By: Wignyan Wiyono
For over a decade, outsourcing practices in Indonesia have sparked continuous controversy. A scheme once promoted as a middle ground for industrial flexibility has instead bred inequality for workers—substandard wages, blocked career paths, and minimal social protection. President Prabowo Subianto, responding to labor union demands, has announced plans to abolish outsourcing, while preparing the establishment of a National Labor Welfare Council as the driving force behind a fairer replacement system. This bold step deserves support as it ensures a transition toward a formal and protected employment model.
Minister of Manpower Yassierli pointed out that outsourcing often leaves workers in a state of uncertainty. He cited cases of workers in their 40s and 50s still on contracts earning only provincial minimum wages—and in some instances, even less than the stated amount in the contract. Such instability prevents workers from planning for the future or saving for old age.
Meanwhile, according to data from the Central Statistics Agency (BPS) as of February 2025, 86.58 million people are employed, with 59.4 percent still in the informal sector. When outsourced workers lack access to social protection, many shift to informal work, which also lacks safeguards. This is the concern of employers. Bob Azam, Chair of the Employment Division of the Indonesian Employers Association (Apindo), warned that ending outsourcing without a clear transition plan could push more workers into the harder-to-monitor informal sector. His statement highlights the need for a replacement policy that binds all stakeholders—workers, employers, and the state—to uphold workers’ basic rights.
In the fisheries sector, the United Fishermen’s Crew Union (SAKTI) in North Sulawesi sees outsourcing as opening the door to labor exploitation. The system allegedly facilitates recruitment without sufficient protection in terms of wages and safety. Arnon Hiborang, Chair of SAKTI Sulut, described the plan to eliminate outsourcing as “a breath of fresh air” that could liberate crew members from modern-day slavery. Similar sentiments are echoed by other unions: outsourcing is viewed as a system that stifles career growth, suppresses wages, and weakens workers’ bargaining power.
This reality on the ground aligns with Minister Yassierli’s criticisms. He emphasized that many outsourcing contracts fail to meet principles of fairness—workers remain outsourced for decades with no opportunity for permanent employment. This uncertainty contradicts Article 27(2) and Article 28D(2) of the 1945 Constitution, which guarantee the right to employment and decent compensation.
Apindo cited India and the Philippines as examples of successful outsourcing models in technology and teleservices. The argument is that global markets demand flexible labor schemes. However, those countries’ success is rooted in strong protections—clear career paths, training programs, and decent pay. In Indonesia, those prerequisites remain incomplete. Outsourcing is more often used as a loophole to cut labor costs.
Therefore, outsourcing is no longer sustainable as the main instrument of labor flexibility. The government appears to be drafting a new model of permanent employment that adapts to the dynamics of Industry 4.0, while still ensuring fair wages, social protection, and skill development opportunities.
The Manpower Minister stated that President Prabowo’s directive will be formalized through a new Ministerial Regulation, aimed at abolishing inhumane practices. The Ministry is also reviewing labor legislation with a stronger emphasis on fairness. The plan includes forming a National Labor Welfare Council, a tripartite dialogue platform to design labor frameworks that benefit both workers and industry.
A more stable labor relationship will increase workers’ purchasing power. Higher domestic consumption will positively impact economic growth. Indonesia’s gross domestic product (GDP) has long been supported by household spending—contributing over 50 percent. With wage certainty and social protection, workers are more likely to spend on education, healthcare, and housing, beyond just basic needs.
At the same time, Indonesia’s reputation as a country that upholds labor standards will improve in global supply chains. Multinational companies are becoming increasingly selective in choosing suppliers who comply with labor rights principles. Ending exploitative outsourcing could actually attract investment aligned with sustainability values.
President Prabowo’s plan to abolish the outsourcing system is a breakthrough that supports workers and aligns with the Constitution. BPS data on the dominance of the informal sector, testimony from fisheries unions, and findings by the Manpower Minister on wage violations all reinforce the argument that outsourcing in Indonesia has often disadvantaged workers. Though there are risks of transition to the informal sector, these concerns can be addressed through transitional frameworks, strengthened social security, fiscal incentives, and worker upskilling programs.
Abolishing outsourcing is not merely about eliminating a system—it marks the beginning of a new era of fair, humane, and productive labor relations. The government and parliament are moving swiftly to craft supporting regulations, while employers must see this as a long-term investment—because a prosperous workforce is the most valuable asset for the competitiveness of Indonesian industry.
The writer is a labor activist and observer of labor issues.
