Introduction
To implement the provisions of Article 64 paragraph (2), as referred to in Article 81 number 18 of Law Number 6 of 2023 on the Enactment of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation into Law, and to follow up on Constitutional Court Decision No. 168/PUU-XXI/2023 on the judicial review of the same law against the 1945 Constitution of the Republic of Indonesia, the Minister of Manpower (“MOM”) has issued MOM Regulation No. 7 of 2026 on Outsourcing Work (“MOM Regulation No. 7/2026”) which was promulgated and became effective on 30 April 2026.
MOM Regulation No. 7/2026 further clarifies the framework of outsourcing arrangements in accordance with the Constitutional Court’s ruling. Notably, it confirms that outsourced employees may only perform work that falls within the type and scope of work expressly stipulated in a written outsourcing agreement. In addition, the regulation reaffirms the MOM’s authority to determine the categories of work eligible for outsourcing, thereby enhancing legal certainty and clearer guidance for outsourcing practices in Indonesia.
Key Takeaways
Limitations on Outsourced Work
A company may delegate part of the performance of its work (“User Company”) to an outsourcing company pursuant to a written outsourcing agreement. However, the scope of work that may be outsourced is limited to the following supporting activities:
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Cleaning services;
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Catering services;
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Security services;
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Provision of drivers and transportation for workers;
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Operational support services; and
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Supporting work in the mining, oil and gas, and electricity sectors.
The above list encompasses a broader scope of activities compared to those permitted under the previous regulation, namely MOM Regulation No. 19 of 2012 on Requirements for Delegating Part of Work to Another Company, which has since been revoked. At the same time, MOM Regulation No. 7/2026 leaves room for broader interpretation, particularly in relation to “operational support services,” as the regulation does not provide clear parameters or criteria for determining the activities that fall within this category. This ambiguity may give rise to various compliance risks, as failure to adhere to the prescribed limitations may result in the imposition of administrative sanctions as further elaborated below.
Mandatory Contents of Outsourcing Agreements
Under MOM Regulation No. 7/2026, an outsourcing agreement must contain, at a minimum, the following:
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A description of the outsourced work;
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The terms and conditions of the outsourcing arrangement;
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The location where the work will be performed;
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The number of outsourced workers;
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Protection and employment rights of outsourced workers, including wages, overtime pay, working hours and rest periods, annual leave, occupational health and safety, social security, religious holiday allowance (THR), and termination entitlements; and
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The respective rights and obligations of the outsourcing company and the User Company.
In relation to employee entitlements, the User Company is responsible for ensuring that the outsourcing company provides outsourced workers with protection and employment rights in accordance with the prevailing laws and regulations. Accordingly, while such entitlements are to be provided by the outsourcing company, their fulfillment remains subject to the oversight and responsibility of the User Company.
Recordation Requirement
An outsourcing company is required to submit the outsourcing agreement to the relevant manpower office having jurisdiction over the location where the work is performed no later than 3 working days after its execution. Upon receipt of the submission, the manpower office will issue proof of recordation.
Failure to comply with the restrictions on outsourceable work or the mandatory requirements applicable to outsourcing agreements may result in the relevant manpower office suspending the issuance of proof of recordation.
Administrative Sanctions
A User Company may be subject to administrative sanctions imposed by the competent authority responsible for issuing business licenses, based on the recommendation of the labor inspector, in the event of any violation of the limitations on outsourced work. Such sanctions may include written warnings and the gradual imposition of limitations on business activities. These limitations may take the form of:
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limitation of the production capacity of goods and/or services for a certain period of time; and/or
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postponing the grant of business licenses in one or several locations for a company that has projects in multiple locations.
Given that outsourcing agreements are now required to be registered with the relevant manpower office, the risk of sanctions for non-compliance has increased. This is because the MOM has the authority to review and examine the submitted agreements and supporting documentation as part of the recordation process.
Transitional Provisions
Existing outsourcing agreements will remain valid until their respective expiry dates. However, User Company and outsourcing company must adjust the types and fields of outsourced work to comply with the MOM Regulation No. 7/2026 no later than two years from its enactment, i.e., by 30 April 2028.
Conclusion
In light of the framework under MOM Regulation No. 7/2026, User Companies and outsourcing companies should undertake a comprehensive review of all existing outsourcing arrangements to ensure that the relevant outsourced activities fall within the permitted scope of supporting services. Where any outsourced functions fall outside the permissible categories, User Companies should consider either bringing those functions in-house or restructuring the arrangements to achieve compliance with the regulation.
In addition, User Companies and outsourcing companies should ensure that all new outsourcing agreements are drafted and implemented in full compliance with the requirements of MOM Regulation No. 7/2026 from the outset. While existing agreements may remain valid until their respective expiry dates, the parties must ensure continued compliance with the applicable transitional and substantive requirements, including the obligation to align the outsourced work with the regulation by no later than 30 April 2028.
This newsletter is given as general information for reference purposes only and therefore does not constitute our firm’s legal advice. Any opinion stated in this newsletter is a personal view of the author(s) and not our firm’s official view. Given the nature of this newsletter as general information, statutory provisions and source citations may have been intentionally omitted. For any specific matter or legal issue, please do not rely on this newsletter but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.
