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s the controversial decree limiting the use of contract workers through the so-called outsourcing method took full effect Monday, businesses have complained over the pervasive illegal fees and the confusion regarding how to comply with the rule.

The Manpower and Transmigration Ministry issued in November last year Decree No. 19/2012 on outsourcing in which companies will not be permitted to outsource their core business, leaving outsourcing limited to five types of jobs: cleaning services, security, driving, support services on mining sites and catering.

The ministry has given firms one year to comply with the decree and to register their outsourced services, which are not included in the exemption lists, for approval.

However, the Indonesian Outsourcing Association (ABADI), whose 100 members supply more than 200,000 outsourced workers, found that the rule could not be enforced due to a lack of technical implementation guidance from the ministry and coordination among officials.

As a result of the red tape and confusion, officials at local manpower and transmigration agencies allegedly asked for kickbacks in exchange for eliminating the hassle and for accepting their registrations, according to ABADI chairman Wisnu Wibowo.

'€œThe decree does not require us to pay for the registration process. But in reality we have been asked to pay between Rp 500,000 [US$42.67] and Rp 1 million for each process,'€ said Wisnu recently.

'€œSo if you have many branch offices using outsourced services, each of the offices has to register and pay the kickback. You can just imagine the scale of the alleged graft.'€

Manpower and Transmigration Ministry public relations staffer Dicky Risyana said that the ministry had not received any reports of the illegal fees. '€œCompanies that are asked to pay illegal fees should inform us because it'€™s a crime,'€ he said.

But there is a bigger problem than that. Companies are now confronted with problems of major changes in their operational processes.

According to the decree, companies outsourcing work outside the allowable five job sectors are required to have them in the form of wholesale services.

For example, a firm can no longer hire an outsourced worker as a receptionist. Instead, it has to procure such a service from a company that specifically provides reception work as well as supporting equipment for the job, such as telephones and desks.

The firm also has to report such outsourcing with its local manpower agency to get approval.

'€œThe decree will force companies to undergo major business changes that cannot be done overnight,'€ said ABADI'€™s head of international relations, Greg Chen. '€œThis will create not only additional costs but also uncertainty in doing business.'€

ABADI has urged the government to delay the decree implementation as companies will need time to adjust. The association is also awaiting the result of a judicial review it filed with the Supreme Court against the decree.

Indonesian Employers Association (Apindo) chairman Sofjan Wanandi expressed support over the concerns voiced by ABADI.

He said he was still in discussions with officials from the Manpower and Transmigration Ministry over the implementation of the decree.

'€œThe decree turns out to be a major blow for companies, particularly those engaged in labor-intensive sectors. Its implementation will require major changes to the operation of existing companies.'€ (ogi)