Regulation of the Minister of Manpower Number 7 of 2026 Tightens Outsourcing Restrictions and Strengthens Worker Protections

Introduction

On April 30, 2026, the Ministry of Manpower (“MOM”) issued a Regulation of the Minister of Manpower Number 7 of 2026 on Outsourced Work ("MOM Regulation 7/2026"). MOM Regulation 7/2026 regulates the delegation of a portion of work to an outsourcing company (perusahaan alih daya), including establishing limits on types of work and the obligations of businesses to protect the rights of outsourced workers. MOM Regulation 7/2026 was issued to implement the provisions of Article 64 paragraph (2) within Article 81 number 18 of Law Number 6 of 2023 on Job Creation and to follow up on the Constitutional Court Decision Number 168/PUU-XXI/2023.

Key Provisions

Position of the Parties in an Outsourcing Agreement

Article 1 number 2 and number 3 of MOM Regulation 7/2026 stipulate the parties in the implementation of outsourcing. An Employer Company (Perusahaan Pemberi Pekerjaan) is a company that delegates a portion of the implementation of its work to an Outsourcing Company. Meanwhile, an Outsourcing Company is a business entity in the form of a legal entity (badan usaha berbentuk badan hukum) that meets the requirements to carry out certain work based on an agreement with the Employer Company. Under this provision, an outsourcing service provider must take the form of a legal entity and cannot be operated by individuals or business entities that are not legal entities.

Limitations on Types and Sectors of Outsourced Work

MOM Regulation 7/2026 regulates the types and sectors of work that can be outsourced. The delegation of work implementation is conducted through a written Outsourcing Agreement as set forth in Article 2. The implementation of outsourcing is carried out in the form of providing worker/labor services, and is limited to support activities as stipulated in Article 3 paragraph (2), which include:

1. Cleaning services;

2. Provision of food and beverages;

3. Security;

4. Provision of drivers and worker/labor transportation;

5. Operational support services; and

6. Support work in the mining, oil, gas, and electricity sectors.

Mandatory Content in Agreements and Worker Protection Responsibilities

An Outsourcing Agreement must be made in writing and shall at least contain the following as stipulated in Article 4 paragraph (1):

1. The work outsourced to the Outsourcing Company;

2. The term of the Outsourcing Agreement;

3. The location of the work implementation;

4. The number of outsourced workers/laborers;

5. The rights and obligations of the Outsourcing Company and the Company delegating a portion of the work implementation; and

6. The protection and rights of outsourced workers/laborers.

The protection and rights of outsourced workers/laborers shall at least include:

1. Wages;

2. Overtime wages;

3. Working hours and rest periods;

4. Annual leave;

5. Occupational safety and health (OSH) rights;

6. Social security;

7. Religious holiday allowance; and

8. Rights upon the expiration of the employment relationship or termination of employment.

Fulfilling these protections and rights is the responsibility of the Outsourcing Company, while the Employer Company ensures their implementation complies with the provisions of laws and regulations as set forth in Article 4 paragraph (2) and paragraph (3).

Procedures and Deadlines for the Registration of Outsourcing Agreements

The Outsourcing Company must possess proof of registration of the Outsourcing Agreement and submit a registration application to the regency/city Manpower Office (Dinas Ketenagakerjaan) at the work implementation location no later than 3 (three) working days after the Outsourcing Agreement is signed by the parties, attaching the Outsourcing Agreement document. The regency/city Manpower Office may suspend the issuance of the registration proof if the Outsourcing Agreement fails to meet the provisions regarding the types and sectors of support work or the minimum content of the Outsourcing Agreement (which includes worker protection and rights), and shall issue the registration proof once these provisions have been met. The Head of the regency/city Manpower Office subsequently submits a report on the registration of Outsourcing Agreements to the Minister of Manpower every 3 (three) months, with a copy to the provincial Manpower Office, as stipulated in Article 5.

Operational Obligations of Outsourcing Companies as License Holders

The Outsourcing Company, as the holder of an outsourcing business license, is required to fulfill the following obligations as set forth in Article 6:

1. Implement occupational safety, health, and environmental standards;

2. Register the Outsourcing Agreement with the regency/city Manpower Office; and

3. Commence business activities no later than 1 (one) year after the business license is issued.

Manpower Supervision Mechanism

The supervision of the implementation of MOM Regulation 7/2026 is conducted by the Labor Inspector in accordance with the provisions of laws and regulations as stipulated in Article 7.

Administrative Sanctions for Employer Companies and Outsourcing Companies

Employer Companies that violate the provisions regarding the types and sectors of outsourced work are subject to progressive administrative sanctions as stipulated in Article 8 paragraph (1) and paragraph (2), in the form of:

1. Written warnings; and

2. Business activity restrictions.

Business activity restrictions include, as set forth in Article 8 paragraph (3):

1. Restriction on the production capacity of goods and/or services for a certain period; and/or

2. Postponement of the granting of business licenses in one or more locations for Companies with projects in multiple locations.

The imposition of these sanctions is executed by the agency authorized to issue licenses based on the recommendation of the Labor Inspector as stipulated in Article 8 paragraph (4). Outsourcing Companies that fail to meet operational obligations are subject to administrative sanctions in accordance with the provisions of laws and regulations on risk-based business licensing (perizinan berusaha berbasis risiko) as set forth in Article 9.

Transitional Provisions

Existing Outsourcing Agreements remain valid until the expiration of the Outsourcing Agreement's term as stipulated in Article 10 letter a. Outsourcing Companies and Employer Companies are required to adjust the types and sectors of outsourced work no later than 2 (two) years from the date of promulgation of MOM Regulation 7/2026, namely April 30, 2026, as set forth in Article 10 letter b.

Closing

MOM Regulation 7/2026 regulates the delegation of a portion of work to an outsourcing company by requiring the service provider to take the form of a legal entity and limiting outsourced work to support activities encompassing cleaning services, provision of food and beverages, security, provision of drivers and worker/labor transportation, operational support services, as well as support work in the mining, oil, gas, and electricity sectors, while also determining that the implementation of outsourcing is conducted in the form of providing worker/labor services through a written Outsourcing Agreement that must at least contain the scope of work, term, location, number of workers, and the protection and rights of workers. These protections and rights include, among others, wages, social security, occupational safety and health, working hours and rest periods, leave, and rights upon termination of employment, with the responsibility for fulfillment resting on the Outsourcing Company and the obligation of the Employer Company to ensure the implementation of such protections and rights. The Outsourcing Agreement must be registered with the regency/city Manpower Office no later than 3 (three) working days after the Outsourcing Agreement is signed by the parties, with the possibility of suspension of registration if it fails to meet the requirements for the agreement content and the types of support work, and there is a periodic reporting obligation to the Minister of Manpower, while the Outsourcing Company must also fulfill operational obligations as a business license holder. Supervision is conducted by Labor Inspectors, and violations of work limits or operational obligations may be subject to administrative sanctions in the form of written warnings, business activity restrictions, or risk-based licensing sanctions. Existing Outsourcing Agreements remain valid until the expiration of the Outsourcing Agreement's term, with an obligation to adjust the types and sectors of outsourced work no later than 2 (two) years from the date of promulgation of MOM Regulation 7/2026, namely April 30, 2026.