Indonesia

In early August 2019, the Indonesian Minister of Manpower amended Minister of Manpower and Transmigration Regulation Number 19 of 2012 on The Requirements for Outsourcing (“MOMR 19/2012”) by issuing Minister of Manpower Regulation Number 11 of 2019 on the Second Amendment to Minister of Manpower and Transmigration Regulation Number 19 of 2012 on The Requirements for Outsourcing (“MOMR 11/2019”). MOMR 11/2019 aims to simplify manpower outsourcing requirements to adjust to current needs.

Law Number 13 of 2003 on Manpower (“Manpower Law”) and MOMR 19/2012 recognize 2 types of outsourcing: (i) Business Activities Outsourcing and (ii) Manpower Outsourcing. MOMR 11/2019 only changes the requirements for Manpower Outsourcing. It does not amend those for Business Activities Outsourcing. Therefore, we do not discuss Business Activities Outsourcing below, but only focus on Manpower Outsourcing.

Under Article 66 (1) of the Manpower Law, in principle, the work outsourced in Manpower Outsourcing should be considered ‘supplemental work’, not related to the production process of the user (ie. its core business). MOMR 19/2012 only allowed Manpower Outsourcing for the following services:

  1. cleaning services;
  2. worker catering services;
  3. security guard services ;
  4. mining and oil industry support services; and
  5. employee transportation services.

The main highlight of MOMR 11/2019 is that the administration of the approval required from the Manpower Office is now performed online and transferred through the Online Single Submission (“OSS”) system. The OSS system is a web-based business licensing system introduced and operated to try to reduce administrative red tape and make obtaining business permits in Indonesia faster and more efficient.

Highlights

The licensing requirements for an Outsourcing Company (“Provider”) have now been adjusted to integrate them into the OSS system. In addition, an Outsourcing Business License issued through the OSS system now covers the whole nation.

Registration of Outsourcing Agreements

Previously, MOMR 19/2012 required Manpower Outsourcing Agreements to be registered with the Manpower Office within 30 days of the date on which the agreement was signed. This time limit has been eliminated by MOMR 11/2019. As a consequence, there is now no specific time limit for registering a Manpower Outsourcing Agreement with the Manpower Office, although the registration obligation still remains. MOMR 11/2019 also simplifies the requirements for registering a Manpower Outsourcing Agreement as it only requires the following documents to be submitted: (i) the application to the Manpower Office; and (ii) the Manpower Outsourcing Business License.

The timing of the issuance of the Registration Certificate has been reduced to 3 business days as of completion of the required documents while previously, it was 7 business days.

Sanctions

Under MOMR 19/2012, the Provincial Manpower Office would be able to revoke the license of a Provider if it performs outsourcing work without registering the Manpower Outsourcing Agreement. This sanction has been amended under MOMR 11/2019; if a Provider performs Outsourcing Work without registering the Manpower Outsourcing Agreement, it will now only be liable to an administrative sanction, as follows:

  1. a written warning, which will be issued by the Provincial Manpower Office; and
  2. a suspension of business activities, which will be issued by the Minister based on a recommendation from the Provincial Manpower Office.

The Requirements for a Manpower Outsourcing Business License

Under MOMR 11/2019, to obtain a Manpower Outsourcing Business License, Providers only need to submit an application to the OSS Agency and satisfy the following requirements:

  1. be a legal entity and engaged in manpower outsourcing services; and
  2. hold a Business Identification Number (Nomor Induk Berusaha – NIB).

Manpower Outsourcing Business Licenses are now issued by the OSS Agency on behalf of the Minister of Manpower and cover all of Indonesia. In addition, licenses are now valid for as long as the Provider continues its business activities.

Employment Agreements between Providers and their employees

Providers and their outsourcing employees must enter into either (i) a Fixed Term Employment Agreement; or (ii) a Permanent Employment Agreement and register it with the Manpower Office where the work is performed. However, no sanction will now be imposed on a Provider for not registering the employment agreements. Previously, under MOMR 19/2012, if the employment agreements were not registered with the Manpower Office, the license of the Provider would be revoked.

Transitional Phase

From the date on which MOMR 11/2019 came into effect, existing Manpower Outsourcing Business Licenses of Providers remain valid until their expiry, but Providers must register their licenses in the OSS system. Meanwhile, if a license has been applied for but not issued yet, it will now be processed through the OSS system.

Conclusion

Whilst MOMR 11/2019 simplifies a couple of areas and reduces the sanctions for non-compliance, both users and Providers do need to be still aware of the restrictive and far-reaching breadth and scope of Indonesia’s outsourcing regulations. Indeed, the general principles of the regulations remain largely unchanged, and as mentioned above, MOMR 11/2019 does not apply at all to Business Activities Outsourcing. Given this, it could be argued that MOMR 11/2019 does not radically change the underlying structure of Indonesia’s outsourcing regime.

*****

M&T Advisory is an email publication prepared by the Indonesian law firm, Makarim & Taira S. It is only intended to inform generally on the topics covered and should not be treated as a legal advice or relied upon when making investment or business decisions. Should you have any questions on any matter contained in M&T Advisory, or other comments generally, please contact your usual M&T contact or advisories@makarim.com.

Contacts:

Lia Alizia – lia.alizia@makarim.com
Raditya Anugerah Titus – raditya.titus@makarim.com

Related Articles by Firm
Indonesia: New regulation on the procurement of goods and services in the state-owned enterprises sector
On 12 December 2019, the new Minister of State-Owned Enterprises, Erick Thohir, issued new Ministry of State Owned Enterprises Regulation ...
Regulation on integrated mortgage services through electronic systems
The service aims to improve disclosure, punctuality, simplicity and affordability.
New Indonesian franchise regulation relaxes certain requirements
The new regulation aims to simplify the registration process and facilitate investment.
New amendment to Indonesia’s KPK Law
The main purpose of the amendments is to change the corruption eradication paradigm from prosecution measure to prevention measure.
Aircraft finance and leasing in Indonesia
The Indonesian aviation sector has grown rapidly over the past few years. Due to this, airlines and lessors have been capitalising on the general availability of diverse sources of funding ...
New KPPU regulation on merger filings
Simplification yet some clarity is needed.
Reminder – Requirement in the OSS System for companies to adjust their Business Classification Code
This joint notice requires limited liability companies to adjust their purpose and objectives.
Requirement to use the Indonesian language is regulated further
Indonesia has finally issued an implementing regulation of the Language Law.
BKPM amends its regulation on the procedures for licence and investment facilities
Divestment and foreign directors and commissioners’ requirements.
Indonesia's new regulation on e-litigation
The Supreme Court aims to have e-litigation operating in all courts of first instance by early 2020.
Latest amendment to the procedure for the resolution of small claims lawsuit
The new procedure provides more optimal and effective regulation than the previous regulation.
New government regulation on organisation of electronic systems and transactions
The Government of Indonesia finally issued Government Regulation No. 71 of 2019 on Organisation of Electronic Systems and Transactions on 4 October 2019, gaining momentum as the country sees the rise of ‘unicorns’ and President Joko Widodo boasting about the country’s digital economy ...
New decree on foreign workers in Indonesia
The Ministry of Manpower has issued a codified list of businesses in which foreign employees may be employed.
Regulating the sale and provision of digital content through mobile cellular networks
Regulations on digital content are becoming more relevant as investor interest in the Indonesian market rises.
Joko Widodo re-elected: How will it affect doing business in Indonesia?
In his election campaign, Jokowi declared nine missions ...
Indonesia: New regulation on Foreign Construction Representative Offices and Construction Foreign Investment Companies
On 13 June 2019, the Minister of Public Works and Public Housing issued Regulation No. 09/PRT/M/2019 on Guidelines on Licensing Services for Foreign Construction Business Entities ...
Settlement of disharmony between laws and regulations through mediation
On February 12, 2019, the Minister of Laws and Human Rights (MOLHR) issued Regulation No. 2 of 2019 on The Settlement of Disharmony between Laws and Regulations through Mediation (MOLHR Reg 2/2019), which came into effect on February 14, 2019 ...
Bank Indonesia issues a new regulation on the reporting of foreign exchange flows
Bank Indonesia (BI) recently issued Regulation No. 21/2/PBI/2019 on the Reporting of Foreign Exchange Flow Activities ...
Related Articles
Compliance with official measures to combat Covid-19 made mandatory
Significant responsibility for ensuring compliance with directives to stop the spread of Covid-19 has been delegated to the law enforcement authorities of the UAE.
Recent measures implemented by the UAE authorities in response to Covid-19
Noteworthy measures that have been implemented by various UAE authorities to date.
Use the "crisis cycle" of coronavirus to pivot your legal practice for the better
We can take this opportunity to embrace and drive change.
Related Articles by Jurisdiction
Brave new worlds
Asia’s emerging economies continue to play bigger roles on our increasingly integrated world stage. Melinda Finch investigates the rising stars of India, Indonesia, Malaysia and Vietnam and considers the impact of their ascension on the legal industry.
Jakarta In-House Congress
Alongside co-hosts Ashurst; Oentoeng Suria & Partners; Assegaf Hamzah & Partners; Clyde & Co; Dentons Rodyk & ...
What’s in store for Indonesia’s franchise sector?
Indonesia’s franchise sector has experienced rapid growth in the past decade, riding the wave of the country’s economic expansion and …
Latest Articles
Compliance with official measures to combat Covid-19 made mandatory
Significant responsibility for ensuring compliance with directives to stop the spread of Covid-19 has been delegated to the law enforcement authorities of the UAE.
The need to look at Intellectual Property in a new light
Cross border data flows will become one of if not the most important consideration for corporate counsel in the future given the implications for intellectual property (IP), privacy, competition, trade, compliance and innovation ...
Maxwell Chambers offers cutting edge virtual arbitration
The Singapore ADR centre is now offering advanced virtual arbitration solutions in collaboration with Law In Order.