Outsourcing in Indonesia: MoM Regulation 7 of 2026 brings back pre-Omnibus Law regime; watch out for the forthcoming Manpower Protection Law 

Introduction

The Bill on Manpower Protection

Another significant reform of Indonesia's employment regulatory landscape is imminent. On 6 October 2026, the House of Representatives (Dewan Perwakilan Rakyat) approved the Bill on Manpower Protection for enactment (the “Bill”). The Bill will become law once it is signed by the President (or otherwise a 30 day period has lapsed as of 6 October 2026) and promulgated in the State Gazette. According to a press release by the Minister of Manpower, the Bill seeks to balance the protection of workers’ fundamental rights with the sustainability of businesses. As at the date of this article, the final text of the Bill is not publicly available. Our observations on the Bill in this article are therefore preliminary and remain subject to confirmation once the signed and promulgated text is released. We will issue a follow-up article discussing the provisions of the Manpower Protection Law once it is promulgated.

Outsourcing in Indonesia

Outsourcing has long been an integral part of business operations in Indonesia. The Minister of Manpower has issued Minister of Manpower Regulation No. 7 of 2026 on Outsourced Work ("MoM 7/2026") in response to Constitutional Court Decision No. 168/PUU-XXI/2023, which called for clearer limits on outsourced work and stronger protection for outsourced workers. MoM 7/2026 is currently the primary instrument governing outsourcing in Indonesia.

MoM 7/2026 reintroduces a closed list of permitted outsourcing categories (similar to the position before the Omnibus Law¹), reinstates substantive worker protections, prescribes a deadline for registering outsourcing agreements, and introduces new administrative sanctions. Because MoM 7/2026 is a ministerial regulation, it ranks below the statute of law in the hierarchy of Indonesian legislation and may need to be revisited once the Bill is enacted.

The practical next steps under MoM 7/2026 are clear:

• User companies should map all outsourced activities against the six permitted categories, develop transition plans for non-compliant arrangements before 29 April 2028, update contracts and procurement processes to include mandatory worker-protection clauses, and retain evidence of pre-deployment registration.
• Outsourcing providers should confirm their KBLI classification and licences, register each agreement within three working days, maintain centralised records, and audit occupational safety, health, and environmental compliance.

Below, we discuss the regulatory requirements for outsourcing before the Omnibus Law, under the Omnibus Law, and following the issuance of MoM 7/2026, together with the sanctions regime and the anticipated impact of the Bill.

1. Outsourcing before Omnibus Law

Before the Omnibus Law, Articles 64–66 of Law No. 13 of 2003 on Manpower (the “Manpower Law”) recognised two distinct outsourcing models: (i) work contracting, under which a service provider performed a defined scope of work; and (ii) labour supply, under which a service provider placed its workers at a user company. Each model had its own legal relationship, licensing, supervision, and responsibility structure. Both models were designed to confine outsourcing to non-core supporting activities and to prevent the transfer of core business activities to third parties without adequate safeguards. Articles 64–66 of the Manpower Law were implemented by Minister of Manpower and Transmigration Regulation No. 19 of 2012 (“MoM 19/2012”), which limited labour-supply outsourcing to five categories: cleaning services; catering; security; mining and oil support services; and worker transportation.

Under the Omnibus Law, Articles 64 and 65 of the Manpower Law were deleted and Article 66 was substantially amended, and MoM 19/2012 consequently lost its statutory basis.

2. Outsourcing after Omnibus Law and GR 35/2021

The Omnibus Law and GR 35/2021² significantly liberalised outsourcing by removing the distinction between core and non-core activities and the closed list of categories. GR 35/2021 retained procedural safeguards, including written agreements, the service provider's responsibility for worker protection, the principle that workers’ rights continue if the provider changes, legal entity requirements, and business licensing. However, without substantive boundaries, outsourcing could extend to any activity regardless of its connection to a user company’s core operations, which created legal uncertainty.

These concerns led to the Constitutional Court Decision No. 168/PUU-XXI/2023, which held that unclear statutory limits created legal uncertainty inconsistent with constitutional guarantees and required the Minister of Manpower to define permissible outsourced work. MoM 7/2026 was the direct response, as discussed below.

3. Outsourcing after MoM 7/2026

MoM 7/2026 provides that outsourcing is to be implemented through a labour supply model limited to six permitted categories, namely: (i) cleaning services; (ii) food and beverage provision; (iii) security; (iv) driver and worker transportation; (v) operational support services; and (vi) supporting work in mining, oil and gas, and electricity. Arrangements structured as the contracting of a defined scope of work should be reviewed carefully to determine whether they fall within MoM 7/2026 or sit outside the outsourcing framework altogether.

Five of these categories broadly correspond to those under MoM 19/2012. MoM 7/2026 adds a sixth category, "operational support services", and broadens the energy-sector category to include gas and electricity alongside mining and oil. The current framework therefore has a somewhat wider, but still defined, scope than its pre-Omnibus Law predecessor. Since the term “operational support services” is potentially broad, user companies should not assume that an activity falls within it without careful analysis.

MoM 7/2026 requires that outsourcing agreements be made in writing and, at a minimum, set out the work scope, duration, location, number of workers, rights and obligations of the parties, and worker-protection clauses covering wages, overtime, working hours, leave, work health and safety, social security, religious holiday allowance, and termination.

Compliance is enforced through two mechanisms. First, outsourcing agreements must be registered with the local manpower agency within three working days of signing. Second, a co-responsibility structure applies: the service provider bears primary responsibility for worker protections, while the user company must ensure that those protections are actually delivered.

Under its transitional provisions, MoM 7/2026 preserves the validity of existing outsourcing arrangements until their contractual term expires. However, those arrangements must be brought into compliance with MoM 7/2026 within a two-year transition period ending on 29 April 2028. Which means any arrangements running beyond that date should be adjusted by 29 April 2028 at the latest. New arrangements entered into after MoM 7/2026 came into force must comply immediately. The Bill may introduce its own transitional provisions, which could interact with, or override, this timetable.

4. Outlook: Outsourcing under the forthcoming Manpower Protection Law

The House of Representative’s approval of the Bill marks the next stage of Indonesia’s outsourcing reform. Once enacted, the Manpower Protection Law will rank above MoM 7/2026 and GR 35/2021 in the hierarchy of legislation. As a result, any inconsistent provision of MoM 7/2026 may be superseded, and the Minister of Manpower may need to amend or reissue the regulation to align with the new law.

These observations are necessarily provisional and remain subject to the promulgated text of the Manpower Protection Law. In our view, MoM 7/2026 strikes a reasonable balance between worker protection and business interests, and it remains binding until amended or revoked. Companies should therefore continue their MoM 7/2026 compliance programmes rather than wait for the Bill, while building in flexibility to adjust once the final law and any implementing regulations are issued. We will address these points in our follow-up article.

5. Sanctions for non-compliance under MoM 7/2026

MoM 7/2026 sets out separate sanctions frameworks for user companies and service providers, reflecting their different roles. These sanctions may be supplemented or replaced by sanctions under the Manpower Protection Law once enacted.

Sanctions for the users

User companies that outsource work outside the six permitted categories face escalating administrative sanctions, beginning with a written warning. If the breach persists, the sanctions may escalate to a restriction of business activities, which may take the form of production-capacity limits or permit delays for multi-location operations. These sanctions shall be imposed by the competent licensing authority based on the recommendation of labour inspectors.

Sanctions for the service providers

Service providers that fail to (i) implement work health, safety, and environmental standards; (ii) register the outsourcing agreements; or (iii) commence operations within one year of licence issuance are subject to administrative sanctions under the risk-based licensing framework in GR 28/2025³.

Article 520 of GR 28/2025 provides the manpower-sector-specific sanctions in the form of written warnings; restriction or temporary suspension of business activities; business licence revocation; and/or administrative fines. These sanctions are not necessarily sequential; the applicable measure depends on the level of compliance reflected in supervisory findings, having regard to proportionality and fairness.

6. Conclusion

What user companies and outsourcing providers should do now

For user companies, the immediate priority is to map every existing outsourced activity against the six permitted categories and classify each arrangement as compliant, remediable, or non-compliant. For any arrangement outside the permitted categories or otherwise inconsistent with MoM 7/2026, the company should develop a structured transition plan, with clear milestones, and contingency measures. Long-term contracts that cannot be brought into compliance will need to be restructured or terminated rather than allowed to continue unchanged through the transition period. If termination is required, the company should carefully observe all relevant termination provisions, including notice periods, termination provisions, and other contractual requirements, to minimise the risk of claims or disputes. Companies should also update their contracting and onboarding processes so that every new outsourcing agreement contains the mandatory worker-protection clauses and ensure that evidence of the required registration is obtained and retained before workers are deployed.

For outsourcing providers, the first step is to confirm that each service line is supported by the correct KBLI classification and licence, and that those classifications and licences remain consistent with the six permitted categories. Providers should establish a central compliance process to register every outsourcing agreement with the local manpower agency within three working days after signing, retain evidence of registration before deployment, and maintain centralised, readily retrievable records of agreements, amendments, worker-protection terms, and submissions. They should also conduct regular audits of occupational safety, health, and environmental standards, document corrective actions, and monitor compliance across their operations to reduce exposure to administrative sanctions.

Companies in regulated sectors, including oil and gas, mining, and electricity, should factor their procurement contracts and internal procurement procedures into the transition plan. Required tendering, approvals, vendor onboarding, and contract-amendment timelines may make the transition longer and more complex than a standard contract review. These companies should therefore begin planning immediately, including by identifying procurement dependencies and obtaining the necessary internal approvals.

All affected companies should monitor the promulgation of the Bill closely and review their compliance plans once the final text and any implementing regulations are available, particularly with regard to permitted categories, liability allocation, sanctions, and transitional deadlines. Early engagement with legal counsel is advisable to assess existing arrangements, design a compliant transition plan that can accommodate the forthcoming law, address contractual and procurement constraints, and implement the required protections and registration processes smoothly.

Authors: Ratih Nawangsari, Partner and Norman Ibnuaji, Senior Associate.