Navigating the shifting tides of Indonesian labor law is a formidable challenge for foreign investors in Bali. The Omnibus Law and its subsequent regulations have fundamentally reshaped how businesses can hire external help, moving away from strict job segmentation toward a more unified but heavily regulated system.
For PT PMA owners, failing to understand these nuances is not just an administrative error; it can lead to severe operational disruptions and costly disputes with local unions.
The current legal landscape aims to balance business flexibility with worker protection, creating a minefield for the unprepared. Whether you are running a villa management company in Canggu or a manufacturing plant in Surabaya, using “grey area” labor suppliers is no longer a viable strategy. The government has tightened the digital integration of business licensing, making non-compliance easier to detect than ever before.
To secure your operations and protect your investment, you must move beyond basic assumptions and master the specific legal mechanisms now in play. This guide provides seven critical insights into Outsourcing Regulations for 2026, helping you build a resilient, compliant, and efficient workforce strategy without stepping into legal traps.
Table of Contents
- The New Legal Framework for Labor Supply
- Vendor Eligibility and Risk-Based Licensing
- Worker Status and Transfer of Protection
- Allocating Liability Between User and Provider
- Operational Rules for Safe Outsourcing
- Key Risks and Common Compliance Mistakes
- Unconfirmed Areas to Watch in 2026
- Real Story: A Villa Group’s Labor Crisis in Seminyak
- FAQ's about Outsourcing Rules
The New Legal Framework for Labor Supply
The foundation of outsourcing in 2026 rests on the Manpower Law (as amended by the Job Creation Law) and Government Regulation (PP) 35/2021. In the past, regulations drew a sharp, often confusing line between “job supply” (pemborongan pekerjaan) and “labor supply” (penyediaan jasa pekerja).
Today, the terminology has converged under the umbrella of Alih Daya. This shift simplifies the definitions but imposes stricter administrative requirements on how these relationships are structured.
Under the current Outsourcing Regulations, the arrangement is tri-partite. It involves the government as the regulator, the “User Company” (you), and the “Outsourcing Company” (the provider). Crucially, the regulations establish that the workers are employees of the provider, not your company.
However, this legal separation is only valid if the written agreements strictly adhere to the statutory norms. If a contract is found to be defective—for example, if it disguises a direct employment relationship—the law may pierce the corporate veil, reclassifying the workers as your permanent employees with full retroactive benefits.
Vendor Eligibility and Risk-Based Licensing
One of the most significant changes for 2026 is the centralization of licensing. In previous years, outsourcing licenses were issued by local manpower offices, leading to inconsistent standards across different regencies in Bali.
Now, every Outsourcing Company (Perusahaan Alih Daya) must be a limited liability entity (Badan Hukum) and hold a specific business license issued by the Central Government via the Online Single Submission (OSS) system.
For a user company, this simplifies due diligence but raises the stakes. You can no longer hire an informal “manpower agency” or a local freelance coordinator to staff your restaurant or construction site. You must verify that your vendor holds the correct OSS-based license based on National Standards (NSPK).
Engaging an unlicensed provider is a direct violation of PP 35/2021. It exposes your company to immediate administrative sanctions and reputational damage, as authorities view this as utilizing illegal labor brokering.
Worker Status and Transfer of Protection
A critical insight for maintaining stability in your workforce concerns “Transfer of Protection” (TuPE). PP 35/2021 introduced specific mandates to protect outsourced workers when a user company decides to switch vendors.
If you terminate Contract A with Vendor X and sign Contract B with Vendor Y for the exact same scope of work, the workers usually have the right to retain their tenure and entitlements.
This regulation was designed to stop the predatory practice of resetting workers’ “years of service” to zero every time a vendor contract was renewed. For you, this means that changing your cleaning or security vendor isn’t as simple as swapping a SIM card. You must ensure the new vendor acknowledges the workers’ prior service history.
Failure to do so can trigger protests and strikes, disrupting your business operations. Contracts must explicitly address these continuity terms to ensure the Outsourcing Regulations are met.
Allocating Liability Between User and Provider
Determining who pays for what is often where disputes arise. The law is clear: the Outsourcing Provider is the primary employer responsible for wages, holiday allowances (THR), and social security (BPJS). However, the practical reality in Indonesia often introduces a “joint liability” risk.
If your provider disappears or fails to pay the mandatory BPJS contributions, aggrieved workers will inevitably target the User Company for compensation, and local labor courts are frequently sympathetic to these claims.
To mitigate this, your master agreement must have robust indemnity clauses. Furthermore, diligent financial auditing of your provider is essential. Many savvy PT PMA owners now insist on “open-book” billing where they can verify that the money paid for labor costs is actually being deposited into the workers’ accounts and the state insurance fund.
For those needing to audit vendor payroll integrity, engaging a ‘trusted tax management company’ like Bali Accountants can provide the necessary oversight to prevent hidden liabilities from accumulating.
Operational Rules for Safe Outsourcing
To operate safely, you must strictly follow the operational guidelines set by the Ministry of Manpower. First and foremost, the prohibition on “sub-outsourcing” is strict. Your outsourcing provider cannot take your contract and then subcontract the work to a third party.
This “chain outsourcing” dilutes accountability and is illegal. You must verify that the staff on your premises are direct employees of the company you signed the contract with.
Secondly, you must adhere to reporting obligations. User companies are often required to report the type and volume of outsourced work to the local Manpower Office (Disnaker).
While the Omnibus Law removed the rigid list of “core vs. non-core” jobs from the national statute, local practice still heavily scrutinizes the outsourcing of primary production roles. For example, a factory generally cannot outsource its main assembly line workers. Misusing outsourcing for core business functions remains a red flag for inspectors.
Key Risks and Common Compliance Mistakes
The most common mistake foreign investors make is mischaracterization of the relationship. Even with a licensed provider, if you (the User) exert direct control over the outsourced staff—issuing disciplinary letters, managing their leave directly, or setting their specific daily KPIs—you risk blurring the legal lines.
Courts may view this as a direct employment relationship, nullifying the outsourcing shield.
Another major risk involves the duration of contracts. Outsourced workers can be hired on fixed-term contracts (PKWT), but these are subject to strict time limits (typically up to 5 years under current interpretations).
If a provider keeps a worker on a temporary contract beyond the statutory limit, the worker legally becomes permanent. If the provider refuses to recognize this, the liability often bleeds back to the User Company during disputes. Ensuring your provider manages contract renewals lawfully is just as important as the service they deliver.
Unconfirmed Areas to Watch in 2026
While the regulations are clearer than before, several areas remain Not confirmed and require caution. First, there is no single, consolidated national list of exactly which jobs can be outsourced for every sector.
While some sectors like banking have specific guidance (OJK rules), general industries rely on interpretation. You should treat any advice claiming a “guaranteed approved list” with skepticism and consult local counsel.
Second, the standard processing times for provider licensing in OSS can be inconsistent. While the system is digital, “technical verification” delays are common. Finally, the extent of civil liability for user companies in tort cases (e.g., if an outsourced driver crashes a car) varies by court district.
While the law points to the provider, judges often look at “supervision” levels to assign fault. These grey areas mean that your contracts must be specific to your operational reality, not generic templates.
Real Story: A Villa Group’s Labor Crisis in Seminyak
Meet Jeremy, a 45-year-old hospitality entrepreneur from Perth who manages a cluster of luxury villas in Seminyak. Jeremy wanted to streamline his costs, so he hired a “security coordinator” named Pak Wayan, who promised to supply six guards at a rate 20% below the market average. There was no formal contract, just a handshake and a monthly bank transfer to Wayan’s personal account.
Six months later, a theft occurred at one of the villas involving one of the guards. When Jeremy tried to hold Wayan accountable, he vanished. The police investigation revealed that the guards had no contracts, no security certification (Gada Pratama), and no BPJS coverage. The guards then sued Jeremy, claiming they were actually his direct employees because Wayan was not a licensed outsourcing entity.
The “savings” Jeremy made were wiped out instantly. He was forced to pay retroactive salaries, severance, and legal fees totaling over $25,000. To survive, Jeremy overhauled his entire HR strategy.
He engaged a reputable, licensed outsourcing firm and used Bali Accountants to audit the new contracts, ensuring every guard had compliant BPJS registration. Today, his villas are secure, and his liability is legally ring-fenced, allowing him to focus on guests rather than court dates.
FAQ's about Outsourcing Rules
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Can I outsource any type of job in my company?
Legally, the strict "core vs. non-core" ban was relaxed, but in practice, outsourcing your primary business activity (e.g., cooks in a restaurant) is still risky and often challenged by local manpower offices.
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Who is responsible if the outsourced staff don't get paid?
The Outsourcing Provider is legally responsible. However, workers will often protest at the User Company's premises, and authorities may pressure you to mediate or cover the gap to maintain public order.
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Do I need to provide benefits to outsourced workers?
No, you pay a service fee to the provider. The provider is legally obligated to use that fee to provide benefits (BPJS, THR) to the workers.
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Can I interview the outsourced candidates before they start?
Yes, you can vet competency, but the formal hiring and contract signing must be done by the Outsourcing Provider to maintain the legal separation.
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What happens if the outsourcing provider's license expires?
The contract becomes voidable, and the workers could legally be considered your direct employees. You must monitor your vendor's license validity annually.
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Is there a limit on how long I can use an outsourced worker?
There is no limit on the commercial contract between you and the provider, but the provider faces limits on how long they can keep the worker on a temporary contract (PKWT).
