Indonesian Manpower and Transmigration Minister Muhaimin Iskandar said that his ministry has issued a decree that will limit the use of contract workers, known as outsourcing scheme, in companies operating across the country, local media reported on Monday.
The minister said over the weekend that he had already signed on Thursday a revised decree on labor outsourcing and that it had been sent to the Law and Human Rights Ministry to be passed before its immediate enactment.
Under the decree, companies will be given six months to alter the status of their contract workers into permanent staff.
According to the planned decree, companies will not be permitted to outsource their core business, leaving outsourcing limited to five types of job: cleaning services, security, driving, support services on mining sites and catering.
"Businesses are required to comply with the Labor Law and respect workers' normative rights on remuneration, allowances, annual leave and bonuses," Muhaimin said.
"They are allowed only to subcontract their temporary jobs, such as building repairs, painting and card printing, which can be finished within several months," he added.
Due to the inflexibility of the Labor Law, labor-intensive companies, such as footwear and textile firms, prefer to outsource their core work to third parties on a contract basis in order to avoid making them permanent employees.
Companies, meanwhile, argue that they employ contract workers to do core jobs because, under the existing Labor Law, it is costly and difficult to fire under-performing permanent staff, the Jakarta Post reported.
According to a recent labor survey, conducted jointly by the Akatiga social research center, the Indonesian National Workers Union (SPNI) and the Friedrich Ebert Stiftung Foundation, around 20 million people are employed under the outsourcing scheme.
The figure is higher than the 14 million workers registered by business lobby group, the Indonesian Employers Association (Apindo) .
Most of the workers are concentrated around industrial estates in Banten, Batam, East Java, Riau Islands and West Java.
The new decree will also prohibit companies from employing workers outsourced from third-party firms to undertake core jobs.