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An Outsourcing Agreement sets out the terms when a company hands over specific business functions to an external service provider. In Indonesia, these contracts must follow Law No. 13/2003 on Manpower and Ministry of Manpower Regulation No. 19/2012, which limit outsourcing to five business sectors: cleaning services, catering, security, mining support, and employee transportation.

The agreement spells out key details like service levels, payment terms, confidentiality rules, and performance metrics. It protects both parties by clearly defining responsibilities, establishing quality standards, and creating procedures for handling disputes. Indonesian law requires these agreements to include worker protection clauses and ensure outsourced employees receive benefits aligned with local labor regulations.

Consider using an Outsourcing Agreement when your company needs to delegate non-core business functions like cleaning, security, or catering services to external providers in Indonesia. This agreement becomes essential before transferring any operational responsibilities, especially for activities covered under Ministry of Manpower Regulation No. 19/2012.

The timing is critical when scaling operations, reducing operational costs, or focusing on core business activities. Companies must have this agreement in place before any outsourced workers start their duties. It helps prevent legal complications, protects intellectual property, and ensures compliance with Indonesian labor laws, particularly regarding worker rights and benefits under Law No. 13/2003.

• Software Outsourcing Contract: Specifically for IT services and software development, including IP rights and code ownership provisions
• Business Process Outsourcing Agreement: Covers comprehensive business function transfers like customer service or back-office operations
• Outsourcing Service Agreement: General-purpose template for standard services like cleaning or security
• Outsourced Employee Contract: Focuses on individual worker arrangements and compliance with Indonesian labor laws
• Outsourcing Agreement Between Two Companies: Corporate-level agreement with detailed service level agreements and performance metrics

• Client Companies: Organizations seeking to outsource functions like cleaning, security, or IT services to focus on core business activities
• Service Providers: Companies specializing in offering outsourced services, must be registered with Indonesian authorities and comply with labor regulations
• Legal Teams: In-house counsel or external law firms who draft and review agreements to ensure compliance with Indonesian labor laws
• HR Managers: Oversee implementation and manage relationships between outsourced workers and permanent staff
• Outsourced Employees: Workers who perform services under the agreement, protected by Law No. 13/2003 on Manpower
• Labor Authorities: Government officials who monitor compliance and enforce regulations on outsourcing arrangements

• Business Scope: Clearly define which services will be outsourced and ensure they fall within Indonesia's permitted outsourcing categories
• Provider Verification: Confirm the service provider's legal registration and compliance with Ministry of Manpower regulations
• Service Details: Document specific performance metrics, quality standards, and delivery timelines
• Cost Structure: Outline payment terms, including fees, expenses, and any performance-based incentives
• Worker Protection: Include mandatory labor rights provisions as required by Law No. 13/2003
• Risk Management: Define confidentiality terms, liability limits, and dispute resolution procedures
• Implementation Plan: Create a timeline for service transition and establish communication protocols

• Parties' Details: Full legal names, addresses, and registration numbers of both service provider and client company
• Service Scope: Detailed description of outsourced activities, conforming to the five permitted sectors under Indonesian law
• Labor Protection: Worker rights, benefits, and protections as mandated by Law No. 13/2003
• Performance Standards: Clear metrics, quality requirements, and service level agreements
• Compensation Terms: Payment structure, schedules, and any performance-linked bonuses
• Confidentiality: Data protection measures and trade secret safeguards
• Termination Rights: Clear conditions for contract ending and worker transition procedures
• Dispute Resolution: Indonesian law as governing law and local dispute settlement mechanisms

An Outsourcing Agreement differs significantly from an Agency Agreement, though both involve third-party service relationships. Here's how these two agreements serve different purposes in Indonesian business law:

• Legal Authority: Agency Agreements grant the agent power to represent and bind the principal legally, while Outsourcing Agreements only permit the provider to perform specific operational tasks without representation rights
• Regulatory Framework: Outsourcing Agreements must comply with Law No. 13/2003 and Ministry of Manpower regulations, while Agency Agreements follow the Indonesian Civil Code (KUHPer)
• Service Scope: Outsourcing is limited to five specific business sectors in Indonesia, whereas Agency relationships can cover any legal business activity
• Employment Status: Outsourced workers remain employees of the service provider, while agents may be independent contractors or have direct relationships with principals
• Liability Structure: In outsourcing, the provider bears primary responsibility for worker management, while agents can create direct legal obligations for their principals