Indonesia
Summary
Indonesia's Job Creation Law (Omnibus Law) has significantly reformed labor regulations, including those governing fixed-term contracts and outsourcing arrangements.
Key Considerations
Monitoring Strategy
To stay updated on changes to Indonesia's contingent workforce regulations, regularly monitor the Ministry of Manpower website for new regulations and implementing guidelines related to the Omnibus Law. Subscribe to alerts from industry associations such as the Indonesian Employers' Association (APINDO) and chambers of commerce. Legal updates from major Indonesian law firms specializing in employment law are also valuable sources of information on regulatory changes and implementation guidance.
What changed for outsourcing under Indonesia's Omnibus Law?
The old restriction limiting outsourcing to five categories of non-core work was removed. Under the Job Creation Law framework, businesses may outsource a broader range of functions, but outsourcing providers must be licensed legal entities and workers keep statutory protections.
How long can a fixed-term contract (PKWT) last in Indonesia?
Up to five years in total, including extensions, under the Job Creation Law regime. PKWT may only be used for work that is temporary in nature, and exceeding the limits or using PKWT for permanent work converts the arrangement into an indefinite contract (PKWTT).
What is the compensation payment for fixed-term workers in Indonesia?
A statutory end-of-contract payment. Employers must pay PKWT workers compensation proportional to service length when the contract ends or expires, on top of wages. This uang kompensasi obligation is frequently missed in contingent budgeting for Indonesia.
What happens to outsourced workers when the vendor changes in Indonesia?
Their protection continues. Indonesian rules require that outsourced workers' rights are safeguarded when work moves between outsourcing companies, including recognition of accrued entitlements where the same work continues. Transition clauses in vendor contracts should address this explicitly.
Do outsourcing companies need a licence in Indonesia?
Yes. Outsourcing providers must be Indonesian legal entities holding the required business licensing through the OSS system, and they are the legal employer of the outsourced workers, responsible for wages, social security (BPJS) enrolment, and severance obligations.