In August 2019 the minister of manpower amended the Minister of Manpower and Transmigration Regulation (MOMR) on the Requirements for Outsourcing (19/2012) through the issuance of the MOMR on the Second Amendment to MOMR 19/2012 on the Requirements for Outsourcing (11/2019). MOMR 11/2019 aims to simplify manpower outsourcing requirements to reflect current needs.
The Manpower Law (13/2003) and MOMR 19/2012 recognise two types of outsourcing:
- business activities outsourcing; and
- manpower outsourcing.
However, the amendments introduced by MOMR 11/2019 relate only to manpower outsourcing.
In principle, under Article 66(1) of the Manpower Law, work which is to be outsourced should be considered 'supplemental work' and should be unrelated to the provider's production process (ie, its core business). Under MOMR 19/2012, manpower outsourcing was limited to:
- cleaning services;
- catering services;
- security services;
- mining and oil industry support services; and
- employee transportation services.
Obtaining Manpower Office approval
The main highlight of MOMR 11/2019 is that the required Manpower Office approval can now be obtained online and transferred using the online single submission (OSS) system. The OSS system is a web-based business licensing system which was introduced to reduce administrative red tape and make obtaining business permits in Indonesia faster and more efficient (for further details please see "New online single submission system: what is it?").
The licensing requirements for outsourcing companies (providers) have been adjusted to integrate them into the OSS system. In addition, an outsourcing business licence issued through the OSS system now covers the entire country.
Registering 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 they were signed. MOMR 11/2019 has eliminated this time limit. As a consequence, there is now no specific time limit in which a manpower outsourcing agreement must be registered with the Manpower Office, although the obligation to register remains unchanged. MOMR 11/2019 has also simplified the requirements for registering a manpower outsourcing agreement, as only the following documents need be submitted:
- the application to the Manpower Office; and
- the manpower outsourcing business licence.
The timeframe for issuing a registration certificate has been reduced to three business days from completion of the required documents. Previously, this timeframe was seven business days.
Under MOMR 19/2012, provincial manpower offices could revoke a provider's licence if it performed outsourcing work without registering its manpower outsourcing agreement. Under MOMR 11/2019, if a provider performs outsourcing work without registering its manpower outsourcing agreement, it will face only the following administrative penalties:
- a written warning from their provincial manpower office; and
- a suspension of business activities, which will be ordered by the minister of manpower based on a recommendation from the provincial manpower office.
Manpower outsourcing business licence requirements
To obtain a manpower outsourcing business licence under MOMR 11/2019, providers need only submit an application to the OSS Agency and satisfy the following requirements:
- be a legal entity engaged in manpower outsourcing services; and
- hold a business identification number.
Manpower outsourcing business licences are now issued by the OSS Agency on behalf of the minister of manpower and cover all of Indonesia. In addition, licences 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 a fixed-term employment agreement or a permanent employment agreement and register it with the provincial manpower office where the work is performed. However, providers will not be penalised for failing to register their employment agreements. Under MOMR 19/2012, if an employment agreement was not registered with the relevant manpower office, the provider's licence would be revoked.
Providers' existing manpower outsourcing business licences remain valid until their expiry, but – as of the date on which MOMR 11/2019 came into effect – providers must register their licences in the OSS system. Further, if a licence has been applied for but has yet to be issued, it will be processed through the OSS system.
Although MOMR 11/2019 has simplified a number of requirements and reduced the penalties for non-compliance, both users and providers must observe the restrictive and far-reaching breadth and scope of Indonesia's outsourcing regulations. The general principles of the regulations remain largely unchanged and, as mentioned above, MOMR 11/2019 does not apply to business activities outsourcing. As such, it could be argued that MOMR 11/2019 does not radically change the underlying structure of Indonesia's outsourcing regime.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.