The Dilemma of Employment Relationship Compared to Partnership

of Drivers in Logistics Business:

Analytical Study from Contract Law and Indonesian Labor Law

Yayan Hernayanto and Adi Riki Fauzi

Legal Office Manufacturing Industry, Jakarta, Indonesia

(yayan.hernayanto,adirikifauzi.sh)@gmail.com

Keywords: Contract, Employment, Logistic, Outsourcing, Partnership.

Abstract: Supply chain activities is the backbone to run a business especially in the manufacturing industry. However,

logistic work is not the core business in their line of business. Therefore, manufacturing companies outsource

their logistic activities to outsourcing service providers. Indonesian labor laws covers two types of

outsourcing: Business Process Outsourcing and Manpower Outsourcing. In terms of relationship between the

outsourcing providers and their workers, the Laws regulates temporary contract and permanent contract

scheme for both types of outsourcing, with each terms and conditions. Since outsourcing first introduced in

2003, it has been the most common/ favorable cooperation scheme used to support company's non-core

activities. However, it may not be as popular as outsourcing scheme, partnership has also been favorable

choice of cooperation scheme under Indonesian contract law. This type of cooperation emphasizes

professional relationship between company and workers without engaging any “employment relationship and/

or responsibilities”. In terms of logistic work, partnership nowadays is commonly used by the modern so-

called Mobility Service Providers in Indonesia such as Go-Jek, Grab, Uber, etc. Based on latest research, it is

recorded as much as 180 thousands drivers have engaged partnership with those mobility service provider.

Through this paper, the writers would like to figure out which cooperation scheme is better for logistics work

in the company’s perspective as the user. Does the business today against the prevailing provisions? How the

best business should be done in term of comply with prevailing regulations.

1 INTRODUCTION

The success of a company will depend on how it can

manage the relations along the supply chain

management. Therefore, supply chain activities is the

backbone to run a business especially in the

manufacturing industry. However, logistics activity is

not the core business in their line of business.

The company as the user could hire supporting

company for non-core activities especially in logistics

area. As you can see the Flow Process of Supply

Chain in Manufacturing Industry below, Trucking

Company as a Service Provider Company in logistics

area can support the logistics activities to deliver

component, raw material, and production equipment

to Product Maker as well as finished product to

Customers.

Picture 1: Flow Process of Supply Chain in Manufacturing

Industry

Hernayanto, Y. and Fauzi, A.

The Dilemma of Employment Relationship Compared to Partnership of Drivers in Logistics Business: Analytical Study from Contract Law and Indonesian Labor Law.

DOI: 10.5220/0010053901130117

In Proceedings of the International Law Conference (iN-LAC 2018) - Law, Technology and the Imperative of Change in the 21st Century, pages 113-117

ISBN: 978-989-758-482-4

113

2 CLASSIFICATION OF CORE

BUSINESS AND NON-CORE

BUSINESS IN INDONESIA

2.1 Core Business

Article 64 of Law No. 13 of 2003 on Employment,

stated that Companies may outsource a part of its

work operations to another company under a business

process outsourcing agreement or labour outsourcing

agreement. In the Article 65 mentioned about core

business. Core Business means all activities that

cannot be done separately from the main activity. The

concept and definition of core business and non-core

business is a concept that changes and develops

dynamically. The following are the minimum criteria

on core business

 Processes are directly related to product or service

activities;

 The Company will be disturbed if the related

process is disrupted; and

 Customer “is willing to pay” to the company to do

the process.

Slightly different from the criteria above, Alexander

and Young argued that there are 4 definitions that are

related with core business and core activity as

follows:

 Activities traditionally done within the company;

 Activities that are critical to business

performance;

 Activities that create competitive advantage both

now and in the future;

 Activities that will encourage development,

innovation or rejuvenation.

As for the example of core business activities in

manufacturing companies are as follows:

 Machining;

 Casting, Stamping, Welding;

 Quality Assurance;

 Assembling.

The activities as mentioned above shall be done by

the company itself and shall not be transferred to the

outsourcing company.

2.2 Non-core Business

Article 65 and 66 of Law No. 13 of 2003 on

Employment, stated that outsourcing is permitted

https://breath4justice.wordpress.com/2012/01/09/core-

business-dan-non-core-business-dalam-outsorcing

http://jurnalhukum.blogspot.com/2007/05/outsourcing-

dan-tenaga-kerja.html

only for non-core business activities and activities not

directly related to the production process.

R.Djokopranotoin said that:

“In the text of Law No. 13 of 2003 is stated and

differentiated between the core of business and

supporting/outsourcing activities. There is a

principal similarity between the statement of the

Employment Law and the practice of industry, that

the outsourced generally (not all) are non-core

business, however the core of business in general (not

all) remains to be done by the company itself. But

there are potential problems that arise. The potential

problem that arises is whether regulators and law

enforcement on the one hand and entrepreneurs and

industrialists on the other hand have the same

understanding and interpretation of those terms.”

The similarity of interpretation is important, because

under the labour law, outsourcing is only allowed if it

do not concern the core business.Article 17 Minister

of Labour Regulation No. 19 of 2012 on

Outsourcingstated that:

(1) The employer company may subcontract part of

the work to the service provider company worker

/ labor through contracts of worker / laborer in

written;

(2) The work can be outsourced to the service

provider company workers / laborers as referred

to in paragraph (1) shall constitute auxiliary

service activities or that are not directly related

to the production process;

(3) The activities of supporting services as referred

to paragraph (2) shall include:

a. cleaning service;

b. catering;

c. security personnel;

d. supporting services in mining and petroleum;

and

e. providing transportation for workers /

laborers.

In manufacturing company’s business activities, there

are non-core business activities as follow:

 Tooling maintenance;

 Building maintenance;

 Mailing service;

 Driver, etc.

The activities as mentioned above may be outsourced

through a service provider company with an

outsourcing work scheme. In this regard, logistic

R.Djokopranoto, Outsourcing (Alih Daya) dalam

No.13/2003 tentang Ketenagakerjaan (Perspektif

Pengusaha), 2005, hal.5.

http://jurnalhukum.blogspot.com/2007/05/outsourcing-

dan-tenaga-kerja.html



iN-LAC 2018 - International Law Conference 2018

114

activities also include non-core business activities

which may also be undertaken by service providers.

3 THE OUTLINE OF

COOPERATION IN LOGISTICS

BUSINESS

Outsourcing Scheme is divided into 2 Scheme there

are Manpower Outsourcing / Labor Supply (LS) and

Business Process Outsourcing/ Job Supply (JS).

3.1 Manpower Outsourcing / Labor

Supply (LS)

Based on Article 66 ofLaw No. 13 of 2003 on

Employment, Labor Supply (LS) is the subcontract of

part of work to another company shall be performed

under a written worker/labourer outsourcing

agreement.

3.1.1 Type of Work of Manpower

Outsourcing / Labor Supply (LS)

Based on Article 17 paragraph (3) Minister of Labour

Regulation No. 19 of 2012 on Outsourcing, type of

supporting service activities, as follows:

The activities of supporting services as referred to

paragraph (2) shall include:

a. cleaning service;

b. catering;

c. security personnel;

d. supporting services in mining and petroleum;

and

e. providing transportation for workers / laborers.

3.2 Business Process Outsourcing/ Job

Supply (JS)

Based on Article 66 Law No. 13 of 2003 on

Employment, Job Supply (JS) is the subcontract of

part of work to another company shall be performed

under a written outsourcing agreement.

3.2.1 Type of Work of Business Process

Outsourcing/ Job Supply (JS)

Based on Article 3 paragraph (2) c Minister of Labour

Regulation No. 19 of 2012 on Outsourcing, as

follows:

“supporting activity of the company as a whole,

meaning that the activity is an activity that supports

and expedite the implementation of the core business

in accordance with the flow of activities of the

implementation process of work specified by the

business sector associations established in

accordance with legislation”.

In the provision is explained that the supporting

activities of the company by outsourcing can be done

with the following conditions:

1. Activities that support and facilitate the

implementation of core business;

2. In accordance with the work flow of the

implementation process of work established by

the business sector associations.

3.3 Partnership Scheme

This scheme is a new concept in the logistics

business, which is based on the Indonesian Civil Code

as contained in the following Articles:

1. Article 1338 on the principle of freedom of

contract;

2. Article 1320on the legal terms of the agreement,

as follows:

 dealing of the parties;

 ability to create an engagement;

 a certain subject matter;

 not unlawful cause.

3. Article 1601b on outsourcing work agreement;

and

4. Article1618 until 1641 on civil partnership.

The provisions in those Articles shall constitute the

basis of the Partnership Scheme which is

implemented in a partnership agreement. In this

partnership agreement, the provisions on labour law

and outsourcing do not apply to this partnership

agreement.

3.4 The Cooperation Scheme between

Trucking Company and its

Workers

In addition to the cooperation with the company

(user), trucking company as a company that runs

logistics business also has cooperation with its

workers that is with the following forms:

1) Perjanjian Kerja Waktu Tertentu (PKWT)/

Temporary Contract;

2) Perjanjian Kerja Waktu Tidak Tertentu

(PKWTT)/ Permanent Contract; and

3) Partnership Agreement.

As mentioned above, the provisions concerning

employment law and outsourcing do not apply to the

partnership agreement. It can be interpreted that all

rights and obligations set forth in labour law and

The Dilemma of Employment Relationship Compared to Partnership of Drivers in Logistics Business: Analytical Study from Contract Law

and Indonesian Labor Law

115

outsourcing do not apply to parties binding in

partnership agreement.

4 STAKEHOLDERS IN

INDONESIA LABOUR LAW

Based on Law no. 13 of 2003 on Employment, the

existing parties (stakeholders) is divided into 3 or

commonly referred to as tripartite, that is as described

in the following picture:

Picture 1: Stakeholders (Tripartite) in Indonesia Labour

Law

4.1 Government

The role of government in the labor law is enormous,

beside regulators as well as licensing entrepreneurs

who want to run their business in Indonesia. The

supervisory function is also carried out by the

Government with the obligation of employment

reporting for entrepreneurs. From these reports can be

seen how far the entrepreneurs can comply with the

rules of legislation on employment. In addition, the

government is also obliged to protect the rights of

workers, for example the Government has issued a

policy to protect the rights of workers, that

regulations on BPJS Employment and BPJS Health,

pension guarantee, severance pay, holiday allowance,

and so forth. This is done by the Government because

to protect the rights of the workers.

4.2 Employer

Based on Article 1 paragraph (5) Law No. 13 of 2003

on Employment, definition of Employer as follows:

 Persons, Legal Entities, or Other Entities;

 Hires Employee;

 Paying wages or other remunerations.

4.3 Employee

Based on Article 1 paragraph (3) Law No. 13 of 2003

on Employment, definition of Employee as follows:

 Persons;

 Employed;

 Receiving wages or other remunerations.

5 COMPARING OUTSOURCING

SCHEME AND PARTNERSHIP

SCHEME

As mentioned above, there are 2 cooperation schemes

that can be done by companies doing business in

logistics, that Outsourcing Scheme and Partnership

Scheme. Before determining the choice of the

scheme, the company should know and compare it in

order to be wrong in apply the two schemes.

Outsourcing scheme based on Law No. 13 of 2003

on Employment and MoL Regulation No. 19 of 2012

on Outsourcing. There are two type of outsourcing

scheme that is Labor Supply (LS) and Job Supply

(JS). LS has 5 type of work that are Oil & Mining

Supporting, Security, Cleaning Service, Catering,

Transportation (Driver) and for JS based on List of

Business Proses Outsourcing (BPO) from

Association.

We should consider the cost considerations while

using outsourcing scheme, among others basic salary

& overtime (uncontrolled), job guarantee & health

insurance, holiday allowance (THR), pension/

severance pay, operational cost and management fee.

Then we should aware of potential risk while using

outsourcing scheme, among others claims to be

permanent employee, operational is not flexible,

drivers have annual leave, drivers allowed to request

separation pay. Based on the explanation of

outsourcing scheme as mentioned above, generally

been applied by outsourcing companies.

Partnership scheme based on Article 1338 on the

principle of freedom of contract, Article 1320 on the

legal terms of the agreement, Article 1601b on

outsourcing work agreement, Article 1618 until 1641

on civil partnership. Since the legal basis for

iN-LAC 2018 - International Law Conference 2018

116

partnership scheme is derived from the Indonesian

Civil Code, the provisions related with employment

do not apply to the partnership scheme. Outsourcing

scheme that has two types of cooperation, there are

Job Supply agreement and Labor Supply agreement

and partnership scheme has one type of cooperation,

there is partnership agreement. Partnership agreement

has type of work that is consultant/expert, logistics

driver, driver from mobility service provider (Gojek,

Grab, Uber), etc.

We should consider the cost considerations when

using partnership scheme, among others operational

cost, management fee, commission for driver/trip,

considered the cost, partnership scheme cost less than

outsourcing scheme. Then we should aware of

potential risk considerations when using a partnership

scheme, among others driver can deny job

assignment, if driver deny several job assignment,

driver will be dismissed, based on that potential risk,

is smaller than outsourcing scheme.

6 MERIT DEMERIT OF

OUTSOURCING SCHEME AND

PARTNERSHIP SCHEME

Based on comparison of outsourcing scheme and

partnership scheme above, we can see the difference.

By knowing the difference between the two we can

calculate merit demerit over both schemes. The merit

of outsourcing scheme among others driver can’t

deny job assignment, there is a punishment if driver

deny the order / resign and demerit of outsourcing

scheme among others overtime cost (uncontrolled)

like stuck in traffic jam, queuing production,

operational is not flexible, the provisions of Labour

Law shall apply to Outsourcing Scheme (Pension /

Severance Pay, annual leave), claims to be permanent

employee. The merit of partnership scheme among

others no overtime cost, driver always available

(ready to use) & operational flexible, the provisions

of Labour Law shall not apply to Partnership Scheme

(No Pension / Severance Pay, annual leave), without

engaging any employment relationship and/or

responsibilities and demerit of partnership scheme is

if driver deny several job assignment, driver will be

dismissed.

7 CONCLUSION

1. To support company's non-core business, the

company should comply with outsourcing

regulations; and

2. Partnership scheme is a new favourable choice of

cooperation scheme under Indonesian contract

law for logistic activities.

REFERENCES

Atmasasmita, Misbach, Radhie, Seminar Hubungan

Hukum Kemitraan, Sunlake Hotel, Jakarta, Indonesia,

13 March 2018

Chen, Greg, Driver Compliance Seminar for Logistic

Vendor, Sunlake Hotel, Jakarta, Indonesia, 13 March

2018

Gassmann, Oliver, and Frankenberger, Karolin, and Csik,

Michaela, The Business Model Navigator, PT Elex

Media Komputindo, Jakarta, Indonesia, 2016

Hukumonline.com, Undang-undang Republik Indonesia

No. 13 Tahun 2003 tentang Ketenagakerjaan Plus

Komentar Pasal-pasal yang dibatalkan oleh Mahkamah

Konstitusi, Literati, Jakarta, Indonesia, 2014

Husni, Lalu, Pengantar Hukum Ketenagakerjaan, PT Raja

Grafindo Persada, Jakarta, Indonesia, 2003

Rahman, Hasanuddin, Contract Drafting, PT. Citra Aditya

Bakti, Bandung Indonesia, 2003

Suwarto, Hubungan Industrial Dalam Praktek, Asosiasi

Hubungan Industrial Indonesia, Jakarta, Indonesia,

2003

Tunggal, Sjahputra, Iman, Teoridan Kasus Hukum

Ketenagakerjaan Indonesia, Harvarindo, Jakarta,

Indonesia, 2009

Yasar, Iftida, Apakah Benar Outsourcing Bisa Dihapus,

Pohon Cahaya, Yogyakarta, Indonesia, 2013

The Dilemma of Employment Relationship Compared to Partnership of Drivers in Logistics Business: Analytical Study from Contract Law

and Indonesian Labor Law

117