Indonesia’s outsourcing landscape changed significantly in 2026. Through Minister of Manpower Regulation No. 7 of 2026 (Permenaker No. 7/2026), the government introduced more specific rules governing which activities can be outsourced, the responsibilities of outsourcing providers, and the protection of outsourced workers.
For companies operating in Indonesia, these changes affect more than vendor selection. They also require businesses to review existing workforce arrangements, employment contracts, operational responsibilities, and compliance procedures.
The implications are particularly important for foreign companies that rely on third-party providers to support their Indonesian operations. Businesses considering an Employer of Record (EOR) arrangement should also understand how the new outsourcing framework may affect their workforce strategy.
This guide explains the regulation, its practical impact on employers and outsourcing providers, and the considerations companies should address before choosing between traditional outsourcing and an EOR service.
Indonesia Outsourcing Regulations 2026: Key Business Changes
Indonesia’s Ministry of Manpower issued Permenaker No. 7 of 2026 concerning outsourced work on April 30, 2026. The regulation establishes a framework for outsourcing governance, permitted work categories, agreement registration, business requirements, and labor inspection.
The regulation was introduced to implement the relevant provisions of Law No. 6 of 2023 on Job Creation and follow up on Constitutional Court Decision No. 168/PUU-XXI/2023.
According to the Ministry’s official legal database, the regulation is in force.
Companies can review the official text of Permenaker No. 7 of 2026 to understand the requirements applicable to their operations.
One of the most important changes is that outsourcing is not an unrestricted option for every type of work. Businesses must assess whether the activities they intend to outsource fall within the categories permitted by the regulation.
The regulation also emphasizes written agreements, worker protections, and compliance responsibilities for both the company assigning the work and the outsourcing provider.
For employers, this means outsourcing arrangements should be reviewed based on their actual activities and contractual structure—not simply on whether a third-party provider is already in place.
Which Jobs Can Be Outsourced Under the 2026 Regulation?
Permenaker No. 7 of 2026 identifies six categories of work that can be outsourced.
These categories are:
- Cleaning services.
- Food and beverage provision.
- Security services.
- Driver services and transportation for workers.
- Operational support services.
- Supporting work in the mining, oil, gas, and electricity sectors.
The categories are described in the government’s official announcement on the new outsourcing restrictions.
Why the permitted categories matter
Companies should not assume that a position can be outsourced simply because outsourcing has been used for that role in the past.
For example, a manufacturer may use an external provider for cleaning and security. These activities fall within specifically identified categories. However, the company should separately examine any proposal to outsource production-related roles or other functions that do not clearly fit the permitted categories.
The same principle applies to service businesses. A company should assess whether a proposed arrangement qualifies as operational support or falls outside the scope of the permitted work categories.
The classification should be based on the actual duties performed, the business activity involved, and the applicable legal requirements.
Important: The six categories are the framework established by the regulation. Any reported government proposal to reduce the number of permitted categories should be distinguished from an amendment that has formally entered into force. Businesses should check the official legal database before making decisions based on a reported policy change.
How the New Regulation Affects Businesses and Outsourcing Providers
The new outsourcing framework creates several practical considerations for companies using external workforce providers.
1. Existing outsourcing arrangements need to be reviewed
Businesses should identify every outsourced activity and compare it with the categories permitted under Permenaker No. 7 of 2026.
The review should cover more than the service agreement. It should also consider the actual duties performed by outsourced workers, their work locations, the contractual parties, and how responsibilities are allocated in practice.
If an arrangement does not clearly fit the regulatory framework, the company should seek qualified Indonesian employment-law advice before renewing or restructuring the contract.
2. Outsourcing agreements need more detailed documentation
The regulation requires a written outsourcing agreement between the company assigning the work and the outsourcing provider.
The agreement must address key information, including:
- The work being outsourced.
- The duration of the agreement.
- The location where the work will be performed.
- The number of outsourced workers.
- Worker protections and employment rights.
- The rights and obligations of the parties.
Worker protections include matters such as wages, overtime pay, working hours and rest periods, annual leave, occupational health and safety, social security, religious holiday allowance, and rights associated with termination.
Companies should ensure that contractual language accurately reflects the arrangement being implemented. A contract that lists the required information but does not match actual working practices may still create compliance and employment-dispute risks.
3. Outsourcing providers face stronger compliance expectations
The regulation addresses the requirements applicable to outsourcing companies, including business licensing, agreement registration, and labor supervision.
Companies engaging providers should therefore assess more than price and service quality.
Before signing or renewing a contract, procurement and HR teams should confirm that the provider meets the applicable requirements, can document worker protections, and has clear processes for handling payroll, social security, employment records, and labor-related complaints.
A provider’s compliance failures may create operational disruption and legal exposure for the parties involved.
4. Worker protection must remain a priority
The new framework reinforces the importance of protecting outsourced workers’ rights.
Companies should confirm that the relevant responsibilities are properly assigned and implemented, including the payment of wages and overtime, social security administration, leave entitlements, occupational safety, and applicable termination rights.
The outsourcing provider’s contractual obligations should not be treated as a substitute for the company’s own review of whether the arrangement complies with Indonesian law.
For the official government explanation of the regulation’s objectives, see the Ministry of Manpower’s announcement on outsourcing restrictions and worker protection.
How Indonesia’s New Outsourcing Rules May Affect EOR Services
The new outsourcing regulation also raises important questions for businesses using an Employer of Record (EOR) service.
An EOR arrangement generally allows a company to engage employees through a local employing entity while the client manages the employees’ day-to-day work, subject to the agreed structure and applicable law. An EOR provider may support employment contracts, payroll, tax administration, social security registration, and HR administration.
However, an EOR arrangement should not automatically be treated as equivalent to traditional outsourcing—or as automatically exempt from outsourcing-related requirements.
Permenaker No. 7 of 2026 establishes rules for outsourced work, but it does not expressly establish a separate, comprehensive EOR category. Consequently, the legal treatment of a particular EOR arrangement should be assessed based on its actual structure, activities, contractual relationships, and the applicable employment rules.
1. How Indonesia Outsourcing Regulations 2026 Affect EOR Services
Businesses should understand who employs the worker, which entity enters into the employment contract, what services the provider delivers, and how the client directs the employee’s work.
The assessment should consider whether the arrangement is genuinely an employment and HR administration model or whether, in substance, it involves the provision of outsourced labor or services.
The commercial label used in a service agreement does not, by itself, determine its legal classification.
For this reason, companies should obtain appropriate legal advice when evaluating an EOR arrangement, particularly if the proposed model involves activities that may be restricted under the outsourcing framework.
2. Foreign companies should review the roles they intend to hire
Foreign businesses often need Indonesian employees for sales, marketing, customer support, technology, consulting, and other operational functions.
Before choosing an employment model, companies should assess the purpose of the role, the proposed employment relationship, their business activities in Indonesia, and any applicable licensing or establishment requirements.
The key question is not simply whether an EOR provider can administer payroll and employment documentation. It is whether the proposed arrangement is appropriate for the company’s circumstances and complies with the relevant Indonesian requirements.
3. EOR and outsourcing serve different business purposes
Traditional outsourcing generally involves assigning specified work or services to an external provider. An EOR arrangement is commonly designed to support employment through a local employing entity, with employment administration handled by the provider and day-to-day work managed by the client.
Although the models differ commercially, their legal classification depends on the facts and applicable regulations.
Businesses should therefore avoid assuming that changing a contract’s title from outsourcing to EOR will resolve a compliance issue.
4. Compliance documentation becomes more important
Companies considering EOR services should understand how employment contracts, payroll records, tax administration, social security, HR responsibilities, and termination procedures will be managed.
They should also clarify which responsibilities remain with the client and which are handled by the provider.
These steps can help businesses make informed decisions, identify potential risks early, and select a workforce arrangement that fits their operational needs.
For companies exploring this model, BigFish Global Consulting provides an Employer of Record service in Indonesia to support employment setup, payroll and tax administration, BPJS administration, and HR documentation.
The appropriate structure should be confirmed based on the company’s specific circumstances and the legal requirements applicable to the proposed arrangement.
Can Foreign Companies Still Use EOR to Hire Employees in Indonesia?
Foreign companies may consider EOR services when they need to employ workers in Indonesia without immediately establishing their own local entity. However, an EOR service should not be regarded as a universal solution for every hiring situation.
The new outsourcing regulation makes it especially important to distinguish between employment administration and the provision of outsourced work.
Before proceeding, a foreign company should consider the following questions:
- What business activities will the employee perform in Indonesia?
- Which entity will enter into the employment agreement?
- Will the provider act as the employing entity, deliver outsourced services, or perform another role?
- Does the proposed structure comply with applicable employment, licensing, tax, and social security requirements?
- Who will manage the employee’s day-to-day work, and how will employment responsibilities be allocated?
- Are any restrictions relevant to the company’s activities or the role being filled?
The answers may differ between companies, industries, and employment structures.
For example, a foreign technology company hiring an Indonesian employee to support its regional operations may have different considerations from a manufacturer outsourcing a production-related activity. Neither situation should be classified solely by looking at the job title or the provider’s marketing description.
A structured assessment helps companies determine whether an EOR arrangement is appropriate or whether another employment or service model should be considered.
Compliance Risks, Contract Requirements, and the 2028 Transition Deadline
Companies should review both their current arrangements and any planned changes to their workforce model.
Review existing contracts and work categories
Under the transitional provisions, existing agreements remain subject to the regulation’s transition rules. Existing types and fields of outsourced work must be adjusted to comply with the regulation no later than two years after its promulgation.
Because Permenaker No. 7 of 2026 was promulgated on April 30, 2026, the two-year adjustment deadline is April 30, 2028, subject to the precise application of the transitional provisions to the relevant arrangement.
The deadline should not be interpreted as permission to ignore requirements that already apply. Businesses should identify potential compliance issues early and plan any necessary adjustments well before the transition period ends.
Companies can verify the applicable provisions in the official regulation published by the Ministry of Manpower.
Understand potential enforcement consequences
The regulation provides for labor supervision and addresses compliance obligations for outsourcing providers and companies assigning work.
Non-compliance may expose the relevant parties to administrative action under the applicable rules. The consequences depend on the specific violation and the provisions that apply to the company or provider.
Businesses should not assume that using a third-party provider transfers every compliance risk away
