Outsourcing Service Agreement Template for Indonesia

An Outsourcing Service Agreement is a legally binding contract that governs the relationship between your business and an external service provider in Indonesia. Under Indonesian law, particularly Law No. 13 of 2003 on Manpower and Minister of Manpower Regulation No. 19 of 2012, outsourcing arrangements are strictly regulated to protect workers and ensure fair business practices. This agreement ensures you comply with these complex regulations while clearly defining the scope, terms, and conditions of your outsourcing relationship.

When do you need this document?

You need an Outsourcing Service Agreement when engaging external providers for business functions that are legally permitted to be outsourced under Indonesian regulations. This includes support services such as cleaning, security, catering, transportation, and certain administrative functions. The agreement is essential when working with both local Indonesian companies and foreign service providers operating in Indonesia. You'll also need this document when establishing long-term service relationships that require clear performance metrics, compliance standards, and worker protection provisions. Additionally, this agreement is crucial when your outsourcing arrangement involves multiple parties, such as parent company guarantors or local Indonesian entities acting as intermediaries.

Key legal considerations

Several critical legal elements must be addressed in your outsourcing agreement to ensure compliance and protection. The scope of services clause must clearly define which activities are being outsourced and confirm they fall within legally permissible categories under Indonesian regulations. Worker protection provisions are mandatory, including ensuring outsourced workers receive proper benefits, safety protections, and labor rights as required by Indonesian manpower laws. Performance metrics and service level agreements must be clearly specified to enable effective monitoring and enforcement. Liability and indemnification clauses should address potential risks, including regulatory violations and worker-related issues. The agreement must also include termination procedures that comply with Indonesian employment law requirements when outsourced workers are involved.

Legal requirements in Indonesia

Indonesian law imposes specific requirements on outsourcing agreements that you must incorporate into your contract. Under Law No. 13 of 2003 on Manpower, only certain business activities classified as support services can be legally outsourced, and the agreement must explicitly confirm compliance with these restrictions. Minister of Manpower Regulation No. 19 of 2012 requires that outsourcing companies maintain proper business licenses and meet minimum capital requirements, which must be verified and documented in the agreement. The Indonesian Civil Code governs contract formation and enforcement, requiring clear terms, mutual consent, and lawful consideration. For foreign service providers, additional requirements under Law No. 40 of 2007 on Limited Liability Companies may apply, including establishment of local entities or appointment of authorized representatives. The agreement must also address language requirements, with certain provisions potentially requiring translation into Bahasa Indonesia for legal validity and worker comprehension.