When a multinational retailer expanded into Surabaya, they faced staffing challenges during seasonal peaks. Instead of directly hiring hundreds of short-term workers, they turned to an outsourcing agency. However, mismanaging outsourcing rules in Indonesia can lead to costly disputes—something every employer should be cautious about.

What is Outsourcing (Alih Daya)?

Outsourcing in Indonesia allows companies to engage third-party agencies to supply workers for certain functions. Legally, outsourcing is regulated under Law No. 13/2003 on Manpower (as amended by the Job Creation Law) and Government Regulation (PP) No. 35/2021. Agencies must be officially licensed, and workers must receive proper contracts, social security, and rights equivalent to direct employees for the same role.

Scope of Outsourcing

Only certain jobs can be outsourced, typically supporting services (e.g., cleaning, security, catering, call centers, logistics). Core business functions cannot be outsourced. For instance, in the retailer’s case, warehouse logistics could be outsourced, but store managers could not.

Case Example: Dispute in Manufacturing

In 2017, a large manufacturing company in West Java faced strikes when outsourced workers claimed they were doing core production jobs illegally outsourced. The case reached the labor court, and the employer was ordered to absorb the workers as permanent staff. This highlights the importance of aligning outsourcing practices with the law.

Best Practices for Employers

• Partner only with licensed outsourcing agencies.
• Clearly define job scopes in the contract.
• Ensure agencies comply with BPJS social security and wage requirements.
• Communicate transparently with both agency workers and direct employees.

Conclusion

Outsourcing can be an efficient strategy for workforce flexibility, but employers must strictly follow Indonesian rules. By respecting the boundaries of outsourcing and ensuring fair treatment, companies can avoid disputes and maintain a stable workforce.

References

• Law No. 13 of 2003 on Manpower (as amended by Law No. 11/2020).
• Government Regulation (PP) No. 35 of 2021 on Fixed-Term Employment, Outsourcing, and Termination.
• Minister of Manpower Regulation No. 19 of 2012 on Requirements for Outsourcing.
• ILO (International Labour Organization) – Indonesia Country Reports on Outsourcing.
• The Jakarta Post, “Outsourcing Disputes in Manufacturing,” 2017.