New regulations on contract or outsourcing labor, issued just one day before International Workers’ Day, are raising significant concerns among labor associations and academics regarding fairness, utilization, and worker protection.
The Manpower Minister Regulation Number 7 of 2026 concerning Outsourced Work (Permenaker 7/2026) was formulated as a derivative rule of Law Number 6 of 2023 concerning Job Creation (the Omnibus Law) and as a follow-up to Constitutional Court Decision Number 168/PUU-XXI/2023. These legislative actions aim to provide a clearer framework for the complex landscape of outsourced employment in Indonesia.
Article 3 paragraph 2e of Permenaker 7/2026 stipulates that outsourced work is restricted to six specific sectors. These include: cleaning services; food provision for workers/laborers; security personnel (security/satuan pengamanan); supporting services in mining, oil, gas, and electricity; transportation services; and operational support services. While most categories appear straightforward, one particular type of work has emerged as a point of contention.
The term “operational support services” is sparking widespread controversy due to its broad and ambiguous nature. Timboel Siregar, Secretary-General of the All-Indonesian Workers Organization (OPSI), voiced his apprehension, stating, “This article creates a new loophole, potentially opening up more types of jobs to be outsourced.” He further emphasized that Permenaker 7/2026 should ideally provide legal certainty, justice, and worker empowerment, rather than fostering ambiguity in labor protection.
Nabiyla Risfa Izzati, a labor law lecturer from Gadjah Mada University’s Faculty of Law, echoed this concern. “The ‘operational support services’ point can indeed become a loophole to allow a wider range of jobs to be outsourced,” Nabiyla remarked. She explained that this term seems to derive from the “core” and “non-core” work logic prevalent in regulations predating the Omnibus Law. However, the crucial issue is that “operational support services” does not refer to specific job types, which could lead to almost any service being classified as merely supportive. This ambiguity, she noted, often results in multiple interpretations, leaving it to individual company policies, which are difficult for workers to challenge.
From an employer’s perspective, Bob Azam, Head of Manpower Sector at the Indonesian Employers’ Association (APINDO), affirmed that outsourced labor is a widely adopted scheme to meet operational demands. He highlighted that many fluctuating, project-based, or specialized supporting functions within companies—such as helpers, IT support, logistics, maintenance, project administration, and other technical services—are often handled by outsourced personnel. Azam underscored the importance of ensuring that policy changes do not diminish job opportunities or lead to increased informality, thus maintaining sustainable worker protection.
Responding to the concerns, Minister of Manpower Yassierli stated that the regulation represents a concrete government step to ensure fairer outsourcing practices and provide clear protection for workers. Yassierli clarified in a written statement, “This Permenaker is a follow-up to Constitutional Court Decision Number 168/PUU-XXI/2023, which mandated limitations on outsourced work. The policy aims to provide legal certainty, strengthen worker rights protection, and maintain business continuity.”
Hoping for stable salary and certainty of fate
Amidst this regulatory debate, the experiences of outsourced workers offer a critical real-world perspective. Tika, a 26-year-old outsourced worker from Yogyakarta, sees potential for greater protection and clearer job roles in the new restrictions on outsourced work types. She expressed hope for future regulations that could offer long-term opportunities for outsourced workers, stating, “So, it’s not just project-based. But there are also opportunities for further development.”
For the past three months, Tika has been working on a Know Your Customer/Know Your Business (KYC/KYB) verification project for a digital wallet company. Her responsibilities include checking identities, validating documents, and entering data according to established procedures. Her payment is data-based; each completed data, or “ticket,” is valued at Rp230. On an average day, she processes 250-300 tickets, earning approximately Rp62,500 to Rp69,000. Her monthly income, accumulated, ranges from Rp1.37 million to Rp1.51 million. Tika works eight hours a day with one hour break and has two days off per week. Her current contract is for three months, and although she and her colleagues were told they passed probation and received ID cards, no information has been provided regarding contract extensions or permanent employee status. “We’ve asked the leader (about becoming permanent employees), but there’s no definite answer yet. We want at least a basic salary, but haven’t received a response,” she shared, also noting that she does not receive health or work safety insurance like BPJS.
Tika’s journey as an outsourced worker through various vendors began in 2025, primarily on a project-by-project basis. She once worked for six months at an e-commerce platform with a fixed salary and BPJS coverage, and also served as a field officer collecting data for a government agency. Before entering the outsourcing sector, she worked at a stationery store while studying, then moved to a garment factory where her pay depended on the amount of fabric processed. Due to financial constraints, she couldn’t complete her college education, but with a high school diploma, she continues to seek employment. Outsourcing has been a viable option for her, yet she yearns for stability and protection to ensure the continuity of her work.
Similarly, Rizal, an outsourced data analyst from Jakarta, recounted his experience at a food company. Despite his outsourced status, he received a salary above the regional minimum wage (UMR) and benefits. However, his one-year contract was not extended. “Fortunately, I’ve found another job. It was supposed to be extended for only four months, but there was a change in the company’s cooperation with this client,” Rizal explained. During his year at the company, he observed that out of approximately 30 people in his unit, only three were permanent employees; the rest were contract or outsourced workers. This was particularly evident among customer service staff, some of whom had worked for over five years without being made permanent. “So, they were white-listed for five years. Then extended again, white-listed again. Even though we received compensation, there were always ‘games’ played to avoid making us permanent employees,” Rizal revealed. He believes many workers endure these conditions for extended periods due to fear of unemployment. Furthermore, strict rules applied, allowing no tardiness. “Once during a heavy rainstorm, the train had issues, and it was hard to find ride-hailing services. Many were late. People who should have started at 8 AM, but arrived at 8:30 AM, were all scolded,” he recalled. The consequence of tardiness was not a salary cut, but forfeiture of their bonus, which was a significant income component for contract and outsourced workers, typically around 1/20th of their monthly salary. “If attendance drops below 99%, the monthly bonus is forfeited. This includes not being late, not taking sick leave without permission, and not taking annual leave,” he stated.
How is outsourcing worker protection structured?
The experiences of Tika and Rizal represent just a glimpse into the challenges faced by outsourced workers, who often choose this path amidst job scarcity and frequent layoffs driven by efficiency goals. Timboel Siregar of OPSI highlighted the increasing pressure on outsourced workers due to their individual economic needs. “Typically, outsourced workers are faced with the choice of extending their Fixed-Term Employment Agreement (PKWT) or receiving PKWT compensation. Generally, workers choose to extend the PKWT without demanding their right to compensation,” Timboel explained. This situation persists despite the existence of the 2020 Omnibus Law and Government Regulation Number 35 of 2021, which aimed to regulate PKWT, outsourcing, working hours, rest periods, and termination of employment, making all types of work potentially outsourceable.
Timboel further elaborated on the prevalent violations of worker rights within the outsourcing system. These include wages paid below the minimum wage, overtime not compensated according to regulations, and the absence of PKWT compensation upon contract expiration. Additionally, while workers are often registered for Work Accident Insurance and Death Benefit, critical components like Pension Insurance and Job Loss Security (JKP) are frequently omitted. Not all outsourced workers are registered for or receive JKP.
Data from the Ministry of Manpower for January-March 2026 indicates that 8,448 individuals were terminated from their employment. The highest number, 1,721 people, was in West Java. It is important to note that the actual number of laid-off workers could be higher, as this data only accounts for those classified as participants in the JKP program. Furthermore, according to Central Statistics Agency (BPS) data, outsourced workers constituted 34% of the formal workforce in 2023, totaling 55.27 million people, suggesting over 16 million outsourced laborers. This figure has likely increased in 2024 and is projected to continue rising through 2025 and beyond.
Nabiyla Risfa Izzati of UGM noted that the new regulation does not explicitly contain articles governing layoff protection specifically for outsourced workers. Instead, it offers general provisions for normative protection, which could be interpreted to include layoff protection. However, she pointed out a significant complication: the responsibility for fulfilling normative rights, including those related to layoffs, falls upon the outsourcing company, not the user company. “This is where it gets tricky, because when we talk about layoffs that might occur for outsourcing workers, it actually usually depends on the user company,” Nabiyla explained. She added that while “on paper there appears to be normative protection for outsourcing workers, in reality, it will be very difficult to implement, especially regarding layoff protection.”
The broader issue with this ministerial regulation, according to Nabiyla, is not solely about the regulation itself, but about the practical fulfillment of normative rights. “Because, as in the context of layoffs, for example, all the day-to-day work protection for outsourcing workers is carried out at the user company. Meanwhile, the legally obligated party to guarantee their normative rights is the outsourcing company,” Nabiyla elaborated. This creates a legal gap, making it difficult for workers to demand their normative rights from the outsourcing company, as “they don’t even work daily for that outsourcing company.” Conversely, outsourced workers have no legal basis to demand normative rights from the company where they perform their daily work, as they lack an employment relationship with that entity. “This then becomes a paradox that constantly surrounds outsourcing workers, which I believe is not that simple to resolve with rules on paper,” Nabiyla concluded.
Despite these criticisms, Nabiyla acknowledged that the new regulation offers some improvements over previous ones. A notable positive aspect is the requirement for user companies to monitor the implementation of normative protection for outsourced workers. “The hope seems to be that this can indirectly provide a moral responsibility for the user company to continue ensuring that its outsourcing workers receive adequate normative protection,” she stated. However, a key weakness is the absence of sufficiently strict consequences for companies that violate the rules by utilizing outsourcing beyond the specified categories. “There are only sanctions, maximum administrative sanctions… Will this be enforced after industrial relations disputes, or is there a reporting mechanism, or what?” Nabiyla questioned.
Government and employer response
Bob Azam of APINDO highlighted that the outsourcing ecosystem encompasses not only user companies but also thousands of service providers, including small and medium-sized enterprises across various regions. Given this multi-stakeholder structure, policies in this sector profoundly affect equitable business opportunities and the sustainability of small-scale businesses. “Therefore, any policy change in this sector needs to be undertaken cautiously and based on comprehensive analysis, involving all stakeholders within a tripartite dialogue framework, considering its wide-ranging impact on various aspects of employment and business activities,” Bob asserted. He added that APINDO plans to thoroughly review and assess the impact of these policy changes on the business world, particularly concerning the new regulations that limit outsourced labor services to six specific fields. Furthermore, he emphasized that certain considerations must be addressed during implementation to ensure alignment between regulations and on-the-ground practices, especially as outsourcing has evolved to span various sectors and functions, potentially posing operational challenges during its enforcement.
Separately, Manpower Minister Yassierli reiterated that user companies engaging outsourced labor must establish a written agreement. This agreement must detail, at minimum, the type of outsourced work, duration, work location, number of workers, labor protection provisions, and the rights and obligations of all parties involved. Additionally, outsourcing companies are mandated to fulfill all worker rights in accordance with prevailing laws and regulations. This includes provisions related to wages, overtime pay, working and rest hours, annual leave, occupational safety and health (K3), social security for health and employment, religious holiday allowances, and termination of employment rights. The Permenaker also outlines sanctions for both user companies and outsourcing companies that fail to comply with the stipulated regulations.
Summary
The new Permenaker 7/2026 on outsourcing aims to provide a clearer framework but faces significant criticism for potential loopholes. While it restricts outsourced work to six specific sectors, the broad and ambiguous term “operational support services” is feared by labor associations and academics to allow more jobs to be outsourced, potentially undermining worker protection and legal certainty.
Despite the Manpower Minister’s assurance that the regulation ensures fairer practices and stronger worker rights, real-world experiences show outsourced workers struggling with unstable contracts, sub-minimum wages, and lack of social security. Experts highlight a critical flaw: while user companies monitor daily work, the legal responsibility for normative rights, including layoff protection, falls on outsourcing companies, making effective implementation challenging for workers.