DO YOU KNOW THAT AN OUTSOURCING CONTRACT MUST BE REGISTERED?

How to Setting Up Representative Office in Indonesia
How to Setting Up Representative Office in Indonesia
October 23, 2017
A-GUIDE-ON-INDONESIAS-HIERARCHY-OF-EMPLOYMENT-LAW-SOURCE-FOR-COMPANIES
Simple Guide in Setting Up a PMA Company in Indonesia
November 21, 2017

Ministry of Manpower stipulates that the work agreement of outsourcing shall be registered to the related authorities in manpower. Read more to learn about the obligation of registering the agreement.


In the previous article, SMART has discussed the types of jobs in Indonesia you can outsource to the third parties.  Principally, the prevailing framework of regulations does not allow a handing over of all types of jobs, except that such job is included under the provisions of Law Number 13 of 2003 concerning Manpower (“Manpower Law”) and the Regulation of the Minister of Manpower and Transmigration Number 19 of 2012 (“Permenaker 19/2012”) concerning  concerning Requirements for Outsourcing as amended by Regulation of the Minister of Manpower and Transmigration Number 27 of 2014 (“Permenaker 27/2014”), and all its implementation regulations. Furthermore, Permenaker 19/2012 as amended by Permenaker 27/2014 has regulated the requirements on how the employer may hand over a portion of its activities to an Outsourcing or another company.  In this matter, a hand over of a portion of its activities shall be conducted through a written outsourcing contract.  You may see further explanations below :

REGISTRATION OF THE CONTRACT FOR SERVICES
A contract for services basically is a contract that stipulates the employment relationship between the company accepting the contract for services with the employee/labor, to be made in writing and outlining the rights and obligations of each party.  This agreement must specify provisions that will guarantee the protection of the workers and working requirements for the employee/labor, and must stipulate a provision on the possess of a manpower with competency in his/her fields of work.

A contract for services must be registered by the accepting outsource company to the regency/city region manpower authority, where such contract for services would be implemented.  The registration of a contract for services should be conducted within at least 30 (thirty) working days before the implementation of the contract, and it should be signed by the outsourcer and the accepting outsourcing company.

Following the registration of the contract for services, the manpower authority will issue a receipt on registration at the latest 5 (five) working days since the acceptance date of the submitted application, and kindly note that this registration is free of any charges.

REGISTRATION OF THE LABOR SUPPLY AGREEMENT
A labor supply agreement is an agreement made between the outsourcer company and the labor supply company which contain the rights and obligations of the parties.  The Labor supply agreement must stipulate a provision concerning a guarantee on how the rights of the employee/labor in the employment relationship to be fulfilled.

The same obligation to register this agreement is apply, in which the labor supply agreement must be registered to the regency/city region manpower authority, where such labor supply agreement would be implemented. A labor supply agreement is made between the outsourcer with the labor supply company. The registration of a labor supply agreement should be conducted within at least 30 (thirty) working days since the signing date of the agreement.

The difference between the labor supply agreement and the contract for services is that the registration of the labor supply agreement must attach :

  1. A valid operating permits of the labor supply company; and
  2. A draft of employment agreement made between the labor supplier company with the engaged employee/labor.

However, the registration of a labor supply agreement is free of any charges.

Following the complete and legal registration of the labor supply agreement, the manpower authority will issue a receipt on registration at the latest 7 (seven) working days since the acceptance date of the submitted application.

CONSEQUENCES IF AN OUTSOURCING CONTRACT IS NOT REGISTERED
If a labor supply agreement is not registered and the labor supply company is still performing its duties, then the manpower authority will revoke the operating permits of the company, which to be executed based on a recommendation from the regency/city region manpower authority.  However, despite such revocation of operating permits, the responsibility on the fulfillment of the rights of the employee/labor is still upon the labor supply company.

CONCLUSION
Therefore, it is clear that an outsourcing contract must be registered.  A consequence in violating such obligation, where an outsourcing contract is failed to be registered, then the operating permit of the company will be revoked by the authority, and the obligation to fulfill the rights of the employee still be upon the company.

How can SMART help you?

SMART Legal Consulting is a corporate legal service provider with experience in assisting and providing legal advice to its client in reaching their business goals in Indonesia.  SMART is experienced in providing legal advice on the practice of outsourcing, and assisting the Client in handling the required and necessary documents before doing outsourcing to an outsourcing company, in accordance with the prevailing laws and regulations in Indonesia including in the drafting of an outsourcing contract and to handle its registration to the authority.

Please contact SMART for further information on our services, or you may arrange a meeting with us by contacting the following:
E: info@smartcolaw.com
H: +62821-1234-1235
O: 021-8067492

Comments are closed.

 
Fairus Harris Senior Associate
Got question? Leave your message here.