THR for Outsourcing Employees: Who Is Responsible?

Religious Holiday Allowance (THR) is a mandatory employee benefit regulated under Indonesian labor law. However, in practice, there is still confusion regarding THR entitlement for outsourced employees. A common question is: who is responsible for paying THR—the user company or the vendor as the perusahaan outsourcing?

This article explains the legal responsibility for THR payments in outsourcing arrangements, the importance of employment agreements, and the legal risks companies need to anticipate.

1. Employment Relationship in an Outsourcing Scheme

In an outsourcing structure, there are three parties involved:

1. The employee
2. The vendor (perusahaan outsourcing)
3. The user company

Legally, the employment relationship exists between the employee and the vendor. This means the vendor, as the perusahaan outsourcing, holds the administrative and legal responsibility for fulfilling employee rights, including salary, social security contributions, and THR.

Many user companies assume that because outsourced employees work daily at their premises, the responsibility for THR lies entirely with the vendor without further oversight. In reality, the situation is more complex.

2. Who Is Responsible for Paying THR?

Under labor regulations, the party that has a direct employment relationship with the employee is responsible for paying THR. In an outsourcing arrangement, this responsibility falls on the vendor or perusahaan outsourcing.

However, companies must understand that:

• If the vendor fails to pay THR,
• And certain clauses exist in the cooperation agreement,
• The user company may also be exposed to legal liability.

This is why user companies cannot simply distance themselves from the issue. In outsourcing Jakarta practices and other regions, user companies must still ensure that the vendor fulfills all statutory employment obligations.

3. The Importance of Employment Agreements and Service Contracts

Two key documents determine responsibility clearly:

a. Employment Agreement Between Vendor and Employee

This document regulates:

• Employment status (fixed-term or permanent)
• Rights and obligations
• Salary components
• THR provisions

If the employment agreement does not clearly regulate THR, the risk of disputes increases significantly.

b. Service Agreement Between Vendor and User Company

This is often overlooked. The cooperation agreement between the user company and the outsourcing company Indonesia must clearly regulate:

• Cost components (including THR allocation)
• Payment mechanisms
• Penalties if the vendor fails to fulfill obligations
• Joint liability clauses (if any)

User companies must ensure that THR costs are included in the fee structure paid to the vendor. Otherwise, there is a risk that the vendor may lack sufficient funds and fail to meet its obligations to employees.

4. Legal Risks If THR Is Not Paid

THR is not merely an additional benefit; it is a statutory obligation. Failure to pay THR can result in serious consequences:

1. Administrative Sanctions

Vendors may face:

• Written warnings
• Business activity restrictions
• Suspension or revocation of business licenses

2. Late Payment Penalties

Delays in THR payment may result in fines in accordance with prevailing regulations.

3. Industrial Relations Disputes

Employees may file:

• Complaints with the Manpower Office
• Claims to the Industrial Relations Court

If investigations reveal systematic negligence or unclear contractual arrangements, the user company may also be held jointly liable.

For companies utilizing outsourcing Jakarta services, reputational risk is another major concern. Labor disputes can negatively affect brand image, investor confidence, and employer branding efforts.

5. How to Minimize Risk

To mitigate legal exposure related to THR for outsourced employees, companies should consider the following strategies:

1. Conduct Vendor Audits

Ensure the perusahaan outsourcing has:

• Complete legal documentation
• Strong administrative compliance
• A proven track record of fulfilling employee obligations

2. Ensure Cost Transparency

The service agreement should clearly state:

• That THR is included in the cost structure
• That proof of payment can be provided

3. Monitor Compliance

User companies may request:

• Proof of THR transfers
• Payroll reports before the holiday period

This is not interference, but rather risk mitigation.

4. Partner with a Professional Outsourcing Company

Choosing a reputable outsourcing company Indonesia with a structured HR and payroll system significantly reduces compliance risks.

6. The Role of a Reliable Outsourcing Partner

When selecting a perusahaan outsourcing, companies must consider experience, credibility, and regulatory understanding.

As an experienced workforce solutions provider, RecruitFirst Indonesia understands the importance of full compliance with labor regulations, including proper THR management for outsourced employees. With transparent systems and structured processes, businesses can minimize legal risks while maintaining healthy industrial relations.

Read more: How to Calculate THR for Employees with Less Than One Year

Conclusion

In an outsourcing scheme, the vendor or perusahaan outsourcing is legally responsible for paying THR to employees. However, user companies are not entirely free from risk.

Clear employment agreements, transparent cost structures, and proper oversight are essential to preventing disputes. Legal and reputational risks may arise if this obligation is neglected.

If your company wants to ensure that its outsourcing arrangement remains compliant and low-risk, partnering with a professional provider is crucial.

Contact RecruitFirst Indonesia today to discuss your outsourcing needs and find the right workforce solution for your business.