Limitation of Work Types and Statutory Outsourcing Agreement under the newly enacted Minister of Manpower Regulation No. 7 of 2026

New MoM Regulation No. 7/2026 limits outsourcing to 6 work types and mandates registration of outsourcing agreements.

Various aspects of the Manpower laws have undergone significant changes in recent years, particularly following the amendments to Law No. 13 of 2003 on Manpower through Law No. 6 of 2023 on Stipulation of Government Regulation In Lieu of Law No. 2 of 2022 on Job Creation As Law (“Manpower Law”).

Amendments of the Manpower Law were widely seen as strengthening the employers’ position in the realm of industrial relations. As a consequent, on 1 December 2023, several labor organizations filed a petition for judicial review of several articles in the Manpower Law which was subsequently decided through Constitutional Court Decision No. 168/PUU-XXI/2023 (“CC 168/2023”).

One of the issues raised in the judicial review is the provision surrounding outsourcing (alih daya). Ever since the amendment to the Manpower Law, outsourcing provisions were no longer considered to provide protection for workers, as the restrictions and types of work that can be outsourced are no longer regulated.

At last, CC 168/2023 granted the petition concerning the outsourcing provisions by mandating that the government should determine the types and fields of work that may be outsourced, which then resulted in the enactment of the Minister of Manpower Regulation No. 7 of 2026 on Outsourcing Work (“MoM 7/2026”) on 30 April 2026.

After years of regulatory vacuum, MoM 7/2026 finally regulates definitive and limited types of work which can be subject to outsourcing arrangements. MoM 7/2026 also establishes new administrative requirements, including mandatory registration of outsourcing agreements with local Manpower Offices.

Key Takeaways from MoM 7/2026

1. Limitation on Outsourceable Work Types

The Manpower Law initially stated that the government should state the types of work which are subject to outsourcing arrangements. However, the implementing regulation of the Manpower Law (i.e. Government Regulation No. 35 of 2021 on Fixed-Term Employment Agreements, Outsourcing, Working Hours and Rest Periods, and Termination of Employment) is silent about the types of work, which was deemed to have created a legal vacuum.

Article 3 of MoM 7/2026 now specifies the types of work which may be subject to outsourcing arrangements, which are classified as supporting activities (kegiatan penunjang) as follows:

a. Cleaning services; b. Supply of Food and beverage; c. Security services; d. Supply of drivers and transportation; e. Operational support services; and f. Supporting work in the mining, oil & gas, and electricity sectors.

Any outsourcing arrangement covering work outside the above closed list is now explicitly prohibited and subject to administrative sanctions ranging from written warning to restriction of business activities, as outlined in Article 8 of MoM 7/2026.

2. Statutory Registration of Outsourcing Agreements (Perjanjian Alih Daya)

As stipulated in Article 2 and Article 4 paragraph 1 of MoM 7/2026, outsourcing of works is carried out through the establishment of an Outsourcing Agreement, which contains at least the following:

a. The work outsourced to the Outsourcing Company; b. The term of the Outsourcing Agreement; c. The location where the work will be performed; d. The number of outsourced workers; e. Protection and rights of outsourced workers, at a minimum covering: wages, overtime pay, working hours and rest periods, annual leave, occupational safety and health, social security, religious holiday allowance, and end-of-employment or termination rights; and f. Rights and obligations of both the Outsourcing Company and the User Company.

It is mandatory for the Outsourcing Company to register the Outsourcing Agreement with the relevant local Manpower Office (Dinas Ketenagakerjaan) no later than 3 (three) working days after the Outsourcing Agreement has been established.

3. The User Company Responsibility for Ensuring Compliance

Although the Outsourcing Company remains primarily responsible for worker protection, wages, welfare, and working conditions, Article 4 paragraph 3 of MoM 7/2026 provides a new obligation for the User Company (Perusahaan Pemberi Pekerjaan) to ensure that the Outsourcing Company fulfils worker protections in accordance with statutory requirements, which indicates partial transfer of compliance burden to the User Company.

4. Transition period: 2 years to adjust existing outsourcing arrangements

Outsourcing Agreements already in effect as of 30 April 2026 shall remain valid until their expiry date. However, if the types and fields of outsourced work does not comply with the list under MoM 7/2026, the Outsourcing Agreements must be adjusted no later than 2 (two) years from the date of enactment of MoM 7/2026 (i.e., by 30 April 2028). Companies which are currently outsourcing any work outside the 6 (six) permitted categories as outlined in Article 3 of MoM 7/2026, shall use this transition period to restructure and adhere to the limitation set forth in MoM 7/2026.

What It Means For Your Company

With the enactment of MoM 7/2026, Companies should review and adjust the existing Outsourcing Agreement to accommodate the limitation of types of work in accordance with Article 3 of MoM 7/2026, if required. On the other hand, establishment of new Outsourcing Agreements shall be subject to the provisions as regulated in MoM 7/2026, ranging from detailing the types of work, regulating worker protection clauses (e.g. wages, overtime, working hours, annual leave, K3, social security, THR, termination entitlements) and registering the Outsourcing Agreement with the Manpower Office.

Batavia Alerts is a publication prepared by Batavia Advocatorum. It is intended only as a general information platform and not as legal advice binding your company’s legal or business decisions.