HR Outsourcing Compliance in Indonesia (2026 Guide): What Permenaker 7/2026 Changes for Employers

Indonesia rewrote the rules on outsourcing in 2026. If your company still runs HR outsourcing or alih daya arrangements the way it did even a year ago, there is a real chance that part of that arrangement is no longer compliant. Peraturan Menteri Ketenagakerjaan No. 7 of 2026 (“Permenaker 7/2026”), issued on 30 April 2026, now restricts outsourcing to six defined categories of supporting activities and requires every outsourcing provider to be a licensed legal entity.

Get the classification wrong, and your company risks administrative sanctions, delayed business licensing, or outsourced workers being reclassified as your direct employees. This guide breaks down exactly what changed, what a compliant outsourcing agreement must include, and how InCorp Indonesia (an Ascentium Company) keeps both foreign and domestic companies fully compliant as they scale their workforce.

Key Takeaways

• Permenaker 7/2026 (effective 30 April 2026) limits outsourcing to six supporting-activity categories; core business functions can no longer be outsourced.
• Companies have until 30 April 2028, a two-year transition window, to bring existing outsourcing arrangements into compliance; contracts signed earlier remain valid until they expire.
• Every alih daya agreement must be written, registered with the local Manpower Office, and cover scope of work, duration, location, headcount, and worker protections.
• Outsourcing providers must be a licensed legal entity (badan hukum); individuals and informal arrangements no longer qualify.
• Non-compliance triggers graduated sanctions — from written warnings to production capacity limits and delayed business licensing across project locations.
• Outsourced workers are entitled to wages, overtime, defined working hours, K3 protection, annual leave, BPJS Ketenagakerjaan and Kesehatan, THR, and termination rights, the same baseline as direct employees.

In-House HR vs Unlicensed Outsourcing vs InCorp Indonesia

Factor	In-House HR Team	Generic / Unlicensed Outsourcing	InCorp Indonesia HR Outsourcing
Compliance with Permenaker 7/2026	Depends entirely on internal legal capacity	Frequently unaware of the 6-category limit	Role classification and agreements built to comply
Legal entity requirement	You must hold a PT PMA or PT	Often not a licensed badan hukum	Licensed, audited outsourcing/EOR structure
Speed to onboard staff	Weeks to months (hiring + setup)	Fast, but with hidden compliance gaps	Days, with contracts issued compliantly
BPJS & payroll accuracy	Depends on in-house payroll expertise	Inconsistent registration and remittance	Automatic BPJS Ketenagakerjaan/Kesehatan, THR
Legal liability exposure	Borne fully by your company	Shared, but provider may be unlicensed	Structured to keep both parties compliant
Scope of permitted work	Any role, but full HR burden on you	Sometimes used for core functions (non-compliant)	Limited to compliant supporting categories
Ongoing regulatory monitoring	Requires dedicated in-house resource	Rarely proactive	Continuous monitoring of Manpower Ministry updates

What is HR Outsourcing in Indonesia, and What Did Permenaker 7/2026 Change?

HR outsourcing, known locally as alih daya, is the practice of engaging a licensed third-party provider to supply workers for specific functions rather than hiring and managing that headcount directly. Historically, Indonesian companies outsourced a wide range of roles with limited restrictions.

That changed on 30 April 2026, when the Ministry of Manpower issued Permenaker 7/2026 to implement Article 64(2) of the Job Creation Law and to follow up on Constitutional Court Decision No. 168/PUU-XXI/2023, which called for stronger limits on outsourcing and stronger protections for outsourced workers.

The regulation doesn’t ban outsourcing. It narrows what can be outsourced, tightens who can act as a provider, and adds mandatory protections and registration steps that did not previously exist in the same form.

6 Supporting Activities Permitted Under Permenaker 7/2026

Outsourcing may now only be used for the supply of labor in the following categories:

• Cleaning services
• Food and beverage provision (catering)
• Security services
• Drivers and worker transportation
• General operational support services
• Supporting work in the mining, oil, gas, and electricity sectors

Any role outside these categories that forms part of your company’s core business must be filled through direct employment rather than an outsourcing arrangement.

READ MORE:

• How Outsourcing HR Services Can Improve Hospital Operations in Indonesia
• How Companies Can Simplify HR and Cut Costs Instantly with EOR Services
• 10 Reasons Outsourcing Services Will Supercharge Your Manufacturing Growth

Core Business vs Supporting Activities: Why the Distinction Now Decides Compliance

A core business function is an activity directly tied to how a company generates revenue. In contrast, a supporting activity helps the business operate but is not the main service or product clients pay for.

Permenaker 7/2026 doesn’t set out a complete, industry-by-industry list of core activities. As a result, the classification must be assessed based on the company’s actual operations and the nature of its industry.

This is one of the most common compliance gaps InCorp Indonesia (an Ascentium Company) finds when reviewing existing outsourcing arrangements: roles were outsourced under the previous framework because it was operationally convenient, not because they genuinely qualified as supporting activities.

Mandatory Elements of a Compliant HR Outsourcing Agreement

Every outsourcing agreement must now be in writing and registered with the Manpower Office (Dinas Ketenagakerjaan) in the relevant regency or city. At minimum, it must specify:

• The scope of work being outsourced
• The duration of the outsourcing agreement
• The work location
• The number of outsourced workers
• The rights and obligations of both the outsourcing provider and the user company
• The protections and entitlements guaranteed to outsourced workers

Registration can be refused if these elements are missing, which stalls your ability to deploy outsourced staff at all legally.

What Companies Must Provide to Outsourced Workers

Outsourced workers must receive, at minimum:

• Wages and overtime pay in line with applicable standards
• Defined working hours and rest periods
• Occupational health and safety (K3) protection
• Annual leave
• BPJS Ketenagakerjaan and BPJS Kesehatan coverage
• Religious holiday allowance (THR)
• Clear rights when the employment relationship ends

The user company must also verify that these protections are actually provided. Outsourcing HR responsibilities doesn’t remove the company’s legal accountability.

Key Deadlines and Sanctions Under Permenaker 7/2026

Permenaker 7/2026 gives companies time to adjust existing outsourcing arrangements, but it also sets clear deadlines and sanctions for non-compliance.

• Existing Contracts: Companies do not need to renegotiate active outsourcing agreements.
• Compliance Deadline: The type and scope of outsourced work must be brought into compliance within two years of the regulation’s enactment, or by 30 April 2028.
• Provider Operating Deadline: An outsourcing provider must begin operating within one year of receiving its business license.
• Sanctions for Employing Companies: Companies that outsource non-permitted functions may first receive a written warning.
• Escalating Sanctions: Continued non-compliance may result in restrictions on production capacity or delays in business licensing approvals at one or more project locations, based on the Manpower Supervisor’s recommendation.
• Provider Sanctions: Outsourcing providers that fail to meet their licensing obligations may face sanctions under Indonesia’s risk-based business licensing framework.

Not sure whether your current outsourcing setup still qualifies? InCorp Indonesia’s HR and legal advisory team can audit your existing HR agreements against Permenaker 7/2026 and flag exposure before the 2028 deadline.

Talk to our HR outsourcing specialists in Jakarta, Bali, Surabaya, Semarang, or Batam ->

HR Outsourcing vs Employer of Record (EOR) vs PEO: Which Fits Your Business?

These models address different workforce needs and should not be used interchangeably.

Model	What It Does	Local Entity Required	Best For	Key Compliance Point
HR Outsourcing	Supplies workers for the six permitted supporting activities through a licensed provider	Yes	Outsourcing specific supporting functions	The outsourced role must fall within the permitted scope under Permenaker 7/2026.
Employer of Record (EOR)	Legally employs workers and manages contracts, payroll, tax, and BPJS	No	Market entry, project-based hiring, or hiring before PT PMA setup	The employment arrangement must comply with Indonesian labor and workforce regulations.
Professional Employer Organization (PEO)	Supports payroll, benefits, HR administration, and compliance through a co-employment model	Usually yes	Companies with an entity that need broader HR support	The division of responsibilities between the company and provider must be clearly defined.

HR outsourcing, EOR, and PEO are not fully standalone legal categories under Indonesian law. Each arrangement must be assessed against the applicable employment, outsourcing, payroll, licensing, and workforce compliance requirements.

How InCorp Indonesia Keeps Your Outsourcing 100% Compliant

As one of the primary HR outsourcing providers hailing from Indonesia, InCorp Indonesia understands the impact of finding the right talent and effectively managing HR functions.

InCorp Indonesia (an Ascentium Company) provides end-to-end HR outsourcing and Employer of Record support, including:

• Outsourcing Compliance: Role classification, alih daya agreement preparation, registration, and review of existing arrangements before the 2028 deadline
• Payroll and Statutory Administration: Payroll processing, BPJS Ketenagakerjaan, BPJS Kesehatan, THR, and required reporting.
• Workforce Solutions: HR outsourcing and Employer of Record support for market entry, project-based hiring, and rapid headcount expansion
• Local Support Across Indonesia: Assistance from teams in Jakarta, Bali, Surabaya, Semarang, and Batam across multiple industries

Ready to review your HR outsourcing setup? Contact us for a compliance assessment in accordance with Permenaker 7/2026.

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