Outsourcing Agreement Between Two Companies Template for Indonesia

An Outsourcing Agreement Between Two Companies is a legally binding contract that establishes the framework for outsourcing specific business functions or processes from one company to another in Indonesia. Under Indonesian law, particularly following the Omnibus Law reforms, these agreements must comply with stringent regulatory requirements to ensure legal validity and enforceability.

When do you need this document?

You need this agreement when your company wants to outsource non-core business functions such as IT services, customer support, accounting, human resources, or manufacturing processes to another Indonesian company. It's essential when establishing long-term service relationships, transferring operational responsibilities, or when you need to comply with Indonesia's specific outsourcing regulations. The document becomes particularly important if you're a foreign company operating in Indonesia or if the outsourcing arrangement involves employee transfers or specialized technical services.

Key legal considerations

Several critical legal elements must be addressed in your outsourcing agreement. Service level agreements and performance metrics should be clearly defined to avoid disputes and ensure accountability. Intellectual property clauses must protect proprietary information, trade secrets, and data security, especially given Indonesia's strict data protection requirements. Personnel management provisions are crucial, particularly regarding employee rights, social security obligations, and compliance with local labor standards. Risk allocation and liability limitations help protect both parties from unforeseen circumstances, while termination clauses should address notice periods, transition responsibilities, and post-termination obligations. Additionally, dispute resolution mechanisms should specify Indonesian courts or arbitration procedures.

Legal requirements in Indonesia

Indonesian law imposes specific requirements on outsourcing agreements that you must follow to ensure compliance. Under Law No. 13 of 2003 on Manpower as amended by the Omnibus Law, certain types of work can only be outsourced under strict conditions, and the service provider must be a legally registered Indonesian entity. Minister of Manpower Regulation No. 19 of 2012 requires that outsourcing companies meet specific licensing and operational standards. Your agreement must include dual-language provisions (Indonesian and English) with the Indonesian version taking precedence in case of conflicts. The contract must also address social security obligations (BPJS), minimum wage compliance, and worker protection standards. Additionally, the Indonesian Civil Code governs general contract principles, requiring clear terms, legal capacity of parties, and lawful consideration to ensure enforceability.