing or renewing an outsourcing provider, companies should verify whether its corporate documents, OSS/business licensing, manpower compliance, and operational scope are consistent with the services being provided.

6. The Employer Itself Can Face Administrative Sanctions

Another reason companies should not treat this as merely the vendor's responsibility is Article 8.

A company assigning work in violation of the permitted outsourcing categories under Article 3 may face administrative sanctions including:

• a written warning; and
• restriction of business activities.

Business restrictions may include:

• temporary restrictions on production capacity for goods and/or services; and/or
• postponement of business licensing at one or more locations for companies operating multiple projects.

Sanctions may be imposed by the authority responsible for business licensing based on recommendations from Manpower Inspectors.

For foreign investors, this means outsourcing compliance can potentially extend beyond an HR issue.

It can become a business licensing and operational risk.

Outsourcing companies that fail to comply with their obligations under Article 6 may also be subject to administrative sanctions under Indonesia's risk-based business licensing framework.

7. Existing Outsourcing Contracts Are Not Automatically Cancelled

The regulation includes an important transitional provision.

Outsourcing agreements already in existence when Permenaker 7/2026 became effective may remain valid until their contractual term expires.

At the same time, existing outsourced job types and fields must be adjusted to comply with the new regulation within two years from the date of promulgation.

Because Permenaker 7/2026 was promulgated on 30 April 2026, the outer adjustment deadline is effectively:

30 April 2028

This does not mean companies should wait until 2028 before reviewing their workforce.

For agreements signed, renewed, restructured, or replaced after the regulation came into force, companies should already be assessing compliance with the new framework.

The two-year period is better viewed as a maximum transition period for existing structures, rather than a reason to postpone compliance planning.

8. What About Existing PP 35/2021 Outsourcing Rules?

Permenaker 7/2026 does not operate in isolation.

PP 35/2021 remains in force and continues to regulate core outsourcing employment issues.

Among other things, PP 35/2021 provides that the employment relationship between an outsourcing company and its workers may be based on either:

• PKWT — fixed-term employment; or
• PKWTT — indefinite-term employment.

It also places responsibility for worker protection, wages, welfare, working conditions, and employment disputes on the outsourcing company.

Permenaker 7/2026 adds another layer to this framework, particularly around:

what work may be outsourced, what must appear in the outsourcing agreement, contract recordation, user-company responsibility, and sanctions.

9. Labour Inspection Is Also Becoming More Structured

The regulatory environment has continued to develop after Permenaker 7/2026.

In July 2026, the Ministry of Manpower also brought into force Permenaker No. 11 of 2026 on Labour Inspection Procedures, replacing earlier labour inspection procedural regulations.

Permenaker 7/2026 itself provides that compliance with outsourcing rules is supervised by Manpower Inspectors.

Taken together, companies should expect outsourcing documentation and actual working arrangements to be capable of regulatory review—not simply contractual review.

What Should Foreign Employers Review Now?

Foreign-invested companies should consider conducting an outsourcing compliance audit covering at least the following areas:

Key Question	Key Question
Outsourced positions	Does each position fall within a permitted supporting activity?
Actual job functions	Does the worker's day-to-day role match the contractual job description?
Outsourcing agreement	Does the contract contain all mandatory information required by Permenaker 7/2026?
Vendor licensing	Does the outsourcing provider hold appropriate and valid business licensing?
Agreement registration	Has the outsourcing agreement been properly recorded with the relevant manpower office?
Worker rights	Are wages, overtime, BPJS, THR, leave, working hours and other rights being fulfilled?
K3 compliance	Are occupational safety and health requirements properly implemented?
Existing contracts	When will current contracts expire, and when should restructuring begin?
Vendor monitoring	Can the company demonstrate that it has checked the vendor's employment compliance?
Renewals and new contracts	Will any upcoming renewal trigger the need to restructure the arrangement?

A Particular Risk for Manufacturers and Foreign Investors

For manufacturers, industrial companies and expanding foreign investors, outsourcing is often used to maintain workforce flexibility.

But workforce flexibility now needs to be balanced against job classification and employment compliance.

A company may therefore need to distinguish carefully between:

• outsourced supporting manpower;
• direct employees;
• project-based service providers;
• contractors delivering an independent service or output; and
• other workforce arrangements such as secondment, staff augmentation or EOR structures.

Permenaker 7/2026 specifically describes the covered outsourced work as the provision of worker/labour services.

Not every commercial service agreement should automatically be treated in exactly the same way, but changing a contract title does not remove the need to examine the substance of the arrangement.

If personnel are supplied to work inside the organisation, the structure should be reviewed based on the actual relationship, scope of work and applicable Indonesian employment regulations.

What Foreign Employers Should Do Before the Next Contract Renewal

The safest approach is not to wait until the transition deadline.

Companies using outsourced manpower should start by mapping:

vendor → agreement → outsourced position → actual job function → worker rights → licensing → registration.

Any mismatch should then be identified before renewing or expanding the arrangement.

Companies entering Indonesia for the first time should also incorporate outsourcing compliance into their workforce planning rather than treating it as an issue to resolve after recruitment begins.

The cost of correcting an outsourcing structure after workers are already deployed can be considerably higher than designing a compliant workforce structure from the beginning.

The Bottom Line

Indonesia has not abolished outsourcing.

But the government has significantly narrowed and formalised how manpower outsourcing may be used.

Permenaker No. 7 of 2026 has been effective since 30 April 2026, and, as of 24 August 2026, the Ministry of Manpower's official legal database continues to list it as an active regulation.

For foreign employers, the main compliance priorities are clear:

review which positions are outsourced, verify whether those positions fall within the permitted categories, update outsourcing agreements, confirm vendor licensing and registration, and verify that workers' statutory rights are actually being fulfilled.

The existence of a two-year transition period should not be mistaken for a two-year compliance holiday.

Businesses that begin reviewing their outsourcing structures now will be in a much stronger position when contracts expire, operations expand, vendors change, or labour inspections occur.

Need Help Reviewing Your Workforce Structure in Indonesia?

If your company currently uses outsourced workers—or is planning to build a workforce in Indonesia—Accura can help you review your employment and outsourcing structure from a compliance perspective.

We can support foreign investors and companies with:

• outsourcing and workforce structure reviews;
• employment compliance;
• company and business licensing review;
• HR and payroll compliance;
• vendor documentation review; and
• ongoing corporate compliance support in Indonesia.

Planning to hire, outsource, or restructure your workforce in Indonesia?

Contact Accura before your next outsourcing agreement or workforce expansion.

Visit: accura.co.id

Build your Indonesian operations with the right structure from the beginning.