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W&P Newsletter – New rules on outsourcing – things to observe

The Minister of Manpower (previously Ministry of Manpower and Transmigration) (“MOM”) recently amended several basic rules of outsourcing in Indonesia by issuing Regulation No. 11 of 2019 (“Regulation 11/2019”). This is the second amendment to MOM Regulation No. 19 of 2012 (“Regulation 19/2012”). This Newsletter edition summarizes the major changes to the outsourcing requirements:

  1. Registration of Outsourcing Agreements 

While the previous Regulation 19/2012 was silent on which party should register the outsourcing agreement with the regional manpower office, Regulation 11/2019 clearly requires the outsourcing company to register the outsourcing agreement. 

Note that Regulation 11/2019 prohibits the outsourcing company from commencing the outsourcing activity until the outsourcing agreement is duly registered. Administrative sanctions in the form of warning letters or suspension of business may be imposed on the outsourcing company for non-compliance with the registration requirement. No sanction under Regulation 11/2019 on the outsourcer for failure to register. 

  1. Issuance of Registration Evidence (Bukti Pendaftaran) Accelerated

Regulation 11/2019 stipulates that the registration evidence (bukti pendaftaran) will be issued within a maximum of 3 business days, compared to 7 business days under the previous regulation.

  1. Registration of Employment Agreement

In addition to the registration of the outsourcing agreement as described in No. 1 above, Regulation 11/2019 also requires the outsourcing company to register the employment agreements between the outsourcing company and its employees.

Previously, the sanction of non-compliance with such registration requirement was revocation of the operational license of the outsourcing company. In contrast, Regulation 11/2019 is now silent on the sanction for non-compliance with this requirement.

This requirement is not applicable to the outsourcer. 

  1. Licensing Process through the Online Single Submission System

In line with the intention of the Government to simplify bureaucracy, Regulation 11/2019 mandates outsourcing companies to process their business licenses through the Online Single Submission (“OSS”) system.

  1. All existing outsourcing business licenses and/or operational licenses are valid until their respective expiration dates, and thereafter registration must be done through the OSS system; and
  2. Any application for the outsourcing business license submitted before 5 August 2019 for which the business license has not been issued must now be processed through the OSS system.

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