In the manufacturing industry, having a skilled workforce is crucial for growth and innovation. A manufacturing recruitment agency is vital in ensuring companies succeed by finding the right talent in this competitive landscape.
Navigating the intricate terrain of talent acquisition, a manufacturing recruitment agency is a strategic partner, offering bespoke hiring solutions that align with the industry’s unique demands.
Overview of the manufacturing industry
Indonesia’s manufacturing activities have continued to expand over the past 24 months, accompanied by well-controlled inflation. In August 2023, the manufacturing Purchasing Managers’ Index (PMI) strengthened to 53.9, surpassing July’s figure of 53.3.
This upswing in manufacturing activity is driven by increased new demand, both domestically and from abroad. The trend of manufacturing sector expansion is also expected to be accompanied by more vital employment opportunities in August.
Overall, businesses in the national manufacturing industry remain optimistic about the short-term economic potential.
The challenges in the manufacturing industry
Indonesia’s manufacturing sector is grappling with multiple challenges. Many have observed that the industry is experiencing premature deindustrialization, where the economy is moving from manufacturing to reaching its full potential.
World Bank data reveals that in 2022, manufacturing contributed only 18.3% to the national economy. It indicates a significant decline from 2002 with a 32% economic contribution. This data underscores the scale of the issue and the urgency to address it.
Moreover, labor-intensive manufacturing sectors like leather, textiles, wood, and furniture grew on average or below average. The furniture sector, on average, reduced its workforce by about 1,900 employees annually.
Similarly, the wood sector only created around 4,100 jobs. On the other hand, textiles and leather, although labor-intensive, still witnessed relatively high growth and job creation.
However, they remain susceptible to external shocks, like the current situation in the United States, which has led to decreased exports.
Read more: Batam’s manufacturing industry: key insights and analysis
Why do manufacturing companies need a recruitment agency?
Effective hiring in the manufacturing industry has several positive impacts on a company, particularly when utilizing the services of a recruitment agency. These benefits include:
1. Higher productivity
One of the primary benefits of recruiting competent manufacturing workers in the industry is increased company productivity. Qualified employees can perform their tasks efficiently and effectively. They deeply understand the work processes and can handle challenges more effectively.
2. Innovation and creativity
Competent employees also tend to possess higher levels of innovation and creativity than less skilled workers. They have extensive knowledge in their field and can generate new ideas to advance the company.
3. Efficient operations
Recruiting competent employees can lead to higher operational efficiency than hiring less skilled workers. With experienced employees, the company can reduce the risk of errors, expedite project completion, and optimize resource utilization.
4. Enhanced competitiveness
Companies with competent employees have a higher competitive advantage compared to others. Skilled employees in the company can provide added value through their contributions to the work.
Challenges in hiring for manufacturing companies
There are several challenges in the hiring for manufacturing industries, such as:
1. Shortage of talent and expertise
As the baby boomer generation exits the workforce, job opportunities open. However, this departure also entails a loss of valuable skills and experience.
Recruiting for manufacturing jobs is challenging due to the number of positions and a severe shortage of skilled workers. Manufacturers report a 36% increase in the difficulty of finding the right talent compared to 2018.
Additionally, the required skills for manufacturing talent are changing rapidly, with 74% of manufacturers agreeing that the skills needed are evolving, and 65% believe they are changing faster than the workforce can adapt.
2. Image problem of the manufacturing industry
In the past, there has been a misconception that manufacturing jobs are often seen as low-paying, labor-intensive, and lacking opportunities for career growth.
These misconceptions can deter people from considering careers in manufacturing despite many of them being untrue.
3. Threat of automation
Many workers worry that technology and artificial intelligence (AI) will make their jobs unnecessary. However, automation does not always lead to the elimination of manufacturing jobs.
While it can change how businesses operate and employees work, it does not mean these roles will become obsolete.
Strategies for efficient hiring
Reform education and training programs to align with industry needs, emphasizing cognitive skills that enhance adaptability to technological advancements. Despite the challenges, there are strategies that company & government officials can consider:
1. Training facilities
Establish education and training facilities near industrial hubs to facilitate better information exchange, reducing skill mismatches and training costs.
This strategic placement not only enhances the accessibility of education but also aligns with the evolving needs of industrial recruitment, ensuring that the workforce is well-equipped with the relevant skills demanded by the growing industrial sector.
2. Investment climate
Improve the investment environment to lure businesses seeking to relocate their production operations amidst global geopolitical tensions. This initiative aims to create more production jobs and foster additional employment opportunities.
3. Managing expectations
Consider the right candidate type for each role to manage expectations and minimize frustration amid the industry’s talent gap.
4. Compensation and benefits adjustment
Ensure that your compensation and benefits packages remain competitive with those of businesses in other industries. Consider offering enticing perks such as flexible schedules and family/parental leave.
5. Upskilling and career development
Invest in training programs to meet technological advancements and enhance attraction and retention efforts.
6. Working with recruitment agencies
Partner with established, reliable recruiting agencies to tap into their expertise and experience. Consider working with InCorp Indonesia, which provides recruitment and Employer of Record services to help you find the best talent for your manufacturing business.
Guide to Doing Business in Jakarta
Start hiring with a recruitment agency
Indonesia’s manufacturing industry is growing, and InCorp Indonesia can help you find the right skilled workers through their recruitment and Employer of Record services. Contact our expert consultants by clicking the button below to find out more.
Teddy Willy
Branch Manager – Surabaya Office at InCorp Indonesia
With 10 years of experience in business consultancy, Teddy Willy offers expertise in financial and production auditing, sales and marketing, channels and distribution, supply chain management, and human resources for every business sector in Indonesia.
Frequently Asked Questions
- Prohibit any form of discrimination and provide equal opportunity for Indonesians and expatriates
- Increase the competence of workers by giving or encouraging job training.
- Follow the termination procedures (Terminating an employee in Indonesia can be long, tedious, and expensive.
- Observe working hours, holidays, and overtime regulations
- Give mandatory employee benefits, including social security and health insurance
- Withhold only the right amount of income tax on behalf of the employees
- Follow the wages and other benefits outlined by the law
- Process work permits for foreign employees
- Minimum salary of IDR 3.9 mil for the Jakarta region
- 12-day annual leave (minimum)
- BPJS coverage
- Holiday allowance
There are a few things to consider, such as:
The standard regulations state:
As your HR outsourcing provider, InCorp signs a standard employment agreement with an outsourced employee. After this, we take care of the employee’s payroll in coordination with your company. InCorp is also responsible for paying the salary to the employee.
According to Indonesia’s Manpower Law, employers can hire Indonesian talents under temporary or permanent employment.
