Indonesia may be on the brink of a significant labor policy shift. During his May Day speech in 2025, President Prabowo Subianto expressed his intention to abolish the use of outsourcing. While the statement was followed by an assurance that the government would maintain investor confidence, the proposal has ignited discussions about the future of employment flexibility in the country.
Outsourcing itself is not new to Indonesia’s employment landscape. It was formally recognized under Law No. 13 of 2003 on Manpower and later redefined in Law No. 11 of 2020 on Job Creation, known as the Omnibus Law, which later formalized by Law Number 6 of 2023 on Stipulating Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation into Law.
Outsourcing in Indonesia was further regulated through Government Regulation No. 35 of 2021 (PP 35/2021), which was issued as the implementing regulation for outsourcing and outlined specific protections for contract and outsourced workers. These legal frameworks have long supported outsourcing models, yet they may soon be revisited as part of broader labor reforms.
What’s Being Proposed?
As of now, the Government’s initial proposal to phase out outsourcing in Indonesia has not yet been formalized into regulation. However, steps have been taken to advance labor reform more seriously, including the establishment of the National Workers’ Welfare Council and the Layoff Task Force (Satgas PHK). Both initiatives aim to enhance worker protection and promote fair employment practices.
Additionally, President Prabowo has announced his plans to bring together 150 labor union leaders and 150 business leaders in a national dialogue forum. This approach signals a commitment to building mutual understanding before introducing any major policychanges.
While no immediate abolition is underway, the government appears to be considering narrowing or redefining outsourcing arrangements. Possibilities may include limiting outsourcing to support roles, increasing labor protections, or introducing stricter compliance requirements.
Why Is Outsourcing Widely Used?
Outsourcing has long supported business scalability and efficiency. By delegating specific functions to external providers, companies reduce fixed costs, gain access to specialized expertise, and remain adaptable in competitive environments.
This model is particularly beneficial for businesses with dynamic operational needs or specialized compliance requirements. It allows organizations to focus internal efforts on core business activities while ensuring non-core functions are handled by experienced professionals.
Still, outsourcing has also drawn criticism from labor advocates. Short-term contracts, limited benefits, and lack of job stability are often cited as challenges for outsourced workers. As such, the government’s proposal signals a growing effort to balance workforce flexibility with stronger worker protections.
What Business Should Do Now
While policy direction is still under discussion, companies should begin assessing their internal structures and where applicable, outsourcing arrangement. Rather than waiting for regulations to take shape, it’s advisable to consider three key questions:
- Are current applicable outsourcing arrangements compliant with labor standards?
Take a close look at your company’s outsourcing contracts, vendor agreements, and internal documentation to ensure they meet current labor standards.
- Do contracts provide clarity and fairness for both parties?
Ambiguity in employment terms can create reputational and legal risks. Transparency is no longer optional, especially as public and government attention on labor practices continues to grow.
- Are your internal processes equipped to adjust if new regulation emerge?
Companies with agile HR and operational frameworks will be better positioned to respond quickly and confidently when legal changes occur.
How Moores Rowland Indonesia Can Help
Moores Rowland Indonesia is well-positioned to assist companies in adapting to evolving employment expectations. Our outsourcing solutions offer services across payroll management, HR services and employee outsourcing, accounting services, and back-office support. All tailored to meet both efficiency goals and regulatory requirements.
We help clients streamline operations without compromising on compliance or transparency. Whether you’re re-evaluating your staffing structure or seeking reliable partners for secure and scalable support, our team can provide expert guidance every step of the way.
Looking Ahead
As Indonesia’s employment landscape evolves, one thing remains clear: businesses that prepare early will be better equipped to navigate change. Rather than view outsourcing as a risk, companies should treat this moment as a chance to refine strategies, reinforce good practices, and stay aligned with future policy directions.
Want to ensure your outsourcing practices remain aligned with evolving regulations?
Contact Moores Rowland Indonesia today for a free consultation on how our services can support your business through regulatory change.
