Across Indonesia’s industrial hubs, from Jakarta to Surabaya, worker protests are growing louder. Rising layoffs and deepening concerns over job security have triggered widespread calls to overhaul the country’s labour system—specifically the widespread use of outsourcing. What began as short-term resistance to layoffs has now turned into a national debate on the future of work, investment, and economic stability.
Layoffs Fuel Discontent
Between January and June 2025, 42,385 workers were laid off, a 32% increase compared with the same period in 2024. Union estimates are even higher, claiming up to 70,000 job losses in just the first four months of the year. The brunt has fallen on contract and outsourced workers, who often lack severance pay, benefits, or contract clarity. These job losses have added urgency to the demands of labour groups, transforming economic anxiety into sustained street protests.
Workers’ Demands
Coalitions such as HOSTUM (Hapus Outsourcing, Tolak Upah Murah – “Abolish Outsourcing, Reject Low Wages”) argue that outsourcing erodes stability and dignity. Their proposals include:
- Restricting outsourcing to non-core functions such as cleaning and security.
- Repealing Government Regulation No. 35/2021, which they believe legitimised widespread outsourcing.
- Passing stronger worker protection laws, including a domestic workers bill and more rigid severance rules.
During May Day rallies, banners reading “Eliminate outsourcing, pass the domestic workers bill, anticipate mass layoffs” captured the movement’s mood. For many, this is not just about wages but about fairness and the promise of long-term stability.
Government Response
Acknowledging the pressure, President Prabowo Subianto has announced the creation of a National Labour Welfare Council and a Layoff Prevention Task Force. These initiatives aim to review labour regulations, anticipate future shocks, and place outsourcing reform firmly on the national agenda. However, how far and how fast these reforms will go remains uncertain.
Business and Investor Concerns
Employers and investors view the debate differently. For many businesses, outsourcing offers flexibility, especially in sectors such as manufacturing, textiles, logistics, and services. It allows companies to scale up or down depending on global demand, keeping costs competitive with neighbours like Vietnam and the Philippines.
Restricting outsourcing could increase labour costs and reduce Indonesia’s attractiveness for foreign direct investment. Business associations warn that overly rigid rules could deter new projects or push firms to relocate to countries with more flexible labour regimes. SMEs, which often rely on third-party labour to remain viable, may also be squeezed hardest.
The Balancing Act
Indonesia’s challenge is to find a balance between protecting workers and maintaining competitiveness. For workers, tighter rules would bring greater job security, benefits, and bargaining power. For businesses, it may mean higher costs but potentially lower turnover and greater workforce morale. For the government, the task is to safeguard investor confidence while addressing growing social unrest.
What’s Next
As of mid-2025, the conversation has shifted from whether to reform outsourcing to how. Laws are under review, councils are being formed, and public opinion is pushing for accountability. Yet enforcement remains a critical gap—without adequate monitoring, even the best-written laws may falter.
Indonesia now stands at a crossroads. Outsourcing reforms will not only define the country’s labour market but also influence its competitiveness in the region. The choices made in the coming months could reshape Indonesia’s social contract, balancing workers’ rights with business realities, for decades to come.
