Why Choose Outsourcing in Indonesia and How to Evaluate it?

In recent years, outsourcing has emerged as a significant trend in Indonesia’s business landscape. As organizations and companies seek innovative ways to enhance efficiency and reduce operational costs, many are outsourcing in Indonesia as a strategic solution.

By adopting outsourcing strategies, companies can redefine their operations, re-energize their workforce, and drive sustainable growth in an increasingly competitive market.

What is Outsourcing in Indonesia?

Outsourcing in Indonesia involves hiring an external party to handle services or produce goods previously managed in-house by a company’s employees.

This practice is often used as a cost-saving strategy or as part of a broader management approach. It can apply to various job functions, from customer support and manufacturing to back-office operations.

Outsourcing, also known as management third-party outsourcing, boosts business growth by letting companies focus on strategies and core business functions instead of mundane tasks such as bookkeeping, payroll processing, and accounting.

In an organization’s life cycle, here is how an outsourcing policy plays an important role:

• Phase 1—Introduction. The strategy is to choose experienced staff, so the training program has not yet become integral to this phase.
• Phase 2—Growth. The strategy to overcome the accumulation of uncompleted work (backlogs) and scheduling is implemented by recruiting and improving selection to attract new staff.
• Phase 3—Maturity. When the organization and staff stabilize, they must develop new products or services and outsource temporary workers.
• Phase 4—Decline. In this stage, product diversification and cost reduction are the best strategies. The organization can close existing facilities, take early retirement, or even terminate employees (if necessary). This phase requires outsourcing to support organizations that carry out downsizing strategies.

READ MORE:

• Risks and Benefits of Business Process Outsourcing in Indonesia
• 7 Obvious Signs You’ve Chosen the Wrong Business Process Outsourcing Provider in Indonesia

Labor Laws in Indonesia

The primary sources of labor and employment regulations in Indonesia include:

• The 2003 Labor Law on Manpower, recently amended by Law Number 11 of 2020 on Job Creation, was further impacted by the revocation of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation.
• Law Number 21 of 2000 concerning Labor Unions.
• Law Number 2 of 2004 regarding the Settlement of Industrial Relations Disputes.

These labor laws govern all employment relationships in Indonesia. Employers are required to ensure the following employee rights are fulfilled:

• Payment of the minimum wage, which varies by sector and region;
• Provision of social security, including pension plans, healthcare, life insurance, accident insurance, and old-age benefits;
• Payment of a religious holiday allowance (equivalent to one month’s salary, subject to length of employment);
• Compensation or statutory absence for unused annual leave; and
• Overtime pay for hours worked beyond the standard work schedule.

What are the 4 Types of Outsourcing?

Outsourcing in Indonesia has become a popular strategy for optimizing operations, reducing costs, and accessing specialized skills for businesses. Below are some of the most common jobs companies outsource.

Professional Outsourcing

One of the most common forms of outsourcing is professional services. This includes specialized roles such as legal, accounting, procurement, and administrative tasks.

Many businesses routinely outsource these jobs without even realizing it. For instance, hiring an external accounting firm to handle finances instead of employing an in-house accountant is a typical example of outsourcing.

IT Outsourcing

Many successful companies, such as WhatsApp, BaseCamp, Google, Wise (formerly TransferWise), and Skype, have outsourced IT development to remote or offshore workers at some point. IT outsourcing involves hiring developers or IT specialists from other regions or countries.

Finding the right expertise takes priority over geographical proximity for businesses developing apps, software, or technology. Many companies seek talent in places like India, Ukraine, or Russia to fulfill their IT needs, and in some cases, these outsourced workers transition into full-time employees.

Manufacturing Outsourcing

Outsourcing manufacturing can be a cost-effective solution for businesses that produce physical products. Rather than producing goods domestically, companies may outsource to countries where manufacturing is more affordable, such as China.

Outsourcing manufacturing allows businesses to reduce production costs while maintaining quality standards.

Project Outsourcing

Sometimes, companies need assistance with specific, short-term projects but only require a part-time employee. Project outsourcing is ideal in such cases, where businesses may need help redesigning a website, writing an ebook, or managing a digital marketing campaign.

This allows companies to access specialized skills temporarily without long-term employment commitment.

The Benefits of Outsourcing to Indonesia

Outsourcing in Indonesia has become essential for businesses looking to streamline operations, reduce costs, and access specialized expertise. Here are some of the key advantages of outsourcing to Indonesia:

Access to a Diverse Talent Pool

As the world’s fourth-most populous nation, Indonesia has a large, highly skilled workforce with various educational backgrounds and expertise.

Cost-effective Solutions

Indonesia’s competitive pricing, particularly in sectors like manufacturing and IT, allows businesses to achieve excellent value for their investment.

Strong Economic Growth

Indonesia is experiencing rapid economic growth, presenting abundant opportunities for business expansion.

Strategic Location

Situated in Southeast Asia, Indonesia offers businesses easy access to key markets and economic hubs in the Asia-Pacific region.

Advancement in Digital Technology

With the rise of e-commerce and fintech, Indonesia’s expanding digital economy and robust technological infrastructure make it an attractive destination for IT and software development outsourcing.

Reasons to Outsource and Common Outsourcing Services in Indonesia

Companies in Indonesia need to consider outsourcing because of the following reasons:

• To reduce and control operating costs
• To increase the company’s strategic focus
• To have access to world-class organizations
• To have resources that the organization does not have
• To share risks

Among the many outsourcing services available, the following are deemed the most beneficial for businesses in Indonesia:

• HR outsourcing services that cover recruitment, payroll, outplacement, compensation survey, employee relations, health insurance, background checks, temporary worker recruitment, benefits management, training, and EEO/affirmative action, among others
• Tax and accounting services that cover income statements, invoice issuance, general ledger, personal income tax, corporate income tax, and audit, among others

READ MORE:

• 4 False Myths about Recruitment Process Outsourcing in Indonesia
• No More of These 4 Time-Consuming HR Practices when You Start Outsourcing in Indonesia

Performance Evaluation of Outsourcing Provider

To evaluate whether cooperating with an outsourcing provider is going to be effective and beneficial, the following points must be considered:

• Outsourcing services provided
• Scope of resources owned
• Ability to meet specifications
• Commitment to product and service quality
• Previous experience
• Flexible contract conditions
• Price and value

Outsourcing in Semarang: Why Choose This Location?

Semarang is the ideal location to start your Business Process Outsourcing (BPO) in Indonesia. Compared to other Indonesian regions, the labor costs are relatively lower. What is more, Semarang is filled with plenty of skilled human resources.

Cost-Effective Labor

• Lower labor costs compared to other major regions in Indonesia, allowing for greater cost-efficiency.

Skilled Workforce

• The abundant pool of qualified professionals, including:
  • IT specialists
  • Customer service representatives
  • Finance and administrative experts
• Educational institutions in Semarang produce a steady stream of well-educated and trained individuals.

Strategic Location

• Situated on Java Island, providing easy access to major ports, airports, and economic hubs.
• Convenient for both domestic and international operations.

Growing Infrastructure

• Ongoing improvements in transportation and communication infrastructure enhance business operations.

Economic Potential

• Semarang’s rapidly growing economy presents numerous opportunities for businesses seeking to expand their outsourcing capabilities.

Outsource Your Business Efficiently with InCorp

Outsourcing in Semarang not only allows you to reduce operational costs but also enables you to concentrate on your core business functions while benefiting from local expertise.

At InCorp, we specialize in empowering businesses to succeed by providing a comprehensive range of BPO Indonesia services tailored to your needs.

• Accounting
• Tax Reporting
• Recruitment Agency Outsourcing
• Employer of Record (EOR)
• Payroll Processing

Outsourcing to Semarang through InCorp allows you to access local talent while enjoying reduced operational costs and enhanced business efficiency.

Complete the form below to unlock the full potential of outsourcing in Indonesia’s thriving business landscape.