Abstract
This study aims to identify regulations and analyze the determinants of outsourcing implementation in the Indonesian manufacturing industry using an analyctic hierarchy process (AHP). We examines both the Indonesian Labor Law–Act No. 13/2003 and the Regulation of Minister of Manpower and Transmigration No. 19/2012 on Conditions for Outsourcing the Implementation of Work to Other Companies. The results suggest that business efficiency, human resource development plan, types of outsourcing, wage level and worker incentive, recruitment and training cost, skilled worker and productivity, recruitment process, and government regulation are the priority factors to implement outsourcing in Indonesian manufacturing industries.
Highlights
The outsourcing phenomenon is becoming more and more important for the government, manufacturing sector and workers in Indonesia
This study examines two research problems as follows: government regulations on labor outsourcing in Indonesia and the factors of labor outsourcing in Indonesia’s manufacturing industry
It seems indispensable to introduce certain government regulations to supervise and evaluate the implementation of this phenomenon it is necessary to emphasize that Indonesia has established certain regulations on outsourcing, which are as follows: the Labor Law – Act No 13/2003 and the Regulation of Minister of Manpower and Transmigration No 19/2012 on Conditions for Outsourcing the Implementation of Work to Other Companies
Summary
The outsourcing phenomenon is becoming more and more important for the government, manufacturing sector and workers in Indonesia. Despite the economic advantages of outsourcing, such as cost reduction in terms of labor as well as research and development; investments in assets, production, and technology; resource efficiency and cost saving, there is no denying that the implementation of outsourcing can lead to undesirable consequences, such as discrimination and exploitation of workers (Tjandraningsih, Herawati and Suhadmadi, 2010). Wiratraman (2007) identifies various consequences of the phenomenon of outsourcing in Indonesia, including a neoliberal approach of the industry, reduction of employee incentives, inconsistency in developing employment relations, lack of job security, exploitation of workers, and social tensions. This study examines two research problems as follows: government regulations on labor outsourcing in Indonesia and the factors of labor outsourcing in Indonesia’s manufacturing industry.
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