Introduction

In a significant development following the 2026 International Labour Day, the Indonesian government has officially issued Minister of Manpower Regulation number 7 of 2026 concerning Outsourcing (Pekerjaan Alih Daya) (Permenaker 7/2026), dated 30 April 2026 and published in State Gazette (Berita Negara) 2026 No. 281. This regulation serves as a direct response to the Constitutional Court Decision number 168/PUU-XXI/2023, which mandated a clearer and more restrictive framework for outsourcing practices in Indonesia.

Through this regulation, the Government aims to balance business flexibility with the protection of labour rights, effectively ending the era of unrestricted outsourcing. As of the latest update on the Ministry of Manpower’s JDIH portal, the regulation is officially listed as effective and in force.

Restoration of sectoral restrictions

One of the key changes introduced under Permenaker 7/2026 is the reintroduction of restrictions on the types of work that may be outsourced. Under the previous outsourcing regime pursuant to Government Regulation No. 35 of 2021 (PP 35/2021), outsourcing practices were considerably more flexible. Permenaker 7/2026 now expressly limits outsourcing to six specific supporting service categories. These include:

1. Cleaning services
2. Catering and food provision
3. Security services
4. Transportation services for drivers and workers
5. General operational support services
6. Specific supporting activities within the mining, oil and gas and electricity sectors.

As a consequence, companies are expected to ensure that core business activities directly related to production, business continuity or principal operational value chains are handled internally by their own employees rather than outsourced workers.
 

Stricter contractual and formal compliance

The regulation also strengthens formal compliance requirements governing the relationship between the user company and the outsourcing provider. Outsourcing arrangements must now be documented through a written outsourcing agreement, and outsourcing providers are required to be established as legal entities (badan hukum). This effectively eliminates the possibility of informal labour suppliers or non-corporate entities operating outsourcing services.
Importantly, the regulation introduces more detailed mandatory contractual contents. The outsourcing agreement between the user company and the outsourcing company must at minimum contain six principal elements, including the:

1. Type of work being outsourced
2. Duration of the outsourcing arrangement
3. Location where the work will be performed
4. Number of outsourced workers involved
5. Protection and rights of outsourced workers / labourers, at minimum covering wages, overtime pay, working hours and rest periods, annual leave, occupational health and safety rights, social security, religious holiday allowance (THR) and rights relating to the termination or end of employment
6. Rights and obligations of both the outsourcing company and the company assigning part of the work.

Furthermore, the protection and rights of outsourced workers / labourers as referred to in point (e) must be implemented at least in accordance with the prevailing laws and regulations.
In practice, this reflects the Government’s effort to ensure transparency and accountability within the relationship between the user company, outsourcing provider and outsourced workers.
 

Shift towards joint responsibility

Under the new framework, user companies can no longer remain detached from the welfare of outsourced staff. Permenaker 7/2026 emphasises ‘joint responsibility’, where the user company is tasked with monitoring and ensuring that their vendors comply with all statutory labour rights. This includes verifying that outsourced workers receive wages according to regional standards, holiday allowances (THR) and proper termination benefits. Failure to uphold these standards may lead to administrative sanctions, which range from written warnings to the suspension of business licences or production restrictions.
 

Transition and strategic outlook

To provide businesses with sufficient adjustment time, the Government has provided a transition period of up to two years from the regulation's effective date. During this period, companies are strongly encouraged to conduct internal workforce audits to identify outsourced positions that may no longer comply with the newly restricted categories. Businesses should also reassess whether certain outsourced personnel performing core operational functions need to be transitioned into direct employment arrangements to minimise future employment disputes and regulatory exposure.

Compared to the more flexible outsourcing framework previously recognised under PP 35/2021, Permenaker 7/2026 signals a shift towards a more restrictive and compliance-oriented outsourcing regime. Companies relying heavily on outsourced manpower should therefore reassess their existing outsourcing structures and vendor arrangements to ensure alignment with the new requirements.
 

How BDO can help

BDO Legal provides a full suite of advisory services to help your organisation navigate Indonesia’s complex and evolving regulatory landscape, including regulations relating to outsourcing services. Given the more restrictive nature of this new framework for outsourcing practices in Indonesia, our team can work with you to ensure your business remains compliant and strategically positioned. We act as your proactive partner, translating new requirements into practical solutions that safeguard your operations and support sustainable growth in the Indonesian market.